commonwealth of australia official committee hansard · 2001. 8. 20. · sporting organisations and...

COMMONWEALTH OF AUSTRALIA

Official Committee Hansard

SENATEECONOMICS LEGISLATION COMMITTEE

Consideration of Budget Estimates

MONDAY, 4 JUNE 2001

C A N B E R R A

BY AUTHORITY OF THE SENATE

Monday, 4 June 2001 SENATE—Legislation E 1

ECONOMICS

SENATE

ECONOMICS LEGISLATION COMMITTEE

Monday, 4 June 2001

Members: Senator Murphy (Chair), Senators Chapman, Conroy, Cook, Gibson andRidgeway

Participating members: Senators Abetz, Boswell, Brown, Brownhill, Calvert, GeorgeCampbell, Coonan, Crane, Eggleston, Faulkner, Ferguson, Ferris, Harradine, Knowles,Lightfoot, Mason, McGauran, Murray, Parer, Payne, Quirke, Tchen, Tierney and Watson

Senators in attendance: Senators G Campbell, Chapman, Conroy, Faulkner, Forshaw,Gibson, Lundy, Mason, Murphy, and Schacht

Committee met at 9.03 a.m.INDUSTRY, SCIENCE AND RESOURCES PORTFOLIO

In AttendanceSenator Minchin, Minister for Industry, Science and Resources

DEPARTMENT OF INDUSTRY, SCIENCE AND RESOURCESEXECUTIVE

Mr Tim Mackey, Deputy CEOINDUSTRY POLICY DIVISION

Mr Terry Lowndes, Head of DivisionMr Don Brunker, General Manager, Industry Analysis Branch

INNOVATION AND SCIENCE DIVISIONMr Grahame Cook, Head of DivisionMs Tricia Berman, General Manager, Innovation Policy BranchMr Steve Irwin, General Manager, Science and Technology Policy BranchDr Joanne Daly, General Manager, International Relations and Technology Diffusion

BranchBUSINESS COMPETITIVENESS DIVISION

Ms Hellen Georgopoulos, Head of DivisionMr Bob Pegler, General Manager, Business Competitiveness and Market Access Branch

ENERGY AND ENVIRONMENT DIVISIONMs Vicki Brown, Acting Head of DivisionMr Steve Payne, General Manager, Greenhouse Response BranchMr Ian Cronshaw, General Manager, Domestic Energy and Environment BranchMr Chris Hyman, Manager, Strategic Support Section

SERVICES AND EMERGING INDUSTRIES DIVISIONMs Patricia Kelly, Head of DivisionMs Sandy Radke, Acting General Manager, Biotechnology Australia

MANUFACTURING, ENGINEERING AND CONSTRUCTION DIVISIONMr Garry Wall, Acting Head of DivisionMr John Dean, General Manager, Industry Contact and Policy Team 2

E 2 SENATE—Legislation Monday, 4 June 2001

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Ms Cecilia Wood, TCF Policy UnitMr Merrick Peisley, TCF Policy UnitMr Craig Lawler, Print and Paper Industries SectionMr Robert Dalitz, Print and paper Industries SectionMr Todd Heyman, Automotive Policy Section

PETROLEUM AND ELECTRICITY DIVISIONMr John Hartwell, Head of DivisionMr Grant Battersby, Manager, Petroleum Retail SectionMs Tania Constable, Manager, Strategic Coordination and Support

COAL AND MINERALS INDUSTRIES DIVISIONMr Malcolm Farrow, Head of DivisionMr Jeff Harris, General Manager, Minerals Access and Rehabilitation BranchMr Les Rymer, General Manager, Minerals Development BranchMr John Karas, Acting General Manager, Energy Minerals Branch

SPORT AND TOURISM DIVISIONMr Robert Crick, Head of DivisionMs Kerry Rooney, General Manager, Best Practice and Program Development GroupMs Janet Murphy, General Manager, Market Access GroupMr David McCarthy, General Manager, Business Development GroupDr Peter Robins, Director, Bureau of Tourism ResearchMr Jeff Dickson, Assistant Team Leader, Program Development and Management TeamMr Aulis Mikkonen, Team Leader, Strategic Management Team

ANALYTICAL AND MAPPING DIVISIONMr Drew Clarke, Head of DivisionDr Sandra Hart, General Manager, AGALMr Mark Nash, Executive Officer, AGALMr Peter Holland, General Manager, AUSLIGMr David Hobson, Manager, Policy and Coordination Program, AUSLIGMs Joanne Lilley, Director, Commonwealth Projects, AUSLIG

AUSINDUSTRYMr Drew Clarke, Executive General ManagerMr Bill Peel, Deputy Executive General ManagerDr Russell Edwards, General Manager, Program Management GroupMr Phil Constable, General Manager, Business Development GroupMs Rhonda Henry, ACT Regional DirectorMr Kevin Noonan, General Manager, Information Management GroupMr Paul Sexton, General Manager, Customer Services GroupMr David Luchetti, Manager, Venture CapitalMr Peter White, Acting Manager, R&D Tax ConcessionMs Michelle Julius, Manager, COMET ProgramMs Lynne Thomson, Manager, CRC/TDP ProgramMr Wayne Kathage, Manager, R&D Tax Concession/Syndicate

INVEST AUSTRALIAMr David Purcell, Principal Adviser, Strategic Investments and Policy


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Mr Barry Jones, Acting Executive General ManagerCORPORATE DIVISION

Mr Philip Noonan, Head of DivisionMr Howard Tipson, Acting General Manager, Knowledge and Information Management

BranchDr Joe Hlubucek, General Manager, Ministerial and Coordination GroupMr Chris Dainer, General Manager, Corporate Finance BranchMs Paula Edwards, Deputy Chief Financial OfficerMr Simon Murray, Budget Coordination TeamMr Mark Ross, Budget 2001 TeamMs Julie-Anne Price, Budget 2001 TeamMr Krishan Singh, Portfolio Coordination

ISR PORTFOLIO AGENCIESIP AUSTRALIA

Dr Ian Heath, Director GeneralAUSTRALIAN TOURIST COMMISSIONMr Bill Calderwood, Deputy Managing DirectorMr John Hopwood, General Manager, Business ServicesMs Margaret Hudson, Manager, Corporate StrategyMs Kate Pembroke, Government RelationsNATIONAL STANDARDS COMMISSION

Dr Judith Bennett, Executive DirectorAUSTRALIAN INSTITUTE OF MARINE SCIENCE

Dr Peter Isdale, Executive Director, Business and FinanceAUSTRALIAN NUCLEAR SCIENCE AND TECHNOLOGY ORGANISATION

Professor Helen Garnett, Executive DirectorMr Garry Seabourne, Manager, Replacement Reactor ProjectMr Rob Wilson, Director, CorporateMr John Rolland, Director, Government and Public AffairsMr Steven McIntosh, Government and Public Affairs

COMMONWEALTH SCIENTIFIC AND INDUSTRIAL RESEARCH ORGANIASTIONDr Geoff Garrett, Chief ExecutiveDr Paul Wellings, Deputy Chief ExecutiveMr Bob Garrett, General Manager, Corporate FinanceMr Malcolm Mahon, Deputy General Manager, Corporate FinanceMr Ian Rout, Manager (Budget), Corporate FinanceMs Marie Keir, Manager, Ministerial and Parliamentary Liaison

AUSTRALIAN GEOLOGICAL SURVEY ORGANISATIONDr Neil Williams, Chief Executive OfficerDr Chris Pigram, Chief, Minerals DivisionMr Tony Robinson, General Manager, Corporate

AUSTRALIAN SPORTS COMMISSIONMr Mark Peters, Executive DirectorMr Michael Scott, Director, AIS


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Mr Brent Espeland, General Manager, Business OperationsMs Sue Baker-FinchGeneral Manager, Sport DevelopmentMs Ann FoxSenior Manager, Corporate Support DivisionMr Allan SmithManager, Planning and Financial Services

AUSTRALIAN SPORTS DRUG AGENCYMr John Mendoza, Chief Executive OfficerMr Peter Shakespeare, Acting Deputy Chief Executive OfficerMs Anne Gripper, Manager, Sports Services DivisionCHAIRMAN—I declare open the public meeting of the Economics Legislation

Committee. On 22 May 2001, the Senate referred to the committee for examination theparticulars for proposed expenditure for the service of the year ending 30 June 2002,documents A and B, in relation to the portfolios of Treasury and Industry, Science andResources. At the conclusion of the hearings the committee will set a date for the receipt ofwritten responses and will prepare a report on its examination of estimates. The report will betabled in the Senate on or before 20 June 2001.

The committee will examine departments and agencies as set out in the circulated program,which was agreed to by the committee members last week. Before we get started could Iplease request that all mobile phones be turned off. The use of mobile phones during hearingsinterrupts the work of the committee.

[9.04 a.m.]

INDUSTRY, SCIENCE AND RESOURCES PORTFOLIOAustralian Sports Commission

Australian Sports Drugs AgencyCHAIRMAN—Do you want to make an opening statement, Mr Mackey?

Mr Mackey—No, Mr Chairman.

Senator LUNDY—I have some general questions about the sports allocation in the budget.Outcome 1 had an increase in funding from the last budget of approximately $670,000. Canyou tell me where the increased funding is going in this year’s budget?

Mr Peters—The outcome 1 budget is the area where we look to work with nationalsporting organisations and other partner groups to increase what we call the efficiency of theindustry. When we look at different programs to do with governance we sit down and reviewwhere national sporting organisations are and talk to them about what sorts of courses weshould be working on with them—seminars or workshops. It also deals with the coaching andofficiating areas. We have just finished a number of discussions with the majority of nationalsporting organisations and now that the policy has been announced we will go back in thesecond round of meetings to look at where we can best allocate those funds.

Senator LUNDY—In terms of the efficiency of industry, I presume you are talking aboutefficiencies within the sporting sector.

Mr Peters—Yes. In the normal allocations we have given to national sportingorganisations—I am not sure whether it is 34 or 36 of those organisations—we have written


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back with specific conditions that relate to some of the management areas and to establishingthe particular advisory committees or management groups that we would expect to beassociated with the outcomes of those fundings.

Senator LUNDY—Is their funding, in both that area and other areas, contingent on themmeeting those specific conditions?

Mr Peters—Yes. The initial assessments are done in consultation with the NSOs. We lookat past performance and have a model and criteria associated with where they have been interms of their performance. Then we look at their high performance plans and theirdevelopment plans to see where they want to go in the future. We assign conditions to thatfunding which are then reflected in what we call a resource agreement. At the moment we aregoing back to those NSOs and negotiating that final resource agreement.

Senator LUNDY—When will those negotiations need to be concluded?

Mr Peters—We are hoping to do that by the end of June. I have written to all of the NSOswith their nominal funding across the next four years and said that we now want to sit downas quickly as possible. Those discussion have actually started.

Senator LUNDY—You mentioned high performance, et cetera. Is their role with respect toparticipatory programs also a part of the hooks you are attaching to this funding?

Mr Peters—In the letter to the NSOs we have discussed the policy change in relation toActive Australia. The first phase of Active Australia was very much about promotion ofphysical activity and working across the spectrum of the community to create an awarenessthat Australian citizens need to be far more physically active and of the associated healthbenefits of that. The next phase is that we want to see that result in increased registrations insporting clubs throughout Australia. We now want to work with NSOs to enhance some of theprograms they have put in place. Part of the policy announced increased funding for ActiveAustralia, and that has now been incorporated in our discussions with national sportingorganisations as to how we can work with them and private sector partners to increaseparticipation.

Senator LUNDY—I suppose the money under this outcome support would be contingenton them making commitments to that increased participation.

Mr Peters—Yes.

Senator LUNDY—Will that increased participation strategy be funded through this moneyand money to the national sporting organisations, or will it come to the national sportingorganisations via Active Australia?

Mr Peters—The funds under this outcome will allow national sporting organisations to setup the proper structures to deliver a number of their programs. Therefore, whether it iscoaching, officiating or administration, what we would hope and expect to see under thisoutcome is improved delivery mechanisms with NSOs which will then allow the funding thatcomes through the other two outcomes to be implemented in the most efficient way.

Senator LUNDY—You mentioned before a four-year budget cycle. Do you propose tocommit in these—I think you described them as resource agreements with the NSOs—over afour-year period, or is it still annualised funding?

Mr Peters—At the moment technically we can only commit for 12 months at a time. Oneof the problems national sporting organisations have in their planning cycle, particularly whenthey offer contracts to coaches or administrators, is that one-year funding is very difficult to


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attract what I would call qualified people into the system. Therefore, if we are able to givethem an indicative figure over four years which we can confirm each year, it gives them somecertainty to offer contracts to their employees over a longer period of time.

Senator LUNDY—Are the resource agreements you are currently negotiating going tocontain such an indicative figure over four years?

Mr Peters—It will talk about certainly the next 12 months and, yes, indicative figures ifthey meet these commitments in the resource agreement.

Senator LUNDY—I presume you have some sort of annual review process to assess theirprogress in meeting their commitments.

Mr Peters—Yes, in the resource agreement it talks specifically about the funding to beapplied to different areas, the performance indicators that will be applicable and, in somecases, the types of committees we would like to set up with the sports to help them in thedelivery of their programs.

Senator LUNDY—Have any infrastructure or facilities been identified to attract fundingunder this outcome?

Mr Peters—From the Australian Sports Commission’s program area there are no facilities,as in bricks and mortar schemes, in operation. The department, through the standingcommittee on recreation and sport, has been working with the states to identify the types offacilities that exist at the moment and following up on some previous reviews to see if there isa need for the federal government to be involved in facilities management; but it is not aprogram for the Sports Commission.

Senator LUNDY—I might come back to that. Under this outcome, what programsspecifically have been identified for increases? So far you have mentioned the strategyrelating to the national sporting organisations. Are there any other programs that will have anincrease in funding, or perhaps administrative roles that have been identified throughincreases in funding under this outcome?

Mr Peters—We are back now talking with the NSOs to see if there are any particularstreams of education that we should be working with, outside of what we have in place at themoment. Once we have those priorities re-established—and we now understand our budget—then we may make some adjustments, although my observations at the moment are that theareas identified certainly will be the key priorities that NSOs wish to go with.

Senator LUNDY—What sort of administrative restructuring have you had to do to pursuethis particular outcome?

Mr Peters—At the moment the delivery sections within Sport Development division areremaining the same. I have made some structural changes in moving into one area anyofficers involved in discussing with national sporting organisations their development needsin the future. Previously there were some officers involved with grant schemes in one divisionand others in another, so there is a minor adjustment to bring them all together to have oneseries of discussions with NSOs and not a number of different people talking to NSOs aboutdifferent areas.

Senator LUNDY—I will come back to that, too. Can you tell me how much, if any, of thisparticular part of funding out of outcome 1 is going to Sportnet and other online informationtechnology services?


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Mr Peters—Sportnet is part of this outcome. Three weeks ago I and other senior officersof the commission met with Telstra, our partner in Sportnet, to look at the deliverymechanism. Our opinion at the moment is that some of the software development has notprogressed as quickly as it should have and we are not able to deliver to our NSOs,particularly in the state and club structure below them, the products that were first talkedabout when Sportnet was introduced. It was a positive response from Telstra and they are nowcoming back to us with their proposal of how they can speed up that software development.

Senator LUNDY—Who is responsible for the software development?

Mr Peters—In the agreement Telstra are to deliver us certain products and we are toestablish the system within our sports to utilise that product.

Senator LUNDY—So Telstra have let you down?

Mr Peters—They have priorities, some of which are commercially based, and they havebeen looking at their own internal structures to see why they have not been delivering ourproduct. They have indicated that they are happy with the product at the moment. Hopefullythis month the next stage of a club model will be finalised and released.

Senator LUNDY—Have they breached their commitments or agreements with the SportsCommission by failing to have this software developed and working effectively by now?

Mr Peters—I do not have the exact wording. It is not my opinion that they have breachedit. The agreement talks about partnerships and the delivery on certain dates, so morally thereperhaps has not been the delivery of some of the software programs. But we have been verymuch part of the discussions and understanding why there have been a number of privatesector companies looking to offer similar services that struggle with the software as well,because they are moving into a new area of delivery.

Senator LUNDY—Are you in a position to look at the competition, so to speak, of thedelivery of online solutions for the Sports Commission and your relationship with the sportingbodies. Or are you really bound now to Telstra?

Mr Peters—We are bound contractually but I think also morally to Telstra, which has put alot of resources into delivery of this product. At the same time we have been looking at whatis happening. A number of our national sporting organisations have gone with other systems.Some, sadly, have not survived. We are working with NSOs to understand why they are nothappy with the product that we have on the ground and whether there are alternatives so thatwe can be challenging Telstra and trying to find out how we make a system work, which iswhat our objective is at the end of the day.

Senator LUNDY—Is there anything preventing the commission, because of Telstra’sfailure to deliver—at least on the moral commitment that they made to the SportsCommission—from entering into a competitive process just to make sure that the SportsCommission achieves what you set out to achieve with Sportnet?

Mr Peters—I anticipate that our discussions now will end with an outcome that says, yes,Telstra can deliver the products we require within a time line, or they cannot. That will allowus to make decisions on whether we progress with this particular project or not.

Senator LUNDY—Is there a deadline?

Mr Peters—We have asked them to come back to us by the end of May and we haveongoing discussions with them now.


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Senator LUNDY—Any specific date?

Mr Peters—I do not have it with me at the moment but I am happy to come back to you onthat.

Senator LUNDY—If you could take that on notice.

Mr Peters—Yes.

Senator LUNDY—With regard to the new funding package, Backing Australia’s SportingAbility, as it is titled, in all of my research I can only find funding four years out. Can youexplain why it has been described, at least by the minister and also in the budget papers, as a10-year plan, and explain to me the features of it that make it a 10-year plan and not afour-year plan?

Mr Peters—The positive aspect of the announcement from the sporting perspective is thatit takes the base funding to sport as the key funding decision, so rather than base fundingsupplemented by other programs in each particular year, as we lead up to an Olympics orwhatever, this has now put the money into the base funding and therefore the certainty of thatfunding into the future is perceived by sport to be guaranteed. The four-year funding is there;the net policy announcement talks about 10 years. My assumption is that that is on the basisthat this is part of base funding.

Senator LUNDY—But is there any specific feature you can point to that identifies a10-year strategy per se? I cannot even find any rhetoric, apart from calling it a 10-year plan,as to why it is a 10-year plan.

Mr Peters—Other than certainty of funding for the future for sport, so they can plan withsome certainty on base funding—

Senator LUNDY—But you have just said that the certainty of funding is only in theoutyears identified in the budget—the four years.

Mr Peters—Perhaps the NSOs have confidence that government policies that talk about10 years and increased base funding to allow things to happen will, in fact, happen.

Senator LUNDY—Mr Mackey, do you know of any specific features that coulddemonstrate the 10-yearism of this?

Mr Mackey—As I am sure you are aware, Senator, the standard practice acrossgovernment is to issue forward estimates for four years only.

Senator LUNDY—Yes. There is a big difference between four years and 10 years, though,isn’t there?

Mr Mackey—Of course.

Senator LUNDY—Mr Peters, the Prime Minister opened a basketball centre in Maitlandin mid-May. Can you tell me whether the funding for this came from the Australian SportsCommission?

Mr Peters—I am not aware of funding for a basketball centre.

Senator LUNDY—Mr Mackey, could I ask you whether or not the funding for that centrecame from the sports portfolio?

Mr Mackey—Just a second; I will have to ask that. I think we had better take that onnotice, Senator.


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Senator LUNDY—I indicate that we will be following that up. I suggest you get someoneonto it. I will come back to it in a short while.

Mr Mackey—Yes, Senator.

Mr Crick—Senator, my recollection is that it was part of the Federation Fund grant for amultipurpose facility in Maitland.

Senator LUNDY—I suggest you get all that information. I will come back to it shortly.Mr Peters, you mentioned before Sport Development division within the Sports Commission.I have some questions about the sport and recreation development grants program. I want toask you if it has been changed in any way.

Mr Peters—The scheme I am aware of was called the Sport Development Grant Scheme. Ican check to see if there is something called a sport and recreation development scheme, butthe Sport Development Grant Scheme again is applied for grants where we assess NSOs interms of what they have done in the past in delivering administrative coaching and officialreforms, and we make an assessment. They also do a self-assessment on where they believethey are against certain criteria and, as a result of that, our funding allocation is made to anNSO. That scheme remains at the moment.

Senator LUNDY—We might be talking at cross-purposes. The scheme I am thinking ofprovides a one- to three-year agreement with the states and relates to sport and recreationdevelopment, but it is a grants program. I do not know if there are any officers present but Iwant to ask some specific questions about that because my understanding is that there havebeen some significant changes with that particular program.

Mr Peters—Under the Active Australia, outcome 2, participation—

Senator LUNDY—This is outcome 2.

Mr Peters—There have been agreements with the states for delivery of Active Australiainitiatives. States have put in applications on how they can work with constituents within theirown jurisdictions and with the commission to deliver the awareness and other ActiveAustralia programs. At the announcement of the government policy, I had a teleconferencewith the heads of sport and rec agencies in the states and territories and explained to them thatthere was now a shift in the government policy. That is, we were now looking to move awayfrom an awareness campaign, which was very much part of stage 1: the states and others wereworking to increase the awareness of physical activity and the importance of it to thecommunity.

That meant that schools, local governments and clubs needed to create an awareness and bein a position to accept any increased registrations that may come out of that awarenesscampaign. The consensus at the moment within the commission is that the awarenesscampaign has not generated the registration numbers associated with the funds that have beeninvested in that particular program. We need to work more closely with NSOs and statesporting organisations. We have had representations from the private sector from those whoare prepared to put money into programs that specifically continue the awareness campaignbut also lead to increased registrations at the club level. The importance of that is that thesurvival of a lot of sporting clubs in Australia depends on capitation fees. Unless we canincrease registrations within that system, a lot of clubs are going to struggle to exist into thefuture, particularly in the rural and remote areas.


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Senator LUNDY—From what I am hearing, you are getting rid of one program andputting that money back in through the outcome 1 initiative that you described with respect tosports development in the NSOs.

Mr Peters—No. We had the initial teleconference with the states. Some of those statesbelieve that the programs that they are putting in place at the moment could easily fit into theobjective of working with NSOs and state sporting organisations to drive increasedparticipation, and we are now talking with those individual states as to how that can actuallybe implemented.

Senator LUNDY—I want to make sure we are talking about the same thing here. Is theprogram you are talking about—that you are discussing with the states—called the sport andrecreation development grant program, or is it called something else?

Mr Peters—Can I come back to you, Senator? It appears as though some of the states haveasked for it to be called different things.

Senator LUNDY—No. What was it called before this budget?

Mr Peters—I will have to take that on notice. My understanding is that it fitted under oursport development, but there are individual contracts of each of the states which may have theword ‘recreation’ in there.

Senator LUNDY—My understanding also was that those agreements were, in fact,three-year agreements and that in some cases they had been terminated, one after just a year.Is that the case?

Mr Peters—They are, in fact, agreements that could go on for 10 years. There are specificclauses in there saying that, if there is a change of government policy or a change in priorityin the commission, the contracts can be finalised. One of the problems in dealing with states isthat we cannot give them long-term commitments and we do not specify how they deliver theoutcomes. They provide submissions as to how they will deliver the outcomes we require,working with the mechanisms within their states.

Senator LUNDY—But notwithstanding those caveats within those agreements, was therea reasonable expectation by at least some states that those agreements would continue beyondjust the one year?

Mr Peters—I would say yes. In fact, I have received letters to that effect and we arediscussing with the states at the moment how we can convert what they have done in theinitial stage into the government policy, now working more specifically with NSOs and clubsand state sporting associations.

Senator LUNDY—Can you tell me how much money is involved in terms of each of thestates under this grants program? I am trying to get a handle on just how much money thestates will lose under this program, notwithstanding the fact that you are talking about otherprograms to complement the work that they were supposed to be doing.

Mr Peters—At the moment we distribute to all of the states and territories a total of$3.2 million. I do not have the individual breakdowns at the moment but I can certainlysupply those.

Senator LUNDY—Can you take that on notice?

Mr Peters—Yes.


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Senator LUNDY—Can you take on notice the state-by-state breakdown and also take onnotice what programs the states were spending that money on?

Mr Peters—Yes.

Senator LUNDY—I am concerned that the money was being spent on initiatives like theolder adult network and rural sports programs, and programs that filled gaps that other grantprograms in fact did not fill. In taking that answer on notice and providing us withinformation about what specific programs were funded by each state, perhaps you could takethe initiative and give some indication as to how you anticipate filling those gaps andproviding for those services in your alternative proposals.

Mr Peters—We are happy to do that. In fact, that is what we have asked the states to comeback to us on. There is a feeling in some states that our money is being substituted forprograms that in fact they should be running.

Senator LUNDY—Was it a ministerial decision to terminate that particular grant programand reallocate the money?

Mr Peters—The policy announcement and the charter letter that the commission receivedfrom the minister asked us to not continue the program at the moment but to look at otherways of delivering the outcomes of NSOs. I do not have a specific instruction to discontinuethe program altogether. There has been a lot of discussion about putting money into creatingan awareness of physical activity, and we now see the health portfolio and education portfoliostarting to understand the necessity of having more Australians physically active. The charterof the Sports Commission is to deliver a sports system, so there is a very fine line betweenwhat portfolio responsibilities are—in fact, what state responsibilities are—in delivering thephysical activity message. From the commission’s point of view and from my point of view,we have led the way in creating a physical activity philosophy out there. We now need towork very closely with our national sporting organisations, our state sporting organisationsand our clubs to ensure that the structure remains. As I say, the lifeblood of Australiansporting clubs is membership and capitation fees.

Senator LUNDY—Mr Peters, with regard to this cancellation of money provided to thestates for community based participation initiatives now being provided through nationalsporting organisations, you mentioned the figure of $3.2 million currently, and yet inoutcome 1 you identified, when we were talking earlier about Sport Development division,that the increase in funding there is only $670,000. Can you tell me whether or not you are ina position to commit that the whole of that $3.2 million will be reallocated in full to initiativessuch as this, back through the states, or whether there has been a diminution in thecommitment to sport and recreational development funding with respect to this program?

Mr Peters—I cannot commit that we will put the $3.2 million back through statedepartments. What I can commit is that the $3.2 million will be spent with NSOs, either inpartnership with state departments or with the private sector.

Senator LUNDY—When you say ‘private sector’, who are you talking about—what sortsof businesses?

Mr Peters—We have had representations from groups like Leisure Australia and we haveput in place a group, Sporting Frontiers, through a tender process. We are about torecommend to the minister the appointment of that particular group to drive sponsorshipproposals for the commission. There is a lot of excitement amongst those groups that they


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have the corporate sector and that they have funds available to partner up with government todeliver some of these outcomes that we are desirous of.

Senator LUNDY—You are happy to take money away from groups like the older adultnetwork and RecLink and other things that could potentially suffer under the state program tosupport sponsorship deal initiatives with the Sports Commission and the private sector. Is thatwhat you are telling me?

Mr Peters—No, what I am saying is that some states have used Commonwealth money tosubstitute for areas that they should be working in. As the commission, our responsibility is todevelop a sports system to work with national sporting organisations, state governments andthe private sector to deliver the outcomes that we believe are appropriate. As I said, we are indiscussions with the states, as we are with NSOs, looking at how we can best partner up todeliver these programs.

Senator LUNDY—You have mentioned the private sector a couple of times, and we nowknow we are potentially talking about Sporting Frontiers and Leisure Australia. Whatproportion of the money that previously went to community groups through the states willnow be allocated not to NSOs but indeed to furthering the arrangements with the privatesector sports promotion outfits?

Mr Peters—The discussions and the proposals that are being brought forward to thecommission at the moment are that the private sector brings money to the particular programand we decide, in conjunction with our partners—which, again, could be the state governmentor could be NSOs—whether we use the funds provided to enhance or double the size of thoseprograms. At the moment the concept is that we are not giving money to any private sectororganisations; we will partner up with them, and others, to deliver the outcomes. There aresome very exciting concepts on the table at the moment, going back to driving after-schoolsports programs and linking them to community clubs. They are the sorts of initiatives thatrequire a lot of funds to put in place, and if we can achieve funding from the private sector tosupplement what government in the past has done by itself, then that is only going to be abetter outcome for our club structure in Australia.

Senator LUNDY—Are you talking about sponsorship of school sport as, potentially, partof that model?

Mr Peters—No. We are talking about looking at programs that can have more kidsinvolved in sport, in—

Senator LUNDY—The two are not necessarily mutually exclusive, though.

Mr Peters—One is a discussion about sport in school, I assume, and ranges from theissues of physical activity, teachers or physical education teachers in schools, which is apolicy issue for the education department.

Senator LUNDY—Yes.

Mr Peters—This is about creating opportunities for young people to learn how to playsport and then make a decision about whether they want to go and do that in a club structure.They are not mutually exclusive, but there are some areas of influence that the commissionhas with clubs to develop and deliver sporting opportunities for young people.

Senator LUNDY—Can you take on notice providing those details, as well as whatproportions of allocations of the money for this proposal you have decided on in terms ofmoney to the private sector and under what conditions that money would be given to the


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private sector—that is, is it dollar for dollar sponsorship, or are you looking for the privatesector to assume both organisational and funding responsibility for whole initiatives? That isthe kind of information I would like.

Mr Peters—Yes.

Senator LUNDY—Could you also take on notice the proportion of the money that will beallocated to national sporting organisations—NSOs—and what hooks or what contingencieswill be attached to the funding that is provided to national sporting organisations as well.

Mr Peters—Yes.

Senator LUNDY—You have spoken about a teleconference between the states andyourself regarding the termination of the sport and recreation development grant program, orwhatever they call it, for each state. Can you tell me if there have been any specificconsultations between the minister and her state counterparts regarding the termination of thatprogram?

Mr Peters—I cannot comment on that. I do not know.

Senator LUNDY—I am trying to ascertain whether it was an initiative of the departmentor the Sports Commission in the first instance, based on that directive from the minister, orwhether the minister actually announced it at a ministerial council for sport or something likethat.

Mr Peters—There has not been a ministerial council meeting since the announcement.Again, on receiving a charter letter from the minister, that is when I had the teleconferencewith the heads of the state organisations.

Senator LUNDY—One of the bigger, bolder statements in Budget Paper No. 2 regardingoutcome 2 was an increase of $32 million over four years, but the bulk of the funding isearmarked for the actual outyears of that—for example, the Sports Commission funding.Given the priority the government claims it gives to participation, how come the bulk of thatfunding is not available now so that those policies can be implemented sooner rather thanlater?

Mr Peters—The only comment I can make is that this is the direction we have in terms ofthe allocation. We are working very closely now with NSOs and the state departments to seehow we look at the delivery mechanisms of increased participation through the clubstructures. I would expect this year that we would be looking at two or three initiatives and atthe success of those—the outcomes—so that we can actually then assess what direction weare going in in the outcoming years. Then we can look to increase the number of initiatives. Ifwe take on too many initiatives, then there is a danger of a popgun approach. We need to bevery careful that what we do in the partnerships we form is effective, and we need to be ableto monitor those.

Senator LUNDY—For the committee’s benefit, in the first year it is $6.6 million, then$7.7 million, then $8.2 million and then in 2004-05 it is $9.5 million, so there is quite adifference in the funding. That actually grows. How does that relate to what you said beforeabout giving sporting organisations some certainty with respect to funding if you are going tobe engaged in an ongoing review exercise?

Mr Peters—For the majority of the sporting organisations this is a new opportunity forthem to address participation. The plea from NSOs, and similarly at the state level from SSOs,is to give them certainty of funding when it comes to them being able to employ staff.


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Therefore, the announcement has been well received by NSOs to date—that there is nowsome certainty of funding in relation to their core business. As I said in the letter that went outto NSOs, in this Active Australia area these are new opportunities for us to work with themand with the private sector and state governments to deliver this participation suite ofprograms. For some NSOs this is a challenge for them now to look at their sports and to seehow they can assist us and the state governments to increase participation areas that they arestruggling with at the moment.

Senator LUNDY—What specific measures and programs have been initiated to increaseparticipation in rural and regional Australia?

Mr Peters—Since the policy announcement?


Mr Peters—We are in discussions with NSOs. There are some sports like AFL andathletics that we know have specific programs that they would like to target out in the ruraland remote areas. But there are additional costs of them doing it, given that some are highpopulation areas. Some of the high population areas actually are defined as isolatedcommunities because they do not have services. They have tended in the past to focus onthose areas because that is where they get the greatest result from increased participation.They have already expressed in initial discussions that they have the programs to take out tothe rural and remote areas but the cost factors are enormous for them, and that they wouldwelcome us partnering up with them and others to deliver them to rural and remote areas.

Senator LUNDY—Could you take on notice to provide the committee with details aboutthose initiatives? Given that there do not seem to be any that you can specifically identify atthis point in time, take on notice to provide them as they become locked in so that thecommittee can get an idea of how that money will be spent. Also, can you provide the specificsource of the funding—which of the programs it is and whether it is a requirement or acondition of NSO funding generally? Can you basically identify the source for each specificprogram targeting rural and regional Australia and, within that funding, provide a breakdownof how much is being spent on transport, equipment, competition, sports science medicine,training, coaching clinics and so forth—the normal breakdown as to how you would allocateeach specific grant?

Mr Peters—Yes.

Senator LUNDY—I would like to ask about the involvement in Active Australia in thatparticular funding package. Is money from Active being allocated to that particular initiative?

Mr Peters—Money from ‘Active’, as in Active Australia?

Senator LUNDY—Active Australia.

Mr Peters—Yes, all that money has now been pooled. The $3.2 million plus the additionalmoney is now all under the Active Australia banner. What we are doing, as I said, is talking tonational sporting organisations at the moment, the private sector and state government people,to see how we best deliver a suite of programs that achieves what we want to do—that is,more people participating in sport and registering through the club structure.

Senator LUNDY—Could I ask you to take on notice to provide details of the incentiveprogram to increase player recruitment? I am presuming that relates to what you were talkingabout in improving the numbers of participants in sports. Can you just clarify if that is thecase?


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Mr Peters—Sorry, an incentive program?

Senator LUNDY—Yes. There was an incentive program announced, in BackingAustralia’s Sporting Ability, to increase player recruitment. Is that what you were talkingabout earlier with respect to increasing participation within national sporting organisations?

Mr Peters—Yes. The issue is for the NSOs and, as I used the example of a couple of sportsbefore—

Senator LUNDY—No, that is fine. I thought it might be something different, but if it iswhat you have been talking about we will move on. Within the Sports Commission someyears ago now, the Women in Sport Unit was mainstreamed. What specific initiatives in thisnew policy announcement can be attributed specifically to improving the participation ofwomen in sport?

Mr Peters—There is no specific announcement in relation to women’s sport. There isdiscussion about key groups—such as women, people with disability, indigenouscommunities—where we need to be conscious of delivery of programs to increaseparticipation in those areas.

Senator LUNDY—Is it the Sports Commission’s intention to identify specific programsfor women in sport?

Mr Peters—Again, in discussions with national sporting organisations—and I talk a lotabout them—we are asking them to look at a whole suite of programs to develop their sports.At the moment we work very closely with a number of those organisations. We also have seena positive trend in recent years of not having separate organisations in sports where males andfemales compete. In fact, we are bringing the administrative expertise of those sports togetherunder one body—such as hockey, which has just amalgamated. Again, that is looking at amore efficient delivery of programs to both sectors.

Senator LUNDY—With respect to indigenous sport, which you mentioned, I would likeyou to clarify that. On page 30 of Our Path Together, the statement by Minister Ruddock, itsays that $1.5 million has been allocated for an indigenous sports program. Can you tell mewhere I can find this in the portfolio budget statement and whether or not it is new money?

Mr Peters—I will just seek some clarification. I am not aware of the actual wording, but Ican do another review of it. There has been an increase in, again, the charter letter receivedfrom the minister of $500,000 to indigenous programs. The specific allocation is now$1.5 million. I think at the last estimates hearing we provided some information on noticesaying that the fund was just over $1 million and here are the things we were doing. It hasnow been increased, specifically in the indigenous areas, to $1.5 million; so there has been anincrease of $500,000.

Senator LUNDY—Can you tell me what specific funding has been allocated to thestrategy to improve indigenous participation in sport? Could I ask you perhaps to take that onnotice and to provide a state and territory breakdown, as well as a sport by sport breakdown,of those allocations?

Mr Peters—Yes. I have it here but I can provide it on notice if you like.

Senator LUNDY—If you have the answers here now, could you provide them?

Mr Peters—Again, we talk a lot about partnerships in sport and the way we deliverprograms. With indigenous sport we work with ATSIC and with state departments; we havejust received funding from Olympic Aid and we have the ATSIC regional councils. In


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summary, we believe with the types of resources that we have partnered up with now throughthe ATSIC national body, there is just over $2 million in the Indigenous Sport Program. Wecontribute $1.5 million; state departments contribute $1.7 million. I am aware that some statedepartments are about to increase that by putting some more indigenous officers intoindigenous communities. Olympic Aid have put $360,000 in and it is assessed that the ATSICregional councils collectively have put about $10 million into sport and recreation within theircommunities.

Senator LUNDY—If you could take on notice those other questions I asked aboutbreaking down how that is spent. Can you tell me whether there is a voice for indigenoussport within Active Australia? By that I mean an indigenous representative to provide adviceon the types of services and infrastructure needed by indigenous communities.

Mr Peters—In the sport development area we employ three staff to deal specifically withindigenous sport programs.

Senator LUNDY—Are they within Active Australia, though?

Mr Peters—They are within the sport development area, of which Active Australia is likean overall philosophy.

Senator LUNDY—Right. What about on the Sports Commission? Is there an indigenousrepresentative at the moment?

Mr Peters—These three staff represent the indigenous program as part of the SportsCommission.

Senator LUNDY—But they are not on the board, are they?

Mr Peters—Not on the board of the commission, no.

Senator LUNDY—Have you thought about the need for indigenous representation on theSports Commission board?

Mr Peters—There is presently one vacancy on the commission and about to be a secondwith Mal Speed’s appointment to the International Cricket Council. I know the minister isconsidering a number of replacements at the moment.

Senator LUNDY—There was an expectation based on comments by the Prime Ministerthat a cricket match between the PM’s side and an ATSIC side would be ongoing, but I cannotfind any future funding for this event. Is it a one-off, or are you going to have to find moneyfor that event from somewhere?

Mr Peters—Our role was to assist, through our indigenous staff, with the administration ofthe games. We did not fund any of it. I am not sure whether another portfolio has the fundsavailable.

Senator LUNDY—So you did not provide any money for that event.

Mr Peters—No, not that I am aware of.

Senator LUNDY—You do not expect to provide any money for that event in the future?

Mr Peters—It is certainly not in our budget allocations.

Senator LUNDY—Could you take this on notice? The 1999 budget estimates revealed thatof the 42 national sporting organisations funded by the participation division only 22 hadworked with divisional staff to improve participation opportunities for indigenous people. Canyou provide the committee with details of the number of national sporting organisations who


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did it in the last financial year, the nature of the initiatives they undertook and yourprojections about where that is going, including what commitment you are going to requirefrom national sporting organisations with regard to indigenous sport as part of thosedevelopment programs?

Mr Peters—Yes.

Senator LUNDY—Mr Peters, you are on the Sports Commission web site as saying thatthe Sports Commission will not fund sports which have limited high performance potentialbut low participation. Can you explain to me how that relates to previous discussions we havehad at this committee about the formula which the Sports Commission applies to the elite sideof funding? How contingent is that upon issues like participatory base or, indeed, their abilityto actually win medals, particularly gold medals?

Mr Peters—There has been a number of formulas that the commission has used over theyears to determine how funding is allocated to NSOs. A lot of it is based on performance atinternational level, as well as what development programs they have in place. At the momentthere are some sports that survive on government funding. Whether they have the ability totake their sport anywhere in terms of participation numbers to eventually be able to competeon the international stage and therefore have the success which, in turn, generatespopularity—and I hesitate to say corporate money, because we are not seeing that eventuate ina lot of sports at the moment. We have to make a decision comparing equity across all sportsagainst those sports we believe can perform on the international stage and development medalwise. That is a difficult decision to make. We are challenging a number of sports at themoment. In the past there have been some board policies not to fund some sports because thedefinition of ‘sport’ becomes hazier every year. A number of organisations come on and wantgovernment funding.

I can probably talk of the future a little more confidently than the past. The key to thefuture is that we are asking national sporting organisations to have strategic plans which tellus where they are taking their sport into the future. This should not be about a handoutmentality. It should be about them running sports as a business and, therefore, them being ableto justify that if the federal government, through the commission, puts money into theirorganisation, what is the outcome of that going to be?

This year we have given funds to some sports in that development area, such as the modernpentathlon, that in normal circumstances would not receive funding because of theirperformances. We believe the Olympics created an opportunity for them to progress theirsport. We are working with them, with supplementary funding from their national body, forthem to put programs in place to develop as a sport with some fairly specific targets that theyhave to meet and have agreed to.

Senator LUNDY—Have you earmarked any sports that you are intending, by virtue oflack of performance or perhaps lack of professionalism, to cut off from NSO funding underthe grants program?

Mr Peters—Not to cut it off. As I said before, we have now established resourceagreements which have put particular challenges to sports. They need to be meeting targetswhich suggest to us—

Senator LUNDY—I understand that. I just wanted to get an idea of whether you are goingto reduce the number of sports funded.


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Mr Peters—We do not have a list of sports we are going to reduce funding to. The fundinghas allowed us to perhaps be a little more generous to some sports in working with them, inthat if we did not get the increased funding there would have been some sports that would nothave been supported by the commission.

Senator LUNDY—The paralympic sport has received a relatively small increase in theelite funding package. Considering the extraordinary success of the paralympians in 2000, canyou explain why there was not a larger fund allocation made to paralympic sport? Can youtell where the decision was made about that level of funding? Was it a ministerial decision orwas it based on your own determinations?

Mr Peters—I am aware that the Australian Paralympic Committee did put submissionsforward to the government. We also made comment to the government. At the end of the day,it was a decision made by government about how much funding was distributed. I have haddiscussions with Greg Hartung, the President of the APC. They are pleased with thecommitment they have been given.

We are also working with a number of the groups representing people with disabilities, interms of their structures. Some of those groups in the past have done a wonderful job throughtheir volunteers, but there have been NSOs created that perhaps have a dual purpose to otherNSOs. We are working with them to look at combining some of those groups. We have giventhe APC support in the Oceania region now for them to look at setting up a paralympic rolethere, on the basis that we can also increase Australia’s representation at international level.There are a number of fronts outside the initial financial allocation where we are workingwith the APC and their groups to strengthen and take advantage of what was a magnificentperformance at the Paralympics.

Senator LUNDY—Can you take on notice providing details of any discussions betweenthe minister’s office, the department, yourselves with the Paralympic Committee or theparalympic community representatives over that funding? I am trying to get a picture of theconsultations that took place up to that decision and any key dates upon which decisions wereactually made leading up to the policy announcement.

I will put on the record a couple of questions that I would like you to take on notice. Firstof all, can you provide a table of all funding for each sport from 1999-2000 through to2001-02 and subsequent out years where known? It is really a breakdown of the grants toNSOs.

Mr Peters—Yes.

Senator LUNDY—Because of the changes in the nature of the funding you havedescribed, with other money potentially being loaded back into NSO grants, also identifythose where they have been determined, or state whether there is an opportunity for NSOs tosecure further funding from the Sports Commission.

Mr Peters—Yes.

Senator LUNDY—Can you please take on notice to provide detail of criteria that wereapplied to these new funding arrangements?

Mr Peters—Yes.

Senator LUNDY—We have gone into that a little this morning. Could you extrapolate onthat, particularly the area of what we were just talking about, whether it was Olympicssuccess or medal success or necessary outcomes with regard to participation, international


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sporting success, whatever those criteria are? Also provide details of the Olympic YouthProgram initiative—for example, how many young people are involved; whether or not this isa talent identification program or indeed an awareness program? Could you provide somemore information about how that particular program will operate?

I have a couple more questions here about the Australian Institute of Sport. There is nomention in the budget papers about funding for maintenance at the Australian Institute ofSport. Can you explain why and how much you estimate the maintenance of the AustralianInstitute of Sport facilities to be?

Mr Peters—My understanding is that, at the time of the initial budget submissions wereput together, there was a decision, I think in conjunction with the department, not to addressthe facilities issue at the AIS. One of the programs that we have now put in place with thearrival of Michael Scott, the Director of the AIS, is to look at what the AIS is going tophysically require in the next five to 10 years. There are increases in the video analysis areathat presently does not have adequate space. We have a couple of condemned buildings forour administrators of the Active Australia Program.

Senator LUNDY—They are still in demountables, aren’t they?

Mr Peters—Yes.

Senator LUNDY—Are you going to fix that?

Mr Peters—There will be a great cheer when I do and we are certainly looking to do that.

Senator LUNDY—Did you get money in this year’s budget for it?

Mr Peters—No. We are now discussing the requirements with the department of finance.In fairness to them, there is a realisation that there needs to be some work done in that area.We need to understand as a commission exactly what we are looking to do in the next five to10 years.

Senator LUNDY—I did not mean to distract you from your earlier response; I am justcurious. So you have not allowed for facilities maintenance within the AIS budget and you donot anticipate you will.

Mr Peters—There are some funds for maintenance of buildings in there, but the big issueis capital for the development and replacement of some facilities.

Senator LUNDY—Is the government committed to retaining the AIS in its presentstructure over the next four years at least, given the extent of the out years funding, butparticularly over the next 10 years, given we are theoretically talking, at least as far as theminister is concerned, about a 10-year plan?

Mr Peters—My understanding is that there is a full commitment. Certainly I have receivedno advice to the contrary. The question most asked of me since my arrival in Canberra is:when is the AIS leaving Canberra?

Senator LUNDY—What is your response?

Mr Peters—My response is that it is a world regarded organisation that is leading edge inits sports science, sports medicine area, that sports are still desirous of being in the AIS, andthat it is under no threat.

Senator LUNDY—Are there plans to alter the composition, number of programs, residentprograms, or plans to decentralise the institute?


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Mr Peters—I cannot guarantee, because governments make overall policy. From thecommission’s point of view at the moment, and our planning, we may make some alterationsto the make-up of some of the programs there, based on what national sporting organisationsdesire within their high-performance plans for the future. There has been a trend for fewerfull-time residential programs in some sports, but that has been supplemented by more campsbeing run out of Canberra. So there have been statistics—and, again, I can supply them ifrequired—

Senator LUNDY—Yes, please.

Mr Peters—Which show a history of some programs that have now been decentralisedinto other capital cities, as against others that have now a non-residential program.

Senator LUNDY—If you can provide a description of the changes that you know will betaking place.

Mr Peters—Yes.

Senator LUNDY—Two other questions I would like to put on notice. Can you provide thelatest structure of the Australian Sports Commission, particularly reflecting any changes thathave taken place as a result of the Backing Australia’s Sporting Ability announcement?

Mr Peters—Yes.

Senator LUNDY—And the associated budget allocations within the Sports Commission’sframework to each of those sections. Then, finally, can you tell me if there is any fundingallocated to Australia Sport International in this year’s budget?

Mr Peters—There is an allocation for our international section which deals with thatgroup, but not specifically an allocation for that particular group.

Senator LUNDY—Would you just take on notice and provide an answer as to what thefuture of Australian Sport International is in the context of ongoing funding, but also in thecontext of the Backing Australia’s Sporting Ability policy announcement?

Mr Peters—Yes.

Senator LUNDY—I would like to hand over to my colleague Senator Faulkner.

Senator FAULKNER—Thank you, Senator Lundy. I just wondered if I could understandthe resources that are going to the department’s sports branch. If you could just point me tothe place in the PBS where I would find that. This is Mr Mackey’s or Mr Crick’s area, I think.

Mr Mackey—Yes, Senator, it is in Mr Crick’s area, so I will ask him to respond.

Mr Crick—Senator, you will not find in the PBS as such what we call our running costs,because that just comes out of the general departmental appropriation. What you will find inhere are specific administered items that you will find where it goes to outcome 1, thedescription of measures affecting outcome 1, beginning on page 35.

Senator FAULKNER—Yes.

Mr Crick—You will find a number of items there that we call administered items that welook after, where we are given grants to do that. On top of that, there is a general departmentalallocation that comes out of the portfolio allocation.

Senator FAULKNER—In terms of the sport agencies, if you like, in the department,obviously we have the ASC—that is correct, isn’t it?


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Mr Crick—Yes, there are portfolio agencies, Senator.

Senator FAULKNER—Yes. We have ASDA and we have the sports branch. Is that thecorrect terminology, sports branch?

Mr Crick—No. It is a division within the department called Sport and Tourism. In fact, thesport component of it is relatively small. The tourism division is essentially what was thetourism department under the previous government but was rolled into the industrydepartment under this government.

Senator FAULKNER—Sure, but there are those three elements—ASC, ASDA and sportand tourism?

Mr Crick—Yes, Senator.

Senator FAULKNER—What I am interested in is just understanding how much of sportfunction is there in the Sport and Tourism element.

Mr Crick—There is a fair bit of emphasis that we place on trying to work with the sportindustry as such, and one of the significant areas where we have been working is what arecalled the action agendas. You will be familiar with the fact that there are several actionagendas across various sectors of industry, looked after by the portfolio, and we havedeveloped an action agenda for the sport and recreation industries. My colleagueMr McCarthy can speak about that in more detail, if you should wish that. That is aimed at themanufacturing and the service providers in the industry, to help them overcome anyimpediments to their growth and development, and to improve their export performance. Thatis a fair bit of the element.

Senator FAULKNER—What is the element actually called, Mr Crick? Is there adisaggregation of Sport and Tourism into a sport element?

Mr Crick—Not specifically, because we have broken up the division into three groups andthere is a sports component in at least two of those three groups, because it makes more senseadministratively, if you are dealing with things like industry development, to link in some ofthe sport and tourism together. But I suppose out of a departmental allocation of around$9 million per annum, probably about a third, descending to a quarter, would go on thingsrelated to the sports industry or sport generally.

Senator FAULKNER—Does the sport element of this have a title?

Mr Crick—No, not specifically. There is a group called Sport and Tourism BusinessDevelopment and there is a group called Sport and Tourism Industry Development. The sportand the tourism grants are administered side by side, because that makes more sense, becausethose people are expert at developing contracts and administering grants, and where theindustry development or business development is being handled then it is, again, in a groupthat is dealing with both sport and tourism.

Senator FAULKNER—So when Senator Lundy asked you about the Maitland basketballstadium earlier on, your comments about it not being funded are from both a sport andtourism perspective?

Mr Crick—That is being handled in an area of the division that deals with administeredfunds and contracts and grants, because we did not have a policy role in it as such. Thosepeople have the expertise to do that. So whether it is the Maitland Federation Centre orSOCOG or whatever, then that is handled in that area.


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Senator FAULKNER—So what is ‘that’ area now?

Mr Crick—It is part of the Sport and Tourism Industry Development.

Senator FAULKNER—Yes, but I am just saying that, when Senator Lundy asked you thatquestion, we can be satisfied that was not funded by either the sports or tourism elements ofthe department?

Mr Crick—It came out of a program that is administered by the Sport and TourismDivision.

Mr Mackey—Senator, if I can interrupt just to answer Senator Lundy’s question, becauseI think you asked about the funding source of that centre earlier, didn’t you, Senator?


Mr Mackey—The funding was actually paid out in 1998-99. That is why we did not havethe material readily to hand. I have checked back with the department, and the funding of$2 million was made in 1998-99, and it came out of what was then called the Sport andRecreation Program of the department.

Senator LUNDY—Sorry, Mr Crick said on the record earlier it was a Federation Fundallocation.

Mr Mackey—Mr Crick, Senator, said he thought from recollection it was, but therecollection has been corrected, since it was back in 1998-99, and in fact it came—

Senator LUNDY—Sorry, I just want to get this clear. When I asked the question I did notnotice the equivocation, and it seemed that you were quite sure that it was Federation Fundmoney. Are you now telling me it had nothing to do with the Federation Fund?

Mr Mackey—Senator, we were not sure, because it was over two years ago, and we had tocheck.

Senator FAULKNER—I might come back to that at a later stage, but I am just trying tounderstand at the moment the departmental role. There is no role of coordination, then, as faras sports policy is concerned at a departmental level?

Mr Crick—Not in an ongoing way, Senator. We certainly had a function in doing somecoordination and pulling together what emerged as Backing Australia’s Sporting Ability, butthat was done in consultation with other agencies, to a large extent. We have a role incoordinating across various agencies the government’s Tough on Drugs in Sport policy orstrategy but, beyond that, we do not have an ongoing role in coordination of sports policy.

Senator FAULKNER—Sorry. Just run that last bit by me again. You have a role in what,monitoring?

Mr Crick—We had a role and have an ongoing role in coordination across variousgovernment agencies that contribute to the government’s Tough on Drugs in Sport strategy.

Senator FAULKNER—Yes, but is there any monitoring of the performance of the ASC orASDA done at a departmental level?

Mr Crick—No, Senator, not in an ongoing way at all.

Senator FAULKNER—What do you mean, not in an ongoing way?

Mr Crick—Certainly the department has a role in providing the government with someadvice or comment on such things as the overall business plan, if the government sought to


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ask us, and they do from time to time, but we certainly do not have any sort of an ongoingmonitoring role with the commission’s own performance.

Senator FAULKNER—Whose business plan do you look at, ASDA’s and the ASC’s?

Mr Crick—If the government wanted, and they have from time to time sought a commenton aspects of those business plans, we would provide it, but that should not be interpreted assome sort of ongoing monitoring role of the performance of those agencies. They are statutorybodies. They have a direct responsibility to the government and to the minister of the day.

Senator FAULKNER—Surely it is one of the functions of the respective boards, I wouldhave thought, too.

Mr Crick—Absolutely.

Senator FAULKNER—Sport and tourism, business development and industrydevelopment run to about $9 million—is that right?—and you think the sports component ofthat might be about $3 million?

Mr Crick—Overall, roughly speaking, it is probably between a quarter and a third, yes.

Senator FAULKNER—Yes, recurrent funding?

Mr Crick—Yes.

Senator FAULKNER—How many departmental staff would be involved in thosefunctions?

Mr Crick—There are probably about 10 or so, maybe.

Senator FAULKNER—Ten or so?

Mr Crick—That is not necessarily every day. Things come and go, of course.

Senator FAULKNER—Did the department have any function in the run-up to theinternational drug summit? I am not talking about ASDA here, obviously. I am talking aboutthe department.

Mr Crick—Absolutely, most certainly, yes.

Senator FAULKNER—Could you explain what that was. Were these two functions in thedepartment responsible for that?

Mr Crick—Yes. When we started to develop the drugs in sport strategy, which wassometime early in 1999, I recollect, we took on the coordinating role across agencies, and anelement of that strategy was the drugs in sport summit, which took place in November 1999.That was organised and managed from my division but in consultation with and throughsteering committees, if you like, that involved other relevant agencies.

Senator FAULKNER—Who was on the steering committee?

Mr Crick—There were two committees. One was a policy committee and one was a sortof overall executive steering committee, if you like. On the executive steering committee,which took all the decisions about management, were ourselves, Prime Minister and Cabinet,Foreign Affairs, the Sports Commission and the Sports Drug Agency.

Senator FAULKNER—That was the policy committee, you say?

Mr Crick—That was the sort of management, if you like.

Senator FAULKNER—That is the executive?


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Mr Crick—The executive committee.

Senator FAULKNER—What about the policy committee?

Mr Crick—On the policy committee I think there were those same agencies plus Healthand Customs, and I think AQIS was there.

Senator FAULKNER—Was this a formal IDC or less formal?

Mr Crick—No, it was just an informal IDC that came together to inject the policyelements into that summit, and in fact it continues to meet from time to time to ensure that weare delivering on the drugs in sport strategy.

Senator FAULKNER—So the policy elements are not the responsibility of ASDA? Theyare the responsibility of a much broader group?

Mr Crick—Let me answer it this way, Senator. Within that drugs in sport strategy, thereare a number of elements that are the policy responsibility of various agencies. For example,import-export regulations come under one agency. The monitoring of which drugs go oninternal restriction lists comes under the responsibility of another agency. ASDA certainly hasresponsibility for key elements of that strategy but several other elements are theresponsibility of other agencies. What the committee does is try to ensure that we are allcoordinated in the approach we have to the strategy.

Senator FAULKNER—Who chairs the committee?

Mr Crick—I have been chairing it, Senator.

Senator FAULKNER—Would you be able to make available for the benefit of thecommittee the membership of both those committees, the policy committee and the executivecommittee?

Mr Crick—In terms of agencies?

Senator FAULKNER—Agencies and individuals.

Mr Crick—The executive committee, of course, is passe. That was put together to managethe drugs in sport summit, which took place in November 1999.

Senator FAULKNER—I am sorry. I thought you suggested it was ongoing.

Mr Crick—No. The policy committee is ongoing inasmuch as the same agencies cometogether from time to time to discuss the implementation of the strategy, but the role ofinjecting the policy component into the summit, of course, was also an historical event.

Senator FAULKNER—It is not clear to me how policy development in this sense wouldmeld with the role of ASDA. I had understood that that was a function and role of ASDA.

Mr Crick—Generally speaking, Senator, the government can obtain policy advice fromany source it likes, basically, whether it be within government or outside government.

Senator FAULKNER—Who does this group report to, though?

Mr Crick—Which?

Senator FAULKNER—The policy committee, the informal IDC, as it has been described.

Mr Crick—Can I just take a step back, Senator. Inasmuch as it met in the lead-up to thedrug summit, it coordinated the policy content of what we wanted to get out of the summitand the approach to issues we took during the summit. It would probably be a misnomer tocontinue to refer to it as a policy committee. It really is an interdepartmental or an interagency


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committee that monitors the drugs in sport strategy and provides a forum for discussion aboutthe drugs in sports strategy.

Senator FAULKNER—Well, does it have a name, Mr Crick? I will just use the right nameonce you give it to me, you see.

Mr Crick—I am not sure it even has a name, Senator. It is drugs in sport strategyinterdepartmental committee.

Senator FAULKNER—Does someone keep minutes of this committee?

Mr Crick—We probably do not. Yes, I think we have documented some summaryoutcomes but it is not a formal interdepartmental committee that has—

Senator FAULKNER—But if it is giving advice to government—

Mr Crick—No. The policy advice that goes to government goes from whatever is therelevant agency. The committee would not purport to usurp the policy advising role ofCustoms or the health department or the industry department or whatever department has arole there.

Senator FAULKNER—I am just trying, unsuccessfully at this stage, to understand itsrole. It does not give advice to government?

Mr Crick—No. Its role is just as a coordinating body or a forum for discussion and furtherdevelopment of the drugs in sport strategy. If the government wanted policy advice on anyparticular component of that strategy, it would get it primarily from the agency responsible forthat area of policy advice.

Senator FAULKNER—But it is pretty informal.

Mr Mackey—I do not think this is unusual, Senator.

Senator FAULKNER—No, I am not suggesting it is. I am just trying to understand itsnature. I was not even aware of it five minutes ago, so I am just trying to understand what itdoes.

Mr Mackey—It is an informal coordinating committee to implement the whole ofgovernment policy of Tough on Drugs in Sport. If the government were to, for example,revisit that strategy and a cabinet submission were to come forward, then that committee maywell have a more formal role, even developing the submission or providing coordinationcomments and so on, but the policy is firmly in place and this is a means of ensuring that theleft hand of government knows what the right hand is doing.

Senator FAULKNER—I can be assured that there is no duplication of the roles andresponsibilities of either the ASC or ASDA? That is really why I am asking these questions. Ican be assured about that, can I?

Mr Crick—In my opinion, Senator, you can be assured. As I said before, the governmentcan obtain policy advice from wherever. The traditional model is that the government obtainspolicy advice from departments of state. It creates statutory bodies to implement policy invarious functions, but I think there is always going to be some slight blurring of the marginsof that. For example, the Sports Commission, quite clearly in its statute, has a role to provideadvice to the government on sports policy, but the departments of state also have a role toprovide policy if the government should wish to seek it from them.

Senator FAULKNER—I read the various announcements on Backing Australia’s SportingAbility and, specifically, can I take you to the antidoping activities there. I am not sure who


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this is directed to, but we have three agencies at the table, so no doubt someone can help me.It says that Backing Australia’s Sporting Ability includes:...an additional allocation of $7.4 million for new anti drugs research, additional testing, and to meetinternational obligations.

In relation to meeting international obligations, is that about, in part, going to support for theWorld Anti Doping Agency, or WADA as everyone calls it these days?

Mr Crick—Yes, Senator, it is.

Senator FAULKNER—In its entirety?

Mr Crick—The amount of $7.4 million that was mentioned is broken up into threecomponent parts. One of those component parts was to put aside some money which would bethe Australian government’s contribution to the World Anti Doping Agency.

Senator FAULKNER—Can you disaggregate for me the $7.4 million into those areas:new antidrugs research, additional testing and meeting international obligations? And can youdo so over the forward estimates period?

Mr Crick—The disaggregation is notional to some extent.

Senator FAULKNER—Sure.

Mr Crick—But, notionally, the disaggregation would be up to about $1.8 million for drugtesting, up to $1 million for the support for the World Anti Doping Agency and up to$5 million for drugs research. A very quick calculation will bring you to the conclusion thatthat is more than $7.4 million.

Senator FAULKNER—Yes, I realise that.

Mr Crick—Therefore, there will be some decisions being made along the way as to wherethe money goes.

Senator FAULKNER—No, I assumed that that would be right because, if we look downat the arrow points below that general statement in the package that was made public, it says$5 million for antidrugs research and $1 million to meet our international drugs in sportobligations in support of WADA, and I appreciate the arithmetic issue that you have justraised with us. But what about over the out years? Can you indicate to me whether that is aconsistent level of funding across four years?

Mr Crick—It is, yes. Notionally, it is a consistent level of funding across those four years.It breaks down to up to almost half a million dollars for drug testing, about a quarter of amillion dollars for support for the World Anti Doping Agency and a bit over $1 million fordrug research.

Senator FAULKNER—I turn to ASDA, then, and ask you or Mr Mendoza, who I assumeis here for ASDA, specifically how much extra money per year ASDA will have.

Mr Mendoza—Senator, per year it is up to $450,000 for additional funding.

Senator FAULKNER—Where do I find that in the PBS, Mr Mendoza?

Mr Mendoza—It is on page 35.

Senator FAULKNER—Yes, okay.

Mr Mendoza—Not that specific figure, but it is included in, as I understand, that section.

Senator FAULKNER—Headed ‘Explanation’?


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Mr Mendoza—Yes.

Senator FAULKNER—I love these explanations in these PBSs! It is always so clear afteryou have read them, and I am sure you would all appreciate that. I did read that with interest.Can I take you to page 285, please? Can I take you to table 2.1, under outcome 1—Resourcing, and to the line in the table ‘Total revenue from government appropriations’. Youmight explain to me the difference between the two columns there which seem to indicate asignificant decline in revenues. If you could explain that to me, I would appreciate it.

Mr Mendoza—There is a fairly simple explanation for that. The additional funds that Ispoke of, the $450,000, are not included under the 2001-02 there; it is back, as you saw, in theISR section. But what appears to be a reduction is somewhat of an anomaly, in that there wasadditional funding provided for this year for the introduction of the blood test, subject to itsapproval for the Sydney Games. That approval was given by the IOC in August and,consequently, the caveat that was put on the $1 million was satisfied and that funding wasprovided for ASDA this year.

Senator FAULKNER—But doesn’t that show a decline in government resourcing ofabout 20 per cent or a cut of 20 per cent?

Mr Mendoza—No, not directly. It looks as though from $5.7 million to $4.6 million is, atface value, a 20 per cent reduction or thereabouts, but the ongoing funding will reduce that,and also there were substantial establishment one-off costs with the establishment of the bloodtesting this year. They will not recur. They included such things as the changes to thelegislation, writing a new scheme for the act, education and training of field staff, et cetera.

Senator FAULKNER—So the average staffing level cut from 46 to 40 is not real either.

Mr Mendoza—There are a number of facts that really lie behind that. This year, as youwould appreciate, Senator, included the Sydney Olympics and a very intense build-up periodof about 10 weeks, from 1 July last year to the commencement of the Games. We had aconsiderable increase in field staff to accommodate a very heavy testing load in those10 weeks. In fact, ASDA did more tests in that period than we did in a full year several yearsago. That was, again, if you like, a bit of an aberration; it is not an ongoing feature of our basestaffing.

Senator FAULKNER—Can you indicate to me whether the cuts that are shown intable 2.1 are going to have any impact at all on ASDA’s normal work?

Mr Mendoza—The introduction of the new blood testing has been happening since thebeginning of this year. ASDA has been doing the blood testing as an additional component ofits standard testing program. During this period we were working towards integrating thatwith our ongoing urine program. We will be able to ensure that the additional funding enablesus to continue to provide a highly effective deterrent program in combination between testing,standard urine testing, EPO testing and our education initiatives.

Senator FAULKNER—But urine testing is still considered by ASDA, is it not, the mostimportant of your broad scale testing regimes? It used to be, but I want to check that is stillthe current situation.

Mr Mendoza—Certainly the urine test provides for a much broader spectrum of drugs.


Mr Mendoza—The blood test is purely, at this stage, for the detection of erythropoietin, anaturally occurring hormone.


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Senator FAULKNER—So urine testing still remains a very significant, if not the primary,competition and out of competition test. Is that fair to say?

Mr Mendoza—That is fair to say.

Senator FAULKNER—What will be the impact of this reduction on competition and outof competition urine testing?

Mr Mendoza—I think the line that there is a reduction is not valid in that if you removethe anomalies that have been associated with this year’s program—two features, the Olympicsand the introduction of the blood testing and the establishment of the systems to supportthat—those one-offs will not occur again. It is probably more relevant to look at funding for1999-2000. You can see that there is a real and significant increase for the introduction of theblood test on an ongoing basis.

Senator FAULKNER—We will get to that. There is a value judgment contained in youranswer to my question which I am willing, in sporting parlance, to lift the bat and let gothrough to the keeper, but let me ask my question in a different way. Will there be changes tothe number of competition and out of competition urine tests and, if so, what will the impactbe? To put it better: if so, can you quantify it? In other words, I am asking the same questionnot linked to what appear to me to be the real reductions and cuts that are demonstrated intable 2.1 that you are taking issue with. Let us put that aside. Let us say that there is not reallyan average staffing level cut from 46 to 40 and the table is wrong. Let us say that there is not areal total revenue reduction from government from $5.7 million to $4.63 million, and thetable is wrong. I accept all that. Now I am just concentrating on competition and out ofcompetition urine testing.

Mr Mendoza—We are, at this point, working through the total numbers that we will beundertaking for next year and beyond. That is based on a whole lot of factors in terms offeedback we have from athletes as to the deterrent effect of our programs. It is important torecognise that in the last 12 months we have maintained a deterrent effect: that is a simplescore of around 90 per cent. What that is saying is that nine out of 10 Australian athletes aredeterred by the programs that we put in place. That is one factor that we will take intoconsideration in determining the final numbers. But we will obviously have to take intoconsideration what we have learnt over the last few months with the introduction of the bloodtests. I might add that this is very much a case that we are leading the world in theintroduction of this test. There is no other domestic testing program in the world which hasintroduced the blood test.

Senator FAULKNER—Yes. I do not normally like to interrupt, Mr Mendoza. Iacknowledge that. I have not got to the blood test for EPO. I think ASDA deserves heartycongratulations for what it has done in that area, and I would be the first to acknowledge itand acknowledge it publicly. But, with respect, my question was about competition and out ofcompetition urine testing; it was not about the blood tests. It was not about the deterrent—nine out of 10. All I want to know—and it may be hard to say—is what effect we are going tosee on competition and out of competition urine testing. I want to know if the number of testsis going to be reduced. The way I read it, they must be. That is all I want to know,Mr Mendoza. We will get to the other stuff. I do not want you for a moment to think I amcritical of what you have done in the area of blood tests for EPO. I think it is a tremendousachievement, and I would be the first to say it. But I am asking about something different.


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Mr Mendoza—I am just trying to put it in context in that I think it is simplistic to just lookat an overall number of urine tests without taking into consideration that we are introducing anew EPO test and hence those two things now make up our testing program. I do not thinkthey should be continued to be looked at in isolation, so the net effect is that we will increasethe total number of tests for the forthcoming year. Regarding the exact number of urine testsand the exact number of EPO tests, I am not in a place today to advise you of what that finalfigure will be.

Senator FAULKNER—What is going to be the effect on education programs?

Mr Mendoza—I do not anticipate any effect, other than a change in content to reflect thenew testing regime that is in place in this country.

Senator FAULKNER—Are you saying to us that extra funding has been made availableto ASDA to undertake blood testing in the current year? I think that is what you have said.

Mr Mendoza—That is right.

Senator FAULKNER—I think you have put a figure on that, have you not?

Mr Mendoza—It was $1 million in the current year.

Senator FAULKNER—I thought someone mentioned $450,000.

Mr Crick—They are two different components, Senator.

Senator FAULKNER—What is your component, Mr Crick?

Mr Crick—My component, to put it that way, is that part of the $7.4 million that youidentified before when we talked about the extra drug testing. That is up to $1.8 million overfour years and up to—

Senator FAULKNER—But isn’t the extra $450,000, which you identified, for bloodtesting? Is that right or wrong, or have I misunderstood that?

Mr Crick—The up to $450,000 is designed to provide additional funding primarily for theEPO test. The EPO test is not just a blood test; it is a blood and a urine test combined.Therefore, there is a bit of extra expense in that, and that is what the supplementary money isfor.

Senator FAULKNER—So it is for the EPO test?

Mr Crick—Primarily for the EPO test, yes.

Senator FAULKNER—That rings true to you, Mr Mendoza—$450,000 extra for EPOtests?

Mr Mendoza—That is correct.

Senator FAULKNER—What will the EPO tests actually cost the agency next year?

Mr Mendoza—That is obviously contingent on the exact number of tests that we conduct.


Mr Mendoza—There are a number of issues in terms of putting an exact figure on the costof a test, transportation being one of the most significant ones. We anticipate doingsomewhere between 500 and 600 tests of this nature. Their costs vary between a minimum ofabout $1,200 per test to around $1,400 a test. So if you can bear with me in terms of thatflexibility; I cannot put an exact number on it because we are yet to determine, as I saidbefore, the final mix of standard urine tests and the EPO test, which is a blood and urine test.


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Senator FAULKNER—Yes. Is there a minimum number of EPO tests that you actuallyhave to conduct for the lab to maintain its capacity to undertake the tests—that technique?I thought there was, from what I have read and heard from international contacts.

Mr Mendoza—It is very early days. The laboratory, while it was associated with theintroduction of the EPO test at the Sydney Olympics, was the key laboratory responsible forthat. That was a very different context to the ongoing program. It would be a little prematureto put a definite number on the minimum number that the laboratory needs to conduct. This iswhat I would call phase 1 of the normalisation of this test into our program. Both thelaboratory and ourselves are in a learning phase as to eventually how many of these tests weneed, from a deterrent point of view first and foremost. But at this stage we have planned onthe basis of between 500 and 600 tests.

Senator FAULKNER—I understood from international experience that that was below thenumber you actually needed for the lab to be able to maintain the technique.

Mr Clarke—The Analytical and Mapping Division in Industry, Science and Resourcesincludes the analytical laboratory which includes the Australian Sports Drug TestingLaboratory. Senator, I do not think the information that you are putting to us fits thecircumstances that we have today. The lab, through the Olympics, through the researchprogram up to the Olympics and during the Olympics, now has the capacity, the staff and theequipment to conduct the full EPO test. The scale of testing program that we are nownegotiating with ASDA of hundreds of tests per year is quite adequate for us to maintain thateffectiveness.

Senator FAULKNER—At $1,200 to $1,400 per test?

Mr Clarke—The price that we will negotiate with ASDA is directly a function of thenumber of tests that they ask us to do; so the price varies, the paradox being that, if there are asmaller number of tests, the overhead of supporting the core infrastructure, people andequipment is spread over a smaller number.

Senator FAULKNER—Mr Mendoza, are you able to tell the committee how much theEPO tests will actually cost the agency next year?

Mr Mendoza—If we go back to what I said before, for somewhere between 500 and 600tests, we are talking in the range—and that is I think as accurate as we can be—


Mr Mendoza—of $600,000 to $800,000.

Senator FAULKNER—And what is your extra funding—$450,000?

Mr Mendoza—$1.8 million over the four years.

Senator FAULKNER—Yes, and what is that per year?

Mr Mendoza—$450,000. That is right.

Senator FAULKNER—Thank you. So you are caught short by quite a substantial amount,aren’t you?

Mr Mendoza—With all due respect, it is simplistic to say that we are caught short,because it is integrating that program into our ongoing urine testing and education programs,and accommodating it in a new mix, if you like, within the total funding available.


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Senator FAULKNER—No, but you are going to pick up this extra funding out of theurine testing program, aren’t you? You will need extra money and you are going to pick it upout of the urine testing program, aren’t you?

Mr Mendoza—I cannot say where exactly at this—

Senator FAULKNER—Surely someone is planning. What is the planning for this? Whereare you going to find the extra money?

Mr Mendoza—It is not a matter of funding the extra money per se; it is a matter ofredefining the mix of the program to ensure that we continue to deliver a deterrent effect toathletes. That, at the end of the day, is what actually matters. It is not a raw number of teststhat matters; it is a matter of whether the combination effect of a sound policy regime and aneffective education program and an effective testing program, which has now, for the firsttime, a combination of urine and blood testing, have the desired effect on athlete attitudes andbehaviour.

Senator FAULKNER—Didn’t the government fund 3,321 urine tests in 1999-2000?

Mr Mendoza—That is correct.

Senator FAULKNER—Surely there is some planning being done at ASDA. With theextra imposition of the blood tests or the EPO test costs, how many government funded urinetests can be undertaken under the current funding scenario in the upcoming year?

Mr Mendoza—I cannot provide that because we are not at that point in our decisionmaking. There is planning going on; I can assure you of that—considerable planning in termsof all aspects of our operation to enable us to continue to deliver a world class program.

Senator FAULKNER—Are you expecting a cut in that number of 3,321?

Mr Mendoza—I would have to say, yes.

Senator FAULKNER—Thank you, Mr Mendoza. You haven’t yet been able to quantifywhat that cut might be?

Mr Mendoza—Not at all.

Senator FAULKNER—Any reasonable person would very genuinely acknowledge theimportant breakthrough with EPO testing. I certainly have a little earlier this morning. I wouldbe the first to say that I think it is a really great breakthrough. But we also need toacknowledge—and I would like you to do this now—that those EPO tests, great technical orscientific breakthrough that they are, do not actually test for other drugs, do they? They arepretty specific, aren’t they, in what they go after? Mr Clarke might prefer to answer this. Thatis my understanding. Is that more in Mr Clarke’s area?

Mr Mendoza—I will start the answer and I will hand over to Mr Clarke. At this moment intime the approved protocol for the blood test pertains only to the detection of erythropoietin.The research has much wider implications, and that is where I would like Mr Clarke to add tothat.

Mr Clarke—Senator, this is a fast moving field where we introduced a combined bloodand urine test. The IOC approved that introduction at the last moment before the Olympicsand we got it up, and that was great. Now the research is continuing because, of course, EPOis not the only drug that we are concerned about that has oxygen enhancing characteristics. Itwould be the laboratory’s expectation that we will be offering to ASDA, as soon as we


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possibly can, an expanded range of capabilities in that blood test to pick up other currentlyundetected drugs.

Senator FAULKNER—What is the current capability, Mr Clarke?

Mr Clarke—EPO only, one drug.

Senator FAULKNER—Thank you.

Mr Clarke—So the point in here is that the testing regime, the analytical service we offerour colleagues at ASDA, is continuously moving in terms of the techniques that we use andthe drugs we can detect.

Senator FAULKNER—I think we all appreciate that. Currently, the EPO test—is it ablood test and a urine test?

Mr Clarke—Yes.

Senator FAULKNER—Is EPO only?

Mr Clarke—Correct.

Senator FAULKNER—Currently.


Senator FAULKNER—But what you are saying, I think, is that that is likely to change atsome stage in the future.

Mr Clarke—Both the drugs that can be detected and the analytical techniques.


Mr Clarke—Whether we use purely blood, or we can, in fact, achieve the same resultsthrough purely urine tests, they are all active research areas.

Senator FAULKNER—When I was suggesting that the EPO tests do not test for otherdrugs, was that an accurate statement?

Mr Clarke—Not strictly, because the urine component, the urine that is collected inconjunction with the blood, is able to be put through the normal urine screening test.

Senator FAULKNER—But the urine tests obviously, as opposed to that blood testcomponent for EPO, are the mainstay for testing for things like steroids? That is right, is itnot?

Mr Clarke—Steroids, stimulants, diuretics.

Senator FAULKNER—Yes, other performance enhancing substances, whatever theymight be?


Senator FAULKNER—Masking agents, I think is also true, is it not?


Senator FAULKNER—The number of urine tests, of course, is going to be cut,Mr Mendoza, but at this stage we cannot quantify it.

Mr Clarke—The only qualification I am putting on that, Senator, is that in the EPO test—which is often characterised as a blood test—both blood and urine samples are collected in the


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one collection and that urine is able to be applied in the normal urine screening for all of thesubstances that you have listed.

Senator FAULKNER—Because I am in opposition and I do not have much to do with mytime, I read a transcript of an interview with Minister Kelly on the Graham Richardson 2GBprogram. I think the date was 25 April 2001. That could not be right, surely; that is AnzacDay. Maybe that is the date of the transcript, I do not know. It could have been Anzac Day. Ican hand this up to you, and it may be best to deal with the minister on this. Is the ministercoming back at 11?

Richardson asked this question, ‘There’s more money for the Sports Drug Agency as well,isn’t there?’ Miss Kelly said, ‘$7 million.’ That’s wrong. ‘We’ll see increased testing.’ Well,that’s wrong. ‘We’ll see increased research.’ That’s wrong. They are probably matters betterraised, are they not, with the minister? No doubt he will be able to try and help extricateMiss Kelly from this hole, so we will deal with it after 11.

Senator SCHACHT—I want to ask some questions about soccer. This is not in the PBS,in this wonderful accrual accounting system that no-one can understand and provides noinformation other than confusion, but that is not your fault. How much is soccer anticipatingbeing funded by the ASC and the AIS in the next financial year?

Mr Peters—Soccer have, with the other sports, been through the model that looks at theirfunding from previous years and what they actually achieved in their results. I have the break-up of the table here.

Senator SCHACHT—When you read it out to me could you also table that document? Itjust gives the list. I do not think there is any secret about it. It is public money.

Mr Peters—Yes. We have released it to the organisations.

Senator SCHACHT—Just give me a rough idea, Mr Peters.

Mr Peters—Yes. Perhaps going back a year or so, soccer in its OAP funding year received$2.76 million.

Senator SCHACHT—What year was that?

Mr Peters—That was in 1999-2000; $806,000 approximately was for the AIS program.High performance was $1.77 million and sports development $180,000. In the year 2000-01,which was our transition year, the overall total was $1.94 million. I do not have the individualbreakdowns. The nominal funding that we have written to soccer this year—

Senator SCHACHT—Sorry. The year just ending, soccer for 1999-2000 was up$12 million. Is that right?

Mr Peters—In 1999-00 the total was $2.76 million. In 2000-01—

Senator SCHACHT—From OAP?

Mr Peters—Which included the OAP fund, yes. In the transitional year, 2000-01, itreduced to—

Senator SCHACHT—What was the AIS figure breakdown as part of—

Mr Peters—$806,000.

Senator SCHACHT—That is part of the $2.76 million?

Mr Peters—Yes.


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Senator SCHACHT—So all in all they got $2.76 million?

Mr Peters—Yes.

Senator SCHACHT—Give or take a bit. In 2000-01, the changeover year?

Mr Peters—$1.94 million. I can get you the breakdown. I do not have it here.

Senator SCHACHT—Yes, that is all right. And this year?

Mr Peters—The total nominal funding this year is $1.87 million, of which $918,000 isAIS, which includes the extension of the women’s soccer program.

Senator SCHACHT—So women have now come into this?

Mr Peters—Yes.

Senator SCHACHT—Was women’s soccer getting any of the $2.76 million from 1999-2000?

Mr Peters—It received some of the funds, but I would need to check.

Senator SCHACHT—So nearly half of the money now is going to soccer women?

Mr Peters—In the AIS program?

Senator SCHACHT—Yes.

Mr Peters—It may be slightly more than that, but I can give you those figures.

Senator SCHACHT—Thank you.

Mr Peters—High performance is $815,000 and sport development, $135,000. So that$1.87 million is a reduction. The reduction was on the basis that the OAP funding was putinto pre-Olympic training. The way soccer operates—and tennis is very similar—is that infact, because they have professionals, a four-year funding cycle for soccer and the Olympicsis not seen in the same light as athletics or swimming or other sports like volleyball. We havehad representation from soccer saying that this substantial decrease affects their intensivetraining centre programs and they have asked us to review—

Senator SCHACHT—Where are the intensive training centres?

Mr Peters—They are the ones run out of the state institutes and academies.

Senator SCHACHT—That would have been funded out of $1.87 million? Whatever theyget will be out of the $1.87 million?

Mr Peters—Yes. They have come back saying that they believe, to continue that program,we should reinstate some funding.

Senator SCHACHT—What was the reason for the significant cut back in soccer? Ideclare my interest again as President of the Australian Volleyball Federation. Why did soccersuffer such a significant cut post the Olympic Games?

Mr Peters—It was based on the commission considering themselves—and tennis were in asimilar situation—as not having a normal preparation period for the Olympics. Therefore, aspreviously, when they received funds for their Olympic program it was believed that over thenext few years their players are overseas playing professionally—as a number of other sportsare—and therefore the development of their Olympic squad is not in the same context as othersports and therefore we would review it the year before the Olympics to see if they need anyadditional assistance.


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CHAIR—Senator, we were due to have a break about now.

Senator SCHACHT—I have one question I would like to put to the minister about soccer.

CHAIR—Fine.

Senator FAULKNER—Just before we do break, could I flag with Mr Crick—I think thisis in his area, but I am not sure; it may be with one of the agencies—that I would like to comeback on the issue Senator Lundy and I have raised in relation to the Maitland stadium. Iwondered if perhaps at some point before we conclude the estimates there could be an officeravailable who might be able to answer some questions in relation to that.

Mr Crick—Okay.

CHAIR—We will break for 10 minutes now and resume at about a quarter past.

Proceedings suspended from 11.04 a.m. to 11.18 a.m.CHAIRMAN—The committee will resume. Senator Schacht.

Senator SCHACHT—Thank you, Mr Chairman. Mr Peters, you indicated that one of thereasons there was a significant reduction in the funding for soccer was the structural issue,that most of the best players who are playing internationally, professionally, are being wellpaid overseas. They would probably like to be paid more but, compared with other sports,they are probably doing quite well. Has any of the funding cut from 1999-2000 of$2.76 million to $1.8 million to do with any other issue than that the Sports Commissionbelieves that soccer has not performed in achieving its goals within Australia?

Mr Peters—The funding model that we use is based on past performance internationally,and in the sport development we look at what development programs they have in coachingofficials. The basic reduction was based on the way that they structure their program leadingup to the Olympics. We have also, under outcome 1, talked to them about some of the issuesto do with governance and structure within their organisation. As I explained earlier, throughour resource agreements we are putting a number of conditions on funding to sports. Soccer atthe moment have amalgamated women’s soccer, as a division underneath their overallumbrella. They are also looking at the situation with futsal at the moment. So in us workingwith them, it is to look at this structure and how they deal with the sport in total. I would notsay at this stage that their reduction in funding was based on a perceived inadequacy at theirmanagement level; it was purely on the formulas that we used relating to the Olympics andthe preparation of their teams.

Senator SCHACHT—If they do not restructure themselves, like bringing futsal andwomen’s soccer into a democratic structure or a balanced structure, would that put theirfunding at some risk in the future?

Mr Peters—The approach we have taken this year with all national sporting organisationsis to establish a resource agreement that says that the federal government, through the SportsCommission, is providing funds to achieve these outcomes and, if those outcomes are notachieved, then we will be looking at the future funding of those organisations.

Senator SCHACHT—Has the Sports Commission had any discussions with SoccerAustralia about the difficulties of the operation of the National Soccer League in recent yearsand, in particular, the season successfully concluded by Wollongong yesterday to win thechampionship? But during the year—and in the last couple of years—a number of clubs haveeither gone bankrupt or have been wound up mid-season, or have been suspended, which hascreated considerable instability in the National Soccer League.


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Mr Peters—The Soccer League, although part of some general discussions, is a separateentity under Soccer Australia. It is not something that the commission has supportedfinancially, but it obviously is of interest to us in terms of the progression of players. So anyof the funding considerations have not been based on the outcomes of the national league.

Senator SCHACHT—But a strong National Soccer League would be the basis for thedevelopment of soccer players to get to that level and then they go on to play for the nationalteam and qualify for the World Cup and the Olympic Games in the future. That would be whyyou need a strong, stable National Soccer League.

Mr Peters—For most sports we would see it to be an advantage to have a strong nationalleague. Unfortunately, we are seeing a number of national leagues struggle. Soccer, as youwould be aware, are going through a major review at the moment and have made somedecisions to exclude some states from the proposed national league. They are going throughthat exercise at the moment.

Senator SCHACHT—Have they discussed with you their criteria of why some clubs maybe dropped and some admitted?

Mr Peters—No.

Senator SCHACHT—Have you seen any press publicity about that criteria?

Mr Peters—Canberra Cosmos is one of the teams supposedly not being in the league, sothere has been a fair amount of paper talk of the reasons why, but there has not been anydirect representation made to us or us, in turn, to soccer.

Senator SCHACHT—Do you see in any of this publicity that the criteria will be affectedby who has got what votes within the structure of the Soccer Australia, its annual generalmeeting and the interests that go there?

Mr Peters—Sorry, will that affect the funding?

Senator SCHACHT—I am told that some clubs who are non-ethnic based may getadmitted because of performance; other clubs who are ethnic based may be excluded, butother ethnic based clubs will be included. For example, I understand Canberra Cosmos is ageographically based team but their performance financially may be difficult. What is thecriteria you understand? Is it going to be a development of a non-ethnic based league or amixture?

Mr Peters—I am not aware of their criteria or their deliberations.

Senator SCHACHT—Do you think it is appropriate, Mr Peters, that maybe the AustralianSports Commission should seek to have some discussions with Australian soccer about whatit is going to do with the National Soccer League, because a couple more years of this presentyear’s performance—those of us who are supportive of soccer and Australian sport arebecoming increasingly alarmed that soccer may go backwards in this country.

Mr Peters—As I said, the National Soccer League has a commercial aspect to it thatI believe there is little influence the commission can have. However, we are vitally interestedin the fact that there is a national league, that it is the pinnacle of development programs thatwe have put in place and that it is a difficult line the commission chooses when we go intosome commercial arrangements that sports may have as to what sort of influence we are ableto exert over those sports other than, yes, we do want to have a strong national league that isseen by the Australian public to be structured in a way that is fair and equal for all toparticipate in.


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Senator SCHACHT—Soccer is probably the biggest played sport in the world. It is themost supported by more billions of people than any other sport, I presume.

Mr Peters—Yes.

Senator SCHACHT—It would be important for Australia, in both our sportingperformance and also our national identity, to have a strong National Soccer League and astrong, successful international qualification—World Cup and Olympic Games, year in, yearout?

Mr Peters—Yes, and financially for Soccer Australia, performances such as our recentperformances overseas and qualifying for the World Cup generates enormous revenue forthem which allows them to develop their sport as well.

Senator SCHACHT—When they win large amounts of money—and I think they are nowin the semi-final of the Confederation Cup in Korea, for which we congratulate them on anoutstanding performance in the last week—they will win several million dollars now, even ifthey come fourth, I suspect.

Mr Peters—Yes.

Senator SCHACHT—Do they give you an indication of where they will spend thatmoney on development?

Mr Peters—I met with them, with other representatives of the executive, last week to talkabout that exact issue. As I said prior to the break, they have made representations back to usthat the lack of funding in the intensive training centres, which is associated with stateinstitutes and academies—seriously puts that program in jeopardy. Our discussion was thatthe type of revenue generated from their present campaign and qualification for the WorldCup, based on the millions of dollars generated, should take some pressure off thecommission to fund their sport in those development areas and agreed to continue to talk withthem, particularly in the construct of their restructuring where they are now taking aconsiderable interest in women’s soccer, which is growing on a percentage basis faster thanmen’s soccer, appreciating the base is much lower.

Senator SCHACHT—Yes.

Mr Peters—There is also an enormous world movement in futsal, which is indoor soccer,and we are having some issues with that in Australia. So at the management level they appearto be listening to the sorts of discussions that have happened before my time and while I amhere, and we are certainly working very closely with them.

Senator SCHACHT—An unfortunate episode occurred three weeks ago where there wasa match between Perth Glory and the Melbourne Knights which had connotations, clearlyidentified, of being ethnically based violence—there can be no other description of it. Wereyou satisfied with the penalties that the Australian Soccer Federation imposed on the peopleinvolved, the clubs involved, the player involved?

Mr Peters—It was not an issue that the commission got involved in. Some havequestioned the amount of time it took to reach a conclusion, and I have summarised it as avery sad affair for a sport. In our brief discussions, albeit we are not involved in the nationalleague or support of it, we found that there is a concern within soccer that a number of reportsdone in the past highlighting the sorts of issues that we are seeing now still have not beenresolved. That will affect the ongoing development of the sport or its image.


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Senator SCHACHT—Have any of the players or the professional players associationdiscussed with the Sports Commission the fact that a lot of the players are not paid on time inaccordance with the contract because of the financial difficulties of individual clubs or thefact that clubs go bankrupt and they do not get paid at all? Has that been discussed by theplayers association with the Sports Commission?

Mr Peters—It has not been raised with me. I am not aware of it being raised with anyoneelse.

Senator SCHACHT—As a result of the unfortunate episode three weeks ago, theAustralian Professional Footballers Association put out a statement asking that an eminentindependent member of the legal business conduct an inquiry into what happened, inparticular, an inquiry into whether there is a structural problem with the ethnic based clubsleading to an obvious continuous cycle. No matter how much we deplore it, its head keepspopping up. In the last recommendation, 7(a) states:A general review of the government’s structure and organisation of the administration of the game ofsoccer in Australia.

And 7(b) states:Establish an independent commission with clearly stated powers capable of making objective andindependent decisions in the long-term interests of the game of soccer in Australia.

Have you seen that suggested draft terms of reference? I have only quoted a small part of itbecause most of it deals with the actual unsavoury incident that took place.

Mr Peters—I am not aware of it. I have not seen a copy.

Senator SCHACHT—You might quite rightly say that this is outside the purview of theAustralian Sports Commission but you do fund them. When taxpayers’ money is in any sport,we all have to stand accountable. Would it be something that the Sports Commission mightconsider in the general context? If the players are asking for this, and there is quite clearlybroad dissent in the soccer community about the way soccer is being run in this country,might the Sports Commission encourage an independent inquiry?

Mr Peters—If issues are raised with the commission about a sport and we are a party tofunding that sport, we should take issues forward. The responses to those issues then dependon what ability we have as a commission to make recommendations to our board. Then theboard will make decisions on how far we get involved in some of these sports. Similarly,cricket has gone through some unsavoury attitudes. Where do we get involved in cricket,other than raising the issue and looking at the way responses are being looked at in sport?

Senator SCHACHT—Do you provide much funding to cricket?

Mr Peters—Cricket receives funding but not as much as soccer. They have the verysuccessful AIS program in Adelaide.

Senator SCHACHT—They are very successful in Adelaide. Because of the large incomecricket gets in comparison with soccer, do they put some of that money into development?

Mr Peters—Yes.

Senator SCHACHT—You have not identified whether any of the money soccer makesoverseas has gone back into development.


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Mr Peters—Certainly the soccer association puts money into the development area. Theoptimism of the future and the millions of dollars that will be generated is what we havestarted to discuss with them, as I said, at a preliminary meeting last week.

Senator SCHACHT—Minister, I have raised this issue with Mr Peters about the requestfrom the players association for an independent inquiry into—amongst other things, apartfrom the unsavoury incident—the governance and structure of Australian soccer. Would thegovernment in any way support such an inquiry, in view of the parlous state of the NationalSoccer League?

Senator Minchin—I do not think I would want to give a view of that on the run, SenatorSchacht.

Senator SCHACHT—I would not ask you to give it on the run either.

Senator Minchin—I am happy to take that on notice and discuss it with Minister Kelly.We will see if any thoughts come out of that.

Senator SCHACHT—Minister, you may remember in the early nineties there was aSenate inquiry into Australian soccer. As well as that, Mr Justice Stewart conducted aninquiry. Both inquiries made a number of—some people would say—controversialrecommendations. I think the Senate committee was bipartisan in its recommendations. Labor,Liberal and the Democrats all agreed. If the government was not interested in having its owninquiry, do you think it is time again for a reference to a Senate committee to look at theseissues which the players association has raised?

Senator Minchin—Again, I really do not want to enter into a discussion about that. I amhappy to also take that on notice.

Senator SCHACHT—I would appreciate if you would, Minister. As I say, you may havereceived—as I have in the last few days, and I think other senators have—a whole range ofemails from people in the soccer community concerned about the future of their sport. Maybeit is time for some leverage from government and the parliament on what is one of our majorsports. It has a major national interest attached to it. Thank you.

Senator FAULKNER—I want to return to this general issue of drug testing. I think it isfair to say, isn’t it, Mr Mendoza, that while government funded tests have always beenimportant, the sports themselves have chipped in and funded a number of tests? That hasbasically been the situation, hasn’t it?

Mr Mendoza—Indeed. In fact, ever since the first year of the agency’s operation, that hasbeen the case.

Senator FAULKNER—What, if any, have been the changes to costs to the sportsthemselves for drug testing?

Mr Mendoza—Do you mean the costs or the charges that the—

Senator FAULKNER—Charges. I use the term ‘costs’. If ‘charges’ is more appropriate,that is what I mean.

Mr Mendoza—These have changed in line with the increases in costs for delivering theservice over the years. They also vary according to the volume that a sport is purchasing. SoNational Rugby League, which purchases a significant number of tests from ASDA, wouldpay less on a per unit basis than a sport that purchases just a handful.

Senator FAULKNER—Is there a sort of sliding scale?


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Mr Mendoza—Essentially, yes. There are obviously costs associated with theestablishment of the contract and maintaining that.

Senator FAULKNER—Are those figures available?

Mr Mendoza—Yes, they are.

Senator FAULKNER—Could you quickly indicate to us what—

Mr Mendoza—I do not have them with me, but they range from about $400 to $500 for anout of competition test for clients. It is those variables of the scale of the program; whether itis just a one-off or ongoing, there is obviously some variability.

Senator FAULKNER—I understand. I do not expect you to have it here with you at themoment but would you be able to indicate to us what that range has been since 1995? Iassume there has been a cost increase since that time because it does seem to be substantiallyhigher than it used to be. That is right, isn’t it?

Mr Mendoza—I cannot recall what 1995 was, but I do know where we stood shortly afterthat in either 1996 or 1997.

Senator FAULKNER—Okay.

Mr Mendoza—They were $340 for an out of competition and $440 for an in competitiontest at that time.

Senator FAULKNER—Would you be able to take on notice what the growth has been? Itshould not be too hard.

Mr Mendoza—Sure.

Senator FAULKNER—I do not want to delay the committee now. What about theproportion of ASDA’s revenue from sport funded tests? How has that changed over recentyears?

Mr Mendoza—This is a pretty good news story in terms of the growth in income fromuser-pays clients, as we describe them—essentially, all the non-federal government sources.Some state governments are now purchasing tests from ASDA, as well as professionalleagues in Australia. In this current year total income from the organisations which weprovide services to is just under $1.8 million, and that will be $1.4 million in the forthcomingyear. The reason for that decline is fairly straightforward. We conducted a lot of testing herein the lead-up to the Games in that 10-week period that I mentioned earlier. Some 600 testswere conducted alone for the World Anti Doping Agency. That simply will not happen nextyear or, indeed, in any of the out years because we are not hosting another Olympic Games—not that we know about, anyway. That largely accounts for that decline.

Senator FAULKNER—You don’t know something that we don’t know?

Mr Mendoza—No.

Senator FAULKNER—Have any of the national sporting organisations complained toyou about the costs of out of competition testing?

Mr Mendoza—Sports administrators obviously want to spend as much money as they canon development and marketing in sport. Convincing them to part with money on drug testingis always a challenge, even though many of them say to us they would like to be able to dothat, but they have a lot of call on their budget and they purchase what tests they can. Theprofessional leagues in Australia, I think, represent best practice anywhere in the world. The


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NRL, AFL and ARU have significant testing budgets and they choose to purchase theirtesting services through ASDA. We are very happy to provide that. The combined effect ofhaving those professional sports and having an independent testing agency complements whatwe are doing in the national sporting organisations that the Australian Sports Commissionfunds. We get, I think, a more effective national program as a consequence. Thoseorganisations are always looking at the cost issues. So we provide to them a service, theychoose to purchase it and they measure the value of that service against their other objectives.It could be fair to say that they would always like them cheaper, but we have to provide themat the actual cost of the service.

Senator FAULKNER—Is it just at the cost of service? Isn’t there a margin there forASDA?

Mr Mendoza—We are currently reviewing our costs in light of changes to the service. Webelieve it is in line with the cost. There is no cross-subsidisation from the governmentprogram. But I cannot definitively say whether there is a profit component in the delivery ofthat service. We certainly utilise all income from these clients to ensure that we are providingthe best possible national program.

Senator FAULKNER—I am surprised that you cannot say to me whether it is strictly costrecovery or whether there is a margin there for ASDA. That does surprise me.

Mr Mendoza—In this particular financial year we have not undertaken that analysis. Wehave done it in previous years and aligned the costs accordingly, and it has been on a full costrecovery basis.

Senator FAULKNER—Some of the sports think they are being clipped, don’t they?

Mr Mendoza—That is not a word or a description I have had from any sports.

Senator FAULKNER—‘Clipped’ is my terminology. I would not have expected any of thesports to say, ‘Look, you’re clipping us.’ But have any suggested that there is a significantmargin here for ASDA and, as a result, they are pretty unhappy?

Mr Mendoza—Some have raised the question of the costs; there is no doubt about that.Then we have been able to explain to them what the cost is broken down into to provide theservice. As I said before, they make that assessment as to whether we are delivering a valueproduct to them, and sports are happy then to purchase it, or they make a choice and theychoose to purchase the service.

Senator FAULKNER—Yes, but some have chosen to pull out, haven’t they,Mr Mendoza?

Mr Mendoza—I am not aware of any pulling out. I am aware of some reductions. If I canuse an example, you will understand what I am saying here. If you take the National RugbyLeague, for instance, that competition has reduced from 20 teams to 14. Consequently, thepool of players that is a part of their testing program is significantly smaller with the 14-teamstructure. At face value, it looks as though there is a reduction, but in a ratio sense, tests toplayers, it has actually increased over the last few years. I am aware of some reductions in thepurchase of tests from domestic clients, but they are generally associated with or caused bythe way they are restructuring their national competition.

Senator FAULKNER—Leaving aside the NRL—and I understand that—could youidentify any other sports where there has been a significant reduction or where there will notbe testing next year because of the concerns about rising costs?


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Mr Mendoza—There are a number of the professional sports that have reduced theirservices. I will go back to the comment I made before. There is one sport that has, in fact,pulled out, and that is the Women’s Basketball League.

Senator FAULKNER—Women’s basketball is out. What is reduced?

Mr Mendoza—As I said, the NRL.

Senator FAULKNER—But you are making the point that that is because of the reducednumber in the premiership.

Mr Mendoza—Yes, that is right.

Senator FAULKNER—And you think that is explicable because of that.

Mr Mendoza—That is right, and there is a similar reason, I think, for the NBL and NSL.They have restructured their national competitions over the last couple of years and havesubsequently reduced tests.

Senator FAULKNER—Women’s basketball is out completely. Do you know what thereduction in tests in the NRL is?

Mr Mendoza—I would have to take that on notice; I am sorry.

Senator FAULKNER—NBL?

Mr Mendoza—Similarly, I would have to take that on notice.

Senator FAULKNER—NSL?

Mr Mendoza—Again, I am sorry, Senator. I cannot provide—

Senator FAULKNER—Are there any other reductions in other sports?

Mr Mendoza—There are reductions in sports such as athletics. Some of the commissionfunded sports have reduced their purchase of tests.

Senator FAULKNER—Which are they? These are ASC funded sports?

Mr Mendoza—The two that I am aware of are athletics and cycling.

Senator FAULKNER—Men’s and women’s basketball, rugby league, soccer, athletics orcycling: does ASDA consider any of these high risk sports?

Mr Mendoza—We do.

Senator FAULKNER—Could you identify which ones are high risk?

Mr Mendoza—Of those ones you have mentioned or that we have spoken of this morning,basketball—the women’s and men’s competitions—and soccer would be at a lower risk thanthose other sports.

Senator FAULKNER—Before we move on with this, can I be assured that there are noother sports where a reduction in drug testing is occurring?

Mr Mendoza—I just want to make sure, Senator, that you understand I am only talkingabout user-pays testing.

Senator FAULKNER—Yes, I know. This is user-pays testing. In terms of governmentfunded testing you might talk about what has happened in terms of those particular sports. Isthere any government funded testing in those sports?

Mr Mendoza—There is in some cases. In the case of, say—


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Senator FAULKNER—Can we just go through each of them, please. There are two types,aren’t there? There is government funded testing, which basically, I think you would agreewith me, Mr Mendoza, or historically, has been for the amateur sports mainly. That is a faircomment for me to take, isn’t it?

Mr Mendoza—That is correct. The link is with the ASC funding.


Mr Mendoza—Essentially that is the Olympic sports, the Commonwealth Games sportsand some non-Olympic sports and non-Commonwealth Games sports, such as power lifting.

Senator FAULKNER—So for women’s basketball, NRL, men’s basketball and soccer,there would not be any government funded testing anyway?

Mr Mendoza—No, that is right. They are all professional leagues and we have had apolicy in place for quite some time that requires them to fully fund the purchase of tests.There is no cross-subsidisation, no allocation out of the government funded pool of tests.

Senator FAULKNER—Yes, so let us be clear in relation to those four sports. There is nodoubt that a reduction in user-pays testing means a reduction in drug testing. That isunarguable, isn’t it?

Mr Mendoza—That is right.

Senator FAULKNER—I want to know about athletics and cycling too. Cycling andathletics, I gather, are in the higher risk. I would not say high risk, but you would categorise inthe higher risk categories.

Mr Mendoza—They are in the higher risk. There has been a trend for some time inreduced purchasing of tests in those sports.

Senator FAULKNER—Can you quantify that for us, please, Mr Mendoza.

Mr Mendoza—I cannot quantify that. I do not have the exact numbers over the longerterm, and I do not have that breakdown by sport to compare what the plan number is this yearwith that of last year. What I would point to is that the number of event tests that are fundedout of the government funded pool has decreased and we have been requesting sports to payfor that. That is a reasonable thing, given that they receive significant sponsorship associatedwith events.

We have been targeting our tests at the area of greatest deterrence. I go back to that point Imade before, that in designing the program, we are looking to maximise the deterrence effect.At the end of the day that is the thing that the government and ASDA’s operation are mostconcerned with—that is, that the net effect of where we place the tests, how we conduct thetests, along with the education and the policy regime that it all sits within, ensures thatathletes are deterred from any use of performance enhancing substances. I think we areconducting a highly credible program nationally in that regard, and internationally recognisedas such.

Senator FAULKNER—We will get to that. So far we know that there is no testing inwomen’s basketball, because there is no user pays; in other words, women’s basketball—

Mr Mendoza—There is testing in basketball—this is under Australian basketball,Basketball Australia’s program—but it is only in relation to the national squad. So prior to aCommonwealth Games, prior to world championships, prior to Olympic Games, those peoplethat are nominated in the national squad are on our out of competition test register.


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Senator FAULKNER—Yes, but in the WNBL there is no drug testing.

Mr Mendoza—And that is a matter that the WNBL board has determined.

Senator FAULKNER—Yes, and there is reduced drug testing in NRL, the NBL and theNSL—Rugby League, men’s basketball in this instance, and soccer. I just want to know aboutthe testing in athletics and cycling, both of which you have identified as high-risk sports. Isthere much government funded testing there anyway?

Mr Mendoza—Indeed, and I just draw the senators’ attention to our last annual report.These two sports receive very significant levels of testing out of the government fundedprogram.


Mr Mendoza—The total number of tests for athletics was 414. We have a pool of athletesin that sport of less than 150, so you can see that the ratio of testing is very high; the numberof out of competition tests in particular is roughly two to one. We have a similar scenario incycling; 280 tests in that financial year, the vast bulk of those in the out of competition mode.

Senator FAULKNER—What would you expect would happen with those numbers of testsin this forthcoming financial year?

Mr Mendoza—It is too early to say what total number of tests we will allocate to thosesports. We have to go through a very detailed process of determining what ranking we givethe sport in terms of risk, and then ranking each of the athletes that the sport advises theywant on our out of competition register. We then allocate the tests to the extent that we can,according to those rankings, and ensure that we are providing a targeted number of tests forathletes.

Senator FAULKNER—Yes, but given that there is a reduction in the number of sportfunded tests or user-pay tests, to use your terminology, can you tell us how many tests havebeen reduced in athletics and how many in cycling? This is before we get to the event tests. Iam going to come to that in a minute.

Mr Mendoza—I am not sure if I understand your question.

Senator FAULKNER—You say that there is a reduction in the number of user-pay tests inthe sport of athletics and in the sport of cycling. Is that right?

Mr Mendoza—I nominated those two that I am aware of. There may be others. I cannotsay that that is the entire sum total.

Senator FAULKNER—I would like you to take on notice what the other sports might be.

Mr Mendoza—Sure.

Senator FAULKNER—I would appreciate that. I do not expect that necessarily you haveall this at your fingertips, but in relation to athletics and cycling can you quantify the numberof tests that are no longer being paid for by the sports themselves; in other words, can youquantify the reduction in tests in those two sports?

Mr Mendoza—I would have to take that on notice, Senator.

Senator FAULKNER—Can you assure me that, in relation to the event tests that you havespoken of—and you said event tests are coming from the government funded pool—


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Mr Mendoza—We are putting emphasis on the out of competition testing, quite obviously,and in the case of particular sports that have high profile national events we have beenendeavouring for some time to get those sports to pay a contribution to those tests.

Senator FAULKNER—So I could be assured in an event like the Commonwealth BankCycle Classic that there would be an adequate level of drug testing, could I?

Mr Mendoza—I am not sure whether there was any testing for that particular event lastyear, but traditionally there has been testing at that event.

Senator FAULKNER—But there was not any last year? Isn’t this a pretty serious issue—

Mr Mendoza—I did not say that.

Senator FAULKNER—Sorry, you cannot be sure that there was?

Mr Mendoza—I would have to take that on notice, Senator, and respond.

Senator FAULKNER—I have heard that it is either non-existent or extremely limited,Mr Mendoza.

Mr Mendoza—It is fair to say that this has been a trend that has—

Senator FAULKNER—Probably non-existent.

Mr Mendoza—No, I am not saying that at all. I am unclear about the status of it in themost recent cycle tour last year, that particular cycle tour, but it is fair to say that it has beendifficult to persuade some of the event organisers in cycling—and they are not, it seems to us,accountable to Cycling Australia for how they administer the budget in relation to particularcycling tours. So it is a discretionary matter. In some cases they choose to purchase tests; inother cases they choose not to.

Senator FAULKNER—Can you name now some cycling or athletics events where therewill be no drug testing?

Mr Mendoza—No, and nor would it be appropriate.

Senator FAULKNER—It may not be, but after the event you are able to raise a significantquestion in relation to the Commonwealth Bank Cycling Classic, for example. We talk aboutthe important deterrent effect, and I share that view with you very strongly, but the more onehears about what is occurring in this area, the more concerned I think a reasonable personwould become. What do we know now? We have established today that there is a reduction incompetition and out of competition urine tests. We have now heard about what is happeningin certain sports, some of which you define as high risk in terms of the user-pay tests thathave been reduced—or, in at least one case, which in a lower risk sport I acknowledge arenon-existent. We hear about the possibility that there was, in fact, no competition testing inlast year’s Commonwealth Bank Cycle Classic. It is not a good look, Mr Mendoza, and Ithink it will raise a lot of concerns in the community.

Mr Mendoza—Senator, I go back to what I said this morning: it is the deterrent effect ofthe total program. Notwithstanding that it may not be a good look in relation to a particularevent that there is no testing—that may be known to athletes and officials after the event—Iwould prefer that every event on a national calendar had testing or that there was the threat oftesting at every one of those. That is essentially the situation. There is the threat of testing atall of those major national events and the bulk of them do have testing, both governmentfunded and user pays. That is the important thing here. As I said before, it is not the crudenumber or the raw number of tests per se that is important; it is the allocation of those tests,


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the targeting of the tests and the impact on the attitudes and behaviours of athletes who mightbe tempted otherwise to use performance enhancing substances.

It would be exactly the same message if I were the police commissioner, where they might,in fact, conduct less random breath tests. Is that necessarily a bad thing? It may not be. It maybe that the resources are better directed towards other strategies at that particular point intime. This is a mixture which we continue to take into consideration—the status and the otherevidence that is available to us at any point in time.

Senator FAULKNER—You raised the hypothetical issue in relation to a policecommissioner and random breath tests. The problem here is—and this is perhaps best directedto you, Minister—that we actually have the minister here giving clearly totally misleading andfalse information publicly. For example, on the Graham Richardson show Richardson asked,‘There’s more money for the Sports Drug Agency as well, isn’t there?’ Ms Kelly: ‘Sevenmillion dollars.’ That is wrong, isn’t it, Minister? ‘We’ll see increased testing.’ That is wrong.‘We’ll see increased research. We haven’t got to research yet, but from the evidence availableso far, we know that is wrong, too.

I would hope that the government would share some of these sorts of concerns.Mr Mendoza, you might tell us about the outyear funding for ASDA. Can you take me to thePBS and tell me what the outyear funding for ASDA is?

Mr Mendoza—We have already recognised the fact that additional funding is notrecognised in the outyears table on page 290-291, so the additional $1.8 million is notreflected in those figures, but the outyear funding for 2001-02 is $4.632 million.

Senator FAULKNER—For 2002-03?

Mr Mendoza—For 2002-03 it is $4.571 million.

Senator FAULKNER—And 2003-04?

Mr Mendoza—It is $3.566 million and 2004-05 is $3.588 million.

Senator FAULKNER—There is a very significant drop of in excess of a million dollars in2003-04, which of course is the lead-up year to the next Olympic Games.

Mr Mendoza—Senator, the important fact there is that the Tough on Drugs in Sportstrategy funding was a four-year initiative and 2002-03 represents the last year of thatfunding.

Senator FAULKNER—But there is a significant drop of in excess of $1 million in thelead-up year to the next Olympic Games, isn’t there?

Mr Mendoza—On the—

Senator FAULKNER—Either there is or there is not, Mr Mendoza.

Mr Mendoza—On the figures that is correct.

Senator FAULKNER—What does that say, Minister, about the government’s commitmentto the fight against drugs in sport?

Senator Minchin—Senator Faulkner, as you will have seen from our Tough on Drugs inSport program, we take the matter very seriously. We have provided a four-year programwhich, as you would know from your time in government, was funded, as I understand it,through to 2002-03. Last year’s Tough on Drugs in Sport thing shows the additional fundingthrough to 2002-03. As you would know, we have these forward estimates for four years but


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they do not actually correlate necessarily to four-year funding programs for particularprograms. Presumably, when the government comes to looking at the next forward four-yearprogram for Tough on Drugs in Sport, it will take account of all these exigencies, look at theunderlying funding and work out what is required.

Senator LUNDY—Why have you described this whole package as a 10-year plan andevery other sporting initiative contained in Backing Australia’s Sporting Ability has a four-year budget attributed to it across those outyears? Why is this different? Why have youbundled it together with the rest of it? That is just misleading, isn’t it?

Senator Minchin—I do not think it is misleading.

Senator LUNDY—I think it is.

Senator Minchin—Some of the overall framework is a 10-year plan but in relation tospecific funding commitments for Tough on Drugs in Sport, it is from 1999-00 through to2002-03. At the appropriate time the next four-year forward plan for Tough on Drugs in Sportwill be contemplated and decided and appropriately resourced.

Senator FAULKNER—Have you looked, Mr Mendoza, at what this means in terms of thenumbers of tests?

Mr Mendoza—No. I think Senator Minchin’s answer alludes to why. We would be lookingto review the Tough on Drugs strategy as it started to come to that final year of funding andthen take on board what the base funding for the agency is but I think it would be way toopremature to do that.

Senator FAULKNER—In the ASC there is a different approach, isn’t there? Why wasn’tASDA’s funding for the outyears rolled into the baseline funding, Senator Minchin? Perhapsyou could explain that to us.

Senator Minchin—Sorry?

Senator FAULKNER—It was with the Australian Sports Commission, I think. Mr Peterscan correct me if I am wrong.

Senator Minchin—I am not sure; it might be on a different four-year cycle to the SportsDrug Agency.

Mr Peters—The commission’s budget up until the policy funding announcement was abase funding line which was supplemented by Olympic athlete program money which is nowconfirmed as part of the base budget over the next four years.

Senator FAULKNER—What is the baseline funding then, Mr Mendoza, for ASDA? Letme put the question another way.

Mr Mendoza—By that I am interpreting you mean pre Tough on Drugs in Sport.


Mr Mendoza—It is of the order of $3.56 million, if one was to go back to the pre Toughon Drugs in Sport strategy.

Senator FAULKNER—Yes, the Tough on Drugs in Sport strategy is looking a bit shaky. Iwant to ask a couple of questions about research money. The research moneys I think youmentioned to us earlier are $5 million over four years. That’s right, isn’t it?

Mr Crick—Yes.


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Senator FAULKNER—Anti drugs—that is in the Backing Australia’s Sporting Abilitypackage. Have you done any work on trying to look at how you are going to utilise thosefunds, where they might go, how you will make assessments on what is appropriate and forwhat purposes they might be used—anticipated outcomes and the like?

Mr Crick—Initially we have, Senator. I will not comment on the actual topics of research.Perhaps my colleagues up there might do it. What we are aiming to do is ensure we have thebest available advice on what are the priority research areas and to be able to lever additionalfunding for our research through international collaboration. We will be putting into place amechanism that seeks to achieve those objectives.

Senator FAULKNER—But this is all going to the department; none of it is going to theASC or ASDA. They have been squeezed out of this research, have they?

Mr Crick—I think there might be a value comment there, Senator, with respect. Nobodyhas been squeezed out. The money had to be placed somewhere to be managed and it hasbeen placed in the department to be managed. It will certainly be managed in full consultationwith the ASC, with ASDA and with the Sports Drug Laboratory. I think a primary target forsome of that research money will be supporting ASDL’s ongoing research and marrying it upwith what the World Anti Doping Agency research grants will be aimed at. There willcertainly be some of those grant moneys we expect to come our way. That will besupplemented by some of this $5 million. Other parts of it will be allocated to primary priorityresearch as determined in that mechanism we set up.

Senator FAULKNER—But don’t AIS and ASDA—or at least ASDA and I think theASC, or the AIS—have a sort of statutory responsibility for research?

Mr Crick—Most of the research for drugs in sport is conducted in the Sports DrugLaboratory.

Mr Clarke—Senator, in the last five years most of the Australian research in this area hasbeen conducted by the IOC accredited laboratory. Indeed, it is a requirement of IOCaccreditation that they undertake an ongoing research program. There has been onespectacularly successful collaboration between the laboratory and the commission in the EPOtest in the lead-up to the Olympics. But, other than that, pretty much all of it has been throughthe lab. The lab collaborates with a number of other researchers—hospitals and researchinstitutes.

Senator FAULKNER—Yes, and the lab is actually part of the department. It is not part ofASDA or the ASC, is it?


Senator FAULKNER—Have there been any allegations at all, Mr Peters, or anysuggestions about any AIS involvement in drugs?

Mr Peters—Other than the recent unfortunate episode with one of the swimming coaches,there has been nothing highlighted to myself in any forum.

Senator FAULKNER—I was not aware of anything. I just wondered if that was the case.

Mr Peters—I am not aware of anything being raised, or any accusations. In fact, if apositive could be taken from a very unfortunate situation, the strength of ASDA’s testingregime within the sport of swimming was recognised worldwide.


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Senator FAULKNER—Yes, thank you for that. In relation to WADA, is Senator Vanstonestill a member of that? I think she was on WADA itself, was she not?

Mr Crick—Senator Vanstone was the nominated government representative on the WADAboard from the time it was set up in November, or soon after November 1999 when it had itsfirst meeting, up until her elevation to the cabinet. Minister Kelly now has taken over thatfunction.

Senator FAULKNER—I see. In terms of Australian support for WADA, I am aware of the$1 million that has been budgeted to support WADA over four years, but what does that meanin terms of personnel and how are we planning to best spend those resources in support of thefight against drugs in sport?

Mr Crick—The $1 million that we talked about as part of the $7.4 million will go directlyto WADA as part of the government’s contribution to support the budget of WADA. The dealthat is at the centre of WADA is that, from 2002 onwards, the budget of WADA will be halfmet by the Olympic movement and, in effect, by the IOC and half met by governments. Wehad a very significant intergovernmental forum that met just this past week which decided onhow that money would be split up between governments in terms of percentages. We nowhave agreement from all the five continental regions of the Olympic movement fromgovernments to contribute that money to WADA, which is a significant internationalagreement and a very hard one to have negotiated. That money will be our contribution to thebudget. Regarding other ongoing support, certainly there are some resources in my area thatgo to WADA in helping prepare papers and contribute. There are resources within the SportsCommission and within ASDA and within ASDL that do likewise.

Senator FAULKNER—Who is our key contact person with WADA? You said MinisterKelly is on the board, but who is at the executive level, if you like?

Mr Crick—At the executive level it is me. We do the coordination with our interactionwith WADA in a policy sense. ASDA have a very significant role in contributing to WADA’sdrug testing program and also in providing people to play significant roles on theircommittees.

Senator FAULKNER—What are relationships like with WADA at the moment?

Mr Crick—I think they are very good.

Senator FAULKNER—I see.

Mr Crick—We just had the executive committee of WADA meet on Friday and certainlythe support that Australia has received from WADA in terms of getting agreements amongstgovernments and in contributing to WADA’s drug testing and research programs, all thefeedback—both public and private—has been extremely positive. The President of WADAacknowledged the role that Australia plays.

Senator FAULKNER—Who is currently the President of WADA?

Mr Crick—Richard Pound.

Senator FAULKNER—In what forum did he acknowledge that?

Mr Crick—This was the executive committee of WADA, which met on Friday, in whichAustralia participated. We are a member of the executive committee.

Senator FAULKNER—Yes. Does the department actually examine the issue of the termsof ASDA board members?


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Mr Crick—I am not sure what you mean by the terms of ASDA board members.

Senator FAULKNER—Does the department draw up suggestions to government, or doesASDA do this itself in terms of representation on the board and so forth?

Mr Crick—On the ASDA board?


Mr Crick—The members of the ASDA board under the legislation are appointed bygovernment.

Senator FAULKNER—I know that. That does not stop the department or ASDA makingrecommendations to government about who might be an appropriate appointee. I wondered ifthe department had a role.

Mr Mackey—As with all board appointments, Senator, ministers can seek advice fromwhomever they like. They often seek advice from the department.

Senator FAULKNER—I am not sure whether this is in Mr Crick’s area or Mr Mendoza’sarea but I would be interested in getting a list of the current board members and when theirterms expire. Just take that on notice.

Mr Crick—It is probably in my area, Senator. We can provide that readily for you.

Senator FAULKNER—Are there any vacancies at the moment on the ASDA board?

Mr Crick—The legislation is written in such a way that it requires a minimum and amaximum. There is a floor and a ceiling, if you like. I guess there is only a vacancy if you arebelow the floor, technically, because the government has the facility to appoint anywherebetween that floor and the ceiling.

Senator FAULKNER—The new governor of Victoria wasn’t previously a member of theASDA board, was he?

Mr Crick—We are not up to the ceiling but we are above the floor.

Senator FAULKNER—What you are saying is that you do not necessarily automaticallyreplace people who leave the board or resign from the board. What is the floor and what is theceiling?

Mr Crick—I think the legislation says there will be a chair, a deputy chair, the chiefexecutive—no less than one and no more than five, is it?

Mr Mendoza—In addition to those three it is no less than one and no more three—sobetween four and six.

Mr Crick—No less than one and no more than three in addition to the chair, the deputychair and the chief executive officer.

Senator FAULKNER—There have been no recent changes to the board then?

Mr Crick—Not since the resignation of the now Victorian governor.

Senator FAULKNER—That was what I was asking. That occurred, I assume, prior to1 January this year because I think he was appointed or sworn in on 1 January this year. Therehave been no changes since then?

Mr Crick—No.

Senator FAULKNER—Is there a quorum rule for the board?


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Mr Crick—Yes, there is.

Senator FAULKNER—What is that, Mr Mendoza?

Mr Mendoza—It is the same as the act prescribes in terms of minimum number. Four isthe minimum for a quorum for board meetings.

Senator FAULKNER—How many current members of the board are there?

Mr Mendoza—There are five.

Senator LUNDY—Can I just clarify that the quorum consists of the positions that younominated earlier, so the only way a board meeting could go ahead is if the person is otherthan the chairman, the vice-chairman and the CEO?

Mr Mendoza—It is a number minimum, Senator, not a position minimum. We have never,to my knowledge, had a board meeting not proceed due to not meeting the quorumrequirements. It has not been an issue. I will just also clarify, Senator, that the terms of boardmembers are all published in the annual report to the minister.

Senator FAULKNER—Ms Buchanan’s term expires this month, doesn’t it, or nextmonth?

Mr Mendoza—No, this month.

Senator FAULKNER—At that time you will be left with four board members. Sheobviously may be reappointed or someone else might leave, but if nothing happens like whatoccurred in relation to Mr Landy’s vacancy you will be right on your quorum.

Mr Mendoza—Senator, I am aware that the matter is in hand and will be dealt with. I donot anticipate a situation arising where the agency does not meet its requirements in terms ofboard members.

Senator FAULKNER—They seem to take a long time, even the processes for replacingthe CEO of ASDA. When did Ms Howson announce she would not be seeking another termas CEO?

Mr Mendoza—I do not know what date that was.

Senator FAULKNER—Can you help us there, Mr Crick?

Mr Crick—Sorry, Senator, I was momentarily distracted.

Senator FAULKNER—I was wondering when Ms Howson announced that she would notbe seeking another term as CEO of ASDA.

Mr Crick—I do not know precisely, Senator. I cannot remember.

Mr Mendoza—I have just been informed it was in July. I do not have an exact date.

Senator FAULKNER—When did she leave the organisation?

Mr Mendoza—On 8 November. She took leave and concluded her term on 17 December.

Senator FAULKNER—When did the recruitment process for this take place?

Mr Crick—The recruitment process was managed by the board, Senator.

Senator FAULKNER—Yes, but I just said, ‘When did it take place?’ It seemed to bearound August, maybe early September last year. That was my impression. I think that isright.


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Mr Crick—I do not know the precise dates or when it was finished. It was a process thatwas obviously very thorough and therefore took some time.

Senator FAULKNER— I would have said it was very slow. I was interested in knowingwhen the recruitment process was finalised and when a recommendation went to the minister.

Mr Crick—I do not know those dates off hand.

Senator FAULKNER—Could you take those two dates on notice?

Mr Crick—Certainly.

Senator FAULKNER—You might also take on notice when it went to cabinet and when itwas announced. It seemed to move extremely slowly. It was a real snail’s pace job as far as Icould see. I am just about finished on my questions to ASDA, but I will come back to somestatements made in your name, I think, Mr Mendoza. I might be wrong here. In numerousASDA publications, there has been reference to Australia as the ‘clean team’. You would beaware of that terminology. Have you heard of that terminology? You might have even used it.

Mr Mendoza—I am aware of that terminology and I am assuming a context in which thatwas used by me.

Senator FAULKNER—Could you provide the committee with some background aboutthat so we all understand it?

Mr Mendoza—I used that term, or it was distilled down to that by some media analysts, inrelation to explaining the situation with the AIS swim squad in April. It was when the issue ofthe alleged steroid find with the AIS coach, Gennadi Touretski, came to light. The point that Iwas making was simply that the AIS squad is one of the groups of athletes in this countrysubjected to more testing than any other on an unannounced, out of competition basis. Theyhave no warning as to when and where the tests are going to occur. I was trying to make thepoint that, in this particular case, on the evidence, there should be no guilt by associationbecause we are dealing with a substance that is readily detectable and the level of testing theywere subjected to was very high. One could, therefore, be highly confident that this was aclean team. I am sure you know the skill of media editors in distilling down a more complexmessage such as that to a catchphrase and applying it more liberally.

Senator FAULKNER—I do appreciate that. Do you think in any sense the agency’sindependence may have been compromised by the way that reportage took place?

Mr Mendoza—I do not believe that the agency compromised its independence in any way,shape or form. We wanted to be clear to the public of Australia who were very interested inthis particular allegation and the circumstances surrounding it. What we wanted to put beforethe public was the evidence that this agency has at its disposal in terms of the rigorous testingprogram that these athletes have been subject to, not just since the Olympics but certainly inthe lead-up to it, and we sought and gained the permission of four of the athletes who were atthe centre of the controversy. They were members of Mr Touretski’s squad. Those athletesgave the agency written permission to release their data, so again we did not compromise anyindependence issues, and the agency, I think with cooperation with the commission, ensuredthat the correct and accurate message was delivered to the Australian public.

Senator FAULKNER—I agree with you that that is very important and I think it is alsoimportant to have on the table the information that Mr Peters provided a little earlier, aboutthis being a one-off circumstance as far as the AIS is concerned. I did direct that question to


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Mr Peters but I may direct it to you, I suppose, in your role at ASDA. You are not aware ofany other comparable circumstance that has occurred?

Mr Mendoza—No, I am not aware of any comparable circumstance. This was an isolatedincident. Unfortunately, it is not going to be dealt with in as timely a way as I am sure theathletes concerned would like, but that is a matter for the ACT court. We have put on thepublic record the status of those athletes. We will continue to subject them to the mostrigorous testing program in the world to demonstrate Australia’s commitment to clean sportand ensuring that this particular squad of athletes can compete in the world championships inJapan in a few months without any sense of apprehension or a cloud hanging over their statusas drug free athletes.

Senator FAULKNER—Yes, that is good. You have had an opportunity, if you like, aforum, I suppose, of this estimates committee to make those points, which I think is useful.Has the agency taken the opportunity to make those points elsewhere?

Mr Mendoza—Indeed. I think in countless media interviews that was the key message thatwe were endeavouring to deliver. We have also ensured that over 50 organisations around theworld, international federations, antidoping agencies and other key players, have been kept upto date. In fact, I have had a lot of positive comment from overseas contacts as to what wewere saying in those statements, and they acknowledged the way we had managed that issueas one that others could emulate.

Senator FAULKNER—Thanks for that, Mr Mendoza. I think it is important that thosethings are said. Mr Peters, is there any involvement at all of the AIS with the Touretski casethat is before the courts in the ACT? I do not want to trample into issues before the court. Iam just asking a process question here, whether there is any AIS involvement, whether youhave needed to seek any legal advice or taken any other action as a result of that prospectivecourt action.

Mr Peters—At the initial stage we took legal advice on the employment options and howwe should deal with that, in the interests of the commission and also Mr Touretski, andsubsequently we suspended him on full pay pending the outcome of the court case.

Senator FAULKNER—That is still the status?

Mr Peters—That is still the status. The only thing we have done on an individual basis isoffer some psychological caring assistance, if you like, to him and his family, because therewas a fair amount of trauma, particularly for his family, around the break-in, so that is anemployer-employee relationship we have continued to offer. Unfortunately this is going todrag on until October when the court case is to be reissued. In the interim we have also set upa computer network into his home so he can actually be working on preparation material thatmay well benefit us in the long term, rather than being fairly idle, which is a disturbingcircumstance for him.

ACTING CHAIR (Senator Chapman)—Being 12.30, the sitting of the committee issuspended till 1.30.

Senator Minchin—Perhaps Senator Faulkner is finished on sport, or do you want to returnto sport after lunch?

Senator FAULKNER—I had not finished but, given that the chairman suggested we havea lunch break, that means that I will not be back, Minister, so that was a good move, wasn’tit?


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Senator Minchin—We try to be cooperative, Senator.

Senator FAULKNER—That is a pleasant change, Minister, but I will be cooperative.Unless I am provoked, I will not be back.

Senator Minchin—We will miss you, Senator.

Senator FAULKNER—But, just so you are aware, Minister—I am not sure it quite fits inhere—I do want to come back on an issue that I have raised with Mr Crick, which iscompletely separate to the issue of drugs in sport which, as far as I am concerned is over. It isan issue I have raised in relation to the funding of a particular project. That is the one thing Ido want to come back to at the appropriate time. Whether it is quite in this area I was notentirely certain. I think it might be. It certainly does not affect either ASC or ASDA.

Senator Minchin—Mr Crick will be here.

ACTING CHAIR—We have completed that?

Senator FAULKNER—Yes, with that one qualification, but I flagged that with Mr Crickearlier on today.

Proceedings suspended from 12.34 p.m. to 1.29 p.m.Senator FAULKNER—This is a question I wanted to canvass and it was the one I raised

before the lunch adjournment, Mr Chairman, in relation to the funding for the Maitlandbasketball stadium. I suppose the best way of dealing with this is to ask officials where detailsof this funding is revealed in the 1998-99 budget papers. I think we have now established thatis the source of the funding.

Mr Mackey—Senator, the details were actually revealed in the 1999-2000 portfolio budgetstatements. It was there stated that it was spent during 1998-99.

Senator FAULKNER—I see. Because you said 1998-99 I did not bring those with me. Doyou have a spare copy of them?

Mr Mackey—We do not have a copy of the 1999-2000 PBS with us, Senator, but we willget hold of one as quickly as we can.

Senator FAULKNER—I can get one from my office in a few minutes, too. Why don’t Icome back in a short while? Would you mind?

Senator GEORGE CAMPBELL—No, come back when you have it.

Senator FAULKNER—Is that all right, Minister?

Mr Mackey—Yes.

Senator FAULKNER—It will save time. Can you point me to which page it is?

Mr Mackey—No, not without having a look at the document, Senator.

Senator FAULKNER—All right, thank you.


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Department of Industry, Science and ResourcesCHAIRMAN—I think that means we can now go on to the general Department of

Industry, Science and Resources, outcome 1.

Senator GEORGE CAMPBELL—I have a number of questions on this outcome, but acouple of general questions first of all which fall to Mr Dainer. Do you have a list of all thegrants administered by the department, both discretionary and ad hoc?

Mr Dainer—Do you mean all the different programs?

Senator GEORGE CAMPBELL—Yes.

Mr Dainer—I do not know that I have one here. One of the officers may have a list.

Senator GEORGE CAMPBELL—If one of your officers has one, can you table it. Doesthat distinguish between the discretionary grants and the ad hoc grants?

Mr Dainer—It should be able to, yes.

Senator GEORGE CAMPBELL—Is that a complete list of them?

Mr Dainer—We are just checking to see if we actually have that list. Are you looking foradministered or departmental?

Senator GEORGE CAMPBELL—Yes, both.

Mr Dainer—Perhaps I can go through the administered grants. There is urban exports,grants to national recreation safety organisations—

Senator GEORGE CAMPBELL—Can you spell out the amounts on those?

Mr Dainer—Urban exports is $350,000 for 2001-02. This is the amount for that particularprogram. There may be an element of discretionary grants within that. Grants to the nationalrecreation safety organisations are $1.9 million next financial year. Grants under the nationalenergy program are $179,000 next year. There are grants under the TCF developmentprogram of $145 million next year. Grants to the National Industrial Supplies Office are$440,000 next year. Support for industry service organisations—they are grants in aid—are$3.1 million. There are obviously the grants under the industry innovation program—Startgrants, et cetera—and they are 154; for tech diffusion it is $17.5 million next year; biotechinnovation is $4½ million; shipbuilding innovation and grants under the major nationalresearch facilities program is $3½ million next year; CRCs get 142. As I said, I am justwaiting for the departmental.

Senator GEORGE CAMPBELL—Mr Dainer, do you have a figure beside those grants—presumably most of those are ongoing—as to the amounts of money that were expended onthose grants as at 1 January this year?

Mr Dainer—No.

Senator GEORGE CAMPBELL—You do not?

Mr Dainer—No. I could get that information for you, though. It will take a little bit oftime.

Senator GEORGE CAMPBELL—How long?

Mr Dainer—We could probably do that this week.


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Senator GEORGE CAMPBELL—What about the other?

Mr Dainer—With grants, are you talking about the expense or the cash expenditure?

Senator GEORGE CAMPBELL—I am talking about the cash expenditure on thosegrants at 1 January this year and what moneys are left in the grants for the remainder of thefinancial year. How long will it take us to get the departmental administered?

Mr Dainer—I am just looking through the papers.

Senator GEORGE CAMPBELL—We might come back to that a little later on. I willcarry on with this other stuff and we will come back.

Mr Mackey—Senator, just to get it clear, I cannot imagine there will be a problem withworking out how much money was expended on 1 January this year. In terms of how much isleft to be spent in the current financial year, we would have to pick a cut-off date betweenJanuary and now, when the latest information is available. It may not be current as of today,obviously.

Senator GEORGE CAMPBELL—Yes, sure, I understand that. Essentially, if there was$10 million for the grant but $7 million was spent at 1 January, then there would be $3 millionleft. That is the information I am looking for. While that is being sorted out I will come to theissue of the three per cent levy on imports. I am not too sure, Minister, whether we shoulddirect this to you or the department or both. The three per cent levy on imports raised$300 million in 1996-97 and that increased to over $397 million by 1999-2000. Can you tellus how much that revenue will raise for 2001-02?

Mr Mackey—Senator, that issue is basically the responsibility of the Treasury, but we donot have that information to hand. We could find out for you.

Senator GEORGE CAMPBELL—You must have some idea of what you expect therevenue to be in that area.

Mr Mackey—We would just be speculating, Senator. We would have to find out the factsfor you.

Senator GEORGE CAMPBELL—Can you take that on notice? I will also ask theTreasury when they come.

Mr Mackey—Certainly.

Senator GEORGE CAMPBELL—Is there any revenue from that scheme being used tofund the duty-free import scheme that you recently announced?

Senator Minchin—Do you mean the Project By-laws Scheme? We do not have adedicated or allocated or hypothecated approach to this. The tariff like the three per cent TCOduty, like the tariff itself, goes to general revenue. Then in relation to the Project By-lawsScheme—which we have recently announced the extension of—an estimate is made of thecost to revenue of introducing that scheme, which will be from 1 July of next year, as to thecost to revenue on an annual basis. But it is not hypothecated against that. Obviously someonecan look at how much you get from one and how much revenue there is foregone on the other,but it is not done that way in any accounting sense.

Senator GEORGE CAMPBELL—So in essence, Minister, what you are saying is it isfunded out of general revenue.

Senator Minchin—The Project By-laws Scheme?


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Senator GEORGE CAMPBELL—The implication being there should be acommensurate reduction in terms of what is available from the three per cent.

Senator Minchin—Yes, it is a revenue forgone item, it is not an expenditure item. Anestimate is made by the Treasury of the revenue the government will forgo by extending thescheme.

Senator GEORGE CAMPBELL—What was that estimate in 2001?

Senator Minchin—Forty-six million a year, off the top of my head. I think that is right.

Senator GEORGE CAMPBELL—Can we just go to the action agendas. How much isthe total funding that is allocated in this budget to all of the action agendas?

Ms Georgopoulos—Senator, you will recall that we have advised you in the past that theaction agendas do not have any dedicated funding. They are funded from departmental fundsand also refinements and drawing down on government programs. Previous advice that wehad provided you was that some $140 million of program funds, some of the action agendasdrew down from those, as well as some $30 million in departmental expenses across alldepartments—ours, and indeed other departments that are involved in the action agendaprocess.

Senator GEORGE CAMPBELL—So that is $140 million annually.

Ms Georgopoulos—No, that is the total from 1997-98 to 2001-02.

Senator GEORGE CAMPBELL—Do you have any projections for 2003-04 and2004-05?

Ms Georgopoulos—No, we do not, Senator, because the action agendas and the costingsand the costs associated with those evolve as the action agendas evolve.

Senator GEORGE CAMPBELL—What is the amount for the year 2001-02?

Ms Georgopoulos—I would have to take that on notice. I just have the accumulated overthat period of costings.

Senator GEORGE CAMPBELL—Can you also identify in that what the department’sshare of that is, which action agendas the department is funding and also what theadministration costs for those are?

Ms Georgopoulos—Certainly.

Senator GEORGE CAMPBELL—How much of the funding for previous allocationsremains unspent?

Ms Georgopoulos—All of that funding that I have quoted to you either would have beenspent or will be spent by the end of this financial year.

Senator GEORGE CAMPBELL—How many of these action agendas are now complete?

Ms Georgopoulos—There are eight action agendas that are complete, Senator. I will quotethem to you: the automotive action agenda, biotechnology, digital broadcasting, Supermarketto Asia, information industries, tourism, downstream petroleum products, and building andconstruction.

Senator GEORGE CAMPBELL—Is there any commitment for further funding for thoseaction agendas?


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Ms Georgopoulos—Sorry, Senator, there is one more. Renewable energy is complete aswell. Your next question was?

Senator GEORGE CAMPBELL—Is there any commitment to ongoing funding for thoseaction agendas, or is your role in them now finished?

Ms Georgopoulos—With regard to Supermarket to Asia, the national food strategy waslaunched by Minister Truss on 13 March this year, so there is some ongoing work that will beassociated with phase 2 of that action agenda. I would have to advise you on the rest of them.

Senator GEORGE CAMPBELL—Do you have a program outlined for theimplementation of these action agendas?

Ms Georgopoulos—Certainly, Senator. All of the action agendas, whether they are in theimplementation phase or in the completed phase, have all of the actions associated with themin either published form or on the web site.

Senator GEORGE CAMPBELL—When you say ‘completed phase’, what do you meanby the word ‘completed’?

Ms Georgopoulos—That the actions undertaken by industry and government have beencompleted under the action agenda.

Senator GEORGE CAMPBELL—So the action agenda is actually finished.

Ms Georgopoulos—Correct, although it does take some time, as you know, Senator, forsome aspects of the action agenda to come to fruition.

Senator GEORGE CAMPBELL—Presumably that would mean that any expenditureassociated with those action agendas would also be complete.

Ms Georgopoulos—Yes.

Senator GEORGE CAMPBELL—Or is there money set aside for ongoing activity?

Ms Georgopoulos—Unless there is a specific action that is of a longer term nature, thenthe actions would be complete.

Senator GEORGE CAMPBELL—Can you give us that detail when you provide us withthe other information?

Ms Georgopoulos—Certainly.

Senator GEORGE CAMPBELL—In relation to the renewable energy action agenda,what adjustments have been made to the strategy in light of the collapse of the KyotoProtocol?

Ms Georgopoulos—I will call on my colleague Ms Kelly to talk about the renewableenergy action agenda.

Ms Kelly—The renewable energy action agenda is not directly affected by the collapse ofthe Kyoto Protocol, so there have been no direct adjustments.

Senator GEORGE CAMPBELL—So what is in place? Is there any intention to revisit it?

Ms Kelly—No, not as such, Senator. In place are a number of strategies to promote marketdevelopment, building community commitment to renewable energy products, buildingindustry capability, setting the policy framework—and this was largely the framework aroundthe tradeable renewable energy certificates—and encouraging a culture of innovation.

Senator GEORGE CAMPBELL—So the outcome of Kyoto does not impact against it?


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Ms Kelly—It does not impact against it directly, no.

Senator GEORGE CAMPBELL—You say ‘directly’. How does it impact against itindirectly?

Ms Kelly—It only impacts against it indirectly if there is any overall change of domesticgovernment policy in response to Kyoto. The main policy that has affected the action agendahas been the tradeable renewable energy certificates.

Senator GEORGE CAMPBELL—Are there any changes under consideration here,Minister?

Senator Minchin—Senator Campbell, as was just mentioned, the renewable energyindustry received the most extraordinary boost to its fortunes as a result of our policy decisionon the two per cent renewables issue. The industry regards that as the greatest thing that hasever happened to the industry, and it will indeed give it an enormous boost. I am not aware ofanyone in the industry directly saying to me that the United States’s reservations about theKyoto Protocol are going to affect their projections about the growth of the industry inAustralia, underpinned as it is by that decision on the two per cent renewables requirement.As you know, our government remains committed to its substantial program of some$250 million a year on greenhouse gas abatement measures, many of which of course alsodirectly assist this industry.

Senator GEORGE CAMPBELL—Can I just come to the issue of tourism and thetourism action agenda? On your web site there is a national action plan for tourism in whichthere are listed a number of key achievements. Mr Crick, how much has been spent of the$50 million that was allocated over four years for promotion and marketing?

Mr Crick—That amount of money, Senator, if it was for promotion and marketing, wouldhave been allocated to the Australian Tourist Commission. There should be somebody fromthere.

Mr Calderwood—Senator, of the $50 million allocated to the end of this financial year,$40 million will have been expended.

Senator GEORGE CAMPBELL—Where has this money derived from?

Mr Calderwood—It was an incremental allocation given to the commission to assist,firstly, with maximising the Olympic opportunity and, secondly, to develop some newemerging markets.

Senator GEORGE CAMPBELL—And the $10 million that has not been spent, where isthat at the moment?

Mr Calderwood—It is identified to be spent to boost our activity both in Europe and inNorth America, and also to continue the campaigns which we have introduced into theemerging markets of China, India, the Middle East, South America and South Africa.

Senator GEORGE CAMPBELL—Can you give us a time frame for when that moneywill be expended on those programs?

Mr Calderwood—The balance of the $10 million is planned to be expended in the2001-02 financial year.

Senator GEORGE CAMPBELL—Over the period of the year or up-front?

Mr Calderwood—Over the period of the year.


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Senator GEORGE CAMPBELL—Has this funding appeared in the budget papers?

Ms Georgopoulos—Senator, are you talking about tourism specifically?

Senator GEORGE CAMPBELL—I am talking about this $50 million.

Mr Mackey—Yes is the answer to that. Part of the ATC’s funding allocation is set out inthe PBS.

Senator GEORGE CAMPBELL—Can you point us to it?

Mr Mackey—Senator, if you have a look at page 123 you will find our budget statement.

Senator GEORGE CAMPBELL—Right.

Mr Mackey—At the top there you will see a line saying ‘Revenue from government’. Thatis the government contribution to the ATC. This year it is $91.948 million, next year it is$91.906 million, and so on. That includes the addition of $50 million which was allocatedover the four years, the final year of which is next year.

Senator GEORGE CAMPBELL—When was the $50 million originally allocated?

Mr Mackey—1998-99.

Senator GEORGE CAMPBELL—Was that shown as a specific budget allocation in thatyear?

Mr Mackey—I do not have those figures here, but we could find out exactly. It wouldhave been included in the overall government contribution to the ATC’s operations.

Senator GEORGE CAMPBELL—Would they have necessarily been identified?

Mr Mackey—We would have to check the documents, Senator. It would have been ameasure, as that is called—in other words, an announcement of new expenditure in thatyear—and, as such, would have been mentioned in that year’s PBS.

Senator GEORGE CAMPBELL—Mr Calderwood, how many regional tourism web siteshave been developed under the regional tourism program?

Mr Calderwood—I think that is a question best answered by the department.

Senator GEORGE CAMPBELL—This is like playing tennis.

Mr Crick—Just to keep you guessing, Senator. What was the question, sorry?

Senator GEORGE CAMPBELL—How many regional tourism web sites have beendeveloped under the regional tourism program?

Mr Crick—My colleague who has responsibility for that is still busily tracking down someinformation required by one of your colleagues, so could I beg your indulgence to wait a fewmoments until she returns and come back to that?

Senator GEORGE CAMPBELL—We will do that. Can you deal with Senator Faulkner’squestion?

Mr Crick—No, I would like to hold that off for a couple of minutes, too, if I might.

Senator GEORGE CAMPBELL—It is the same person?

Mr Crick—Yes.

Senator GEORGE CAMPBELL—Who can tell me what the cost was of the onlinetourism forum that has been established?


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Mr Crick—That is all tied up with the same officer, I am sorry.

Senator GEORGE CAMPBELL—We will come back to that issue.

Mr Crick—Unless you are happy to take them on notice. We can certainly provide youwith that information.

Senator GEORGE CAMPBELL—No, I would like answers now, if I can get them.Mr Dainer, where are we up to with your stuff? I have some considerable questions onanother subject. I do not want to move on to that yet.

Mr Dainer—In ‘departmental’ we have the regional mineral program. With grants out ofthat program, it is $250,000 a year. There is about $2½ million worth of grants out of theAPEC program. The value chain program is about $1 million. Market development programand TCF are about $2½ million. The regional tourism program is about $4 million. TheNational Innovation Awareness program is about $2.8 million.

Senator GEORGE CAMPBELL—What is the timetable? Has the department set atimetable for application, assessment and processing of those applications for next year’sgrants?

Mr Dainer—Generally?


Mr Dainer—It would depend on each particular program.

Senator GEORGE CAMPBELL—Has an overall program been developed?

Mr Dainer—Each program has developed its own time lines and practices, Senator. Ifthere is a particular one that you are interested in, we could answer questions.

Senator GEORGE CAMPBELL—For grants that have been provided for in this budget,what would be the normal practice in terms of calling for applications for access to grants in abudget environment? Presumably, the grants are for 1 July 2001 to 30 June 2002. You wouldnot be calling them in May next year, would you?

Mr Dainer—It varies from program to program and with the timing of when the grants orloans become available. In some cases they are entitlement programs and in some cases theyare competitive programs; therefore the time lines and the guidelines will be different.

Senator GEORGE CAMPBELL—But most of these programs are ongoing programs,aren’t they? How many of the programs that you have outlined are new—in other words, havenot existed before?

Mr Dainer—National Innovation Awareness is, but it has essentially taken over fromSTAP. The rest would be already in existence. Some will cease in the forward estimates yearsat some point.

Senator GEORGE CAMPBELL—But they are all currently programs that are inexistence in one form or another at the moment?

Mr Dainer—We would have to get you the information from each of the grant managersas to when they will go out and get calls of interest.

Mr Peel—This might help to clarify matters. Some grants are available on a continualbasis and there is no set period in which applicants need apply. For example, the R&D Startprogram is ongoing and candidates can apply at any time. Other programs have what we callrounds, whereby we go out and call for applications and they are all considered competitively


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one against the other. There is a mixture of ways in which people can apply for grants. Theyare not all timetabled in the way I think you were suggesting.

Senator GEORGE CAMPBELL—Given, Mr Peel or Mr Mackey, that this is an electionyear, I assume the department is aware of the caretaker conventions and their application tothe operation of grant programs during an election campaign?

Mr Mackey—Yes, certainly, Senator.

Senator GEORGE CAMPBELL—Can the department assure the committee that thecaretaker conventions will be honoured during the forthcoming election campaign and thatany grant program which your department administers will not be used for electoral purposes?

Mr Mackey—Certainly I can give you an assurance that the normal conventions will applyduring an election period, Senator. Of course, we are not in an election period at the moment.

Senator GEORGE CAMPBELL—I can take it that that is a yes?

Senator Minchin—I would expect nothing less.

Senator GEORGE CAMPBELL—Hansard does not record nods of the head. That is ayes?

Mr Mackey—Yes.

Mr Crick—Senator, on your regional web site issue, I have been advised that with the$1 million that we had allocated to that particular program this year—by ‘this year’ I mean thecurrent financial year we are still in—we have funded 38 projects.

Senator GEORGE CAMPBELL—Does that mean there is still $1 million outstandingthat has not been spent?

Mr Crick—No. There was $2 million: $1 million was this year and $1 million was lastyear.

Senator GEORGE CAMPBELL—Are the 38 projects different from those funded in theprevious year?

Mr Crick—Yes. The 38 projects were funded over the year 2000-01.

Senator GEORGE CAMPBELL—How many were funded in the year 1999-2000?

Mr Crick—I do not have that at my fingertips but it would be in the same ballpark.

Senator GEORGE CAMPBELL—Do you have a list of where those web sites are andwhich regions they promote?

Mr Crick—We would have a list of the successful grantees. They would not all necessarilybe additional web sites. Some might have been upgrades or introducing e-commerce to theirweb sites. Some might be totally new web sites.

Senator GEORGE CAMPBELL—But you would have a list of all of the web sitesfunded by that $2 million?

Mr Crick—Yes.

Senator GEORGE CAMPBELL—And the regions which they promote?

Mr Crick—Yes. We can provide that.

Senator GEORGE CAMPBELL—Presumably you would be able to identify those whichhave an upgrade as opposed to those which have totally new funding.


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Mr Crick—We can provide you with a list of the successful grantees.

Senator GEORGE CAMPBELL—When can that be done, Mr Crick?

Mr Crick—Very quickly, Senator.

Senator GEORGE CAMPBELL—Will you do that?

Mr Crick—Yes.

Senator GEORGE CAMPBELL—Is the $2 million allocated to that program adiscretionary grant?

Mr Crick—I think it is. We get caught up in these definitions. I think that comes under thedefinition of a discretionary grant, Senator.

Senator GEORGE CAMPBELL—How is that administered within the department?

Mr Crick—It is administered within the department within a group in my division.Applications are called for publicly through the media and through other means. Applicationsare then assessed against the criteria of the program. Decisions are made then on the bestapplicants, the best projects, against the amount of money we have available. Then they aresigned off within the department. Ultimately I am the one who has the delegation forapproving them.

Senator GEORGE CAMPBELL—What consideration is given in the assessment of theapplications to particular regions? Do you have priority regions?

Mr Crick—No, we do not have priority regions. We have priority projects. Those projectsthat put in the best applications for what they are trying to achieve are the ones that getfunded.

Senator GEORGE CAMPBELL—Do you draw a distinction from the type of region thatis, for example, being promoted?

Mr Crick—Only inasmuch as it is a regional program. Therefore, we would tend not to—and I think probably fairly exclusively—fund projects within the capital cities. But prettymuch everything outside the major cities comes under the nomenclature of ‘regional’.

Senator GEORGE CAMPBELL—Are the applications for these grants beyond thefunding that is available? Are there more applications than there is funding available?

Mr Crick—Inevitably, yes.

Senator GEORGE CAMPBELL—How do you draw distinctions? I do not want todenigrate the back of Bourke but if you had an application from someone in the back ofBourke versus the Central Coast or the Sunshine Coast, a more popular tourism area, howwould you draw a distinction between those two applications? Is there a set of criteria?

Mr Crick—There are program guidelines and we would be looking at the contents of theapplication, what it was trying to achieve, how good it was, whether it was financially viable,the likelihood of it being effective. It would not automatically get an easy entrée simplybecause it was from a nice place like the Sunshine Coast versus the back of Bourke. It wouldbe looked at on its merits against a whole range of criteria.

Senator GEORGE CAMPBELL—Are those criteria or guidelines publicly available,Mr Crick?



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Senator GEORGE CAMPBELL—Are they on the web site?

Mr Crick—Yes, they are.

Senator GEORGE CAMPBELL—What was the cost of the Online Tourism Forum thathas been established?

Mr Crick—That one I would have to take counsel on. We are just getting that informationnow, Senator.

Senator GEORGE CAMPBELL—While we are waiting for that information, whatexactly is the Made in Australia 2001 campaign?

Mr Crick—That is an ATC campaign, Senator. Could I ask my colleague from the ATC?

Mr Calderwood—Senator, the Made in Australia 2001 campaign was an initiative whichwas launched to try to work with the demands of the business tourism sector of the inboundindustry to try and generate an additional 500 meetings in Australia during that particularyear. It was based on an assumption that post the Olympics there would be a heightenedinterest and an opportunity for us to try and develop more activity in the high-yield businesstourism area.

Senator GEORGE CAMPBELL—I think there was $5 million allocated for thatprogram, Mr Calderwood. Has that money been spent and what has it been spent on?

Mr Calderwood—The campaign finishes this calendar year. By the end of this calendaryear any moneys which have been allocated to that will have been completely spent. Theexpenditure was along various lines: the initial launch and production of promotionalmaterials, development of a new web site, working in conjunction with industry overseas,doing a major program during the Olympics to target special businesses who could beinterested, working with various convention bureaus and also providing some form of supportfor visiting delegates who would come to some of these meetings.

Senator GEORGE CAMPBELL—Do you know how much of the $5 million has beenspent and what remains to be spent in this financial year?

Mr Calderwood—I do not have the exact figures. I would have to take that on notice andprovide that information to you.

Senator GEORGE CAMPBELL—Can you do that? How much of the $5 million wasspent on advertising?

Mr Calderwood—On pure advertising? The bulk of the activity was not on what youwould call conventional advertising. The bulk of the activity was in production of materialswhich would assist the industry directly market to overseas businesses and also to businessesin Australia. It was along the lines of production of hard copy collateral, development of websites, development of various seminars, et cetera.

Senator GEORGE CAMPBELL—Where did that $5 million come from,Mr Calderwood?

Mr Calderwood—It was a combination of funds which were identified within the existingbudget of the commission and the special allocation which was provided.

Senator GEORGE CAMPBELL—The special allocation was provided by whom?

Mr Calderwood—By the department, as far as I understand it.

Senator GEORGE CAMPBELL—How much was that allocation?


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Mr Calderwood—I would need to come back to you with that information.

Senator GEORGE CAMPBELL—Can anyone in the department answer that?

Mr Crick—I am not aware of it, Senator, offhand.

Senator GEORGE CAMPBELL—Can you take that on notice, Mr Calderwood, andprovide us with an answer?

Mr Calderwood—Yes.

Senator GEORGE CAMPBELL—Was there anything contained in the action agenda forthe tourism industry to deal with the negative effects of the GST on inbound tourism?

Mr Crick—That is one of those questions, Senator, that is a little bit loaded.

Senator GEORGE CAMPBELL—Only a little bit? I will have to sack my staff.

Mr Crick—I think we launched that action agenda before the GST came into effect.

Senator GEORGE CAMPBELL—Are you saying there is no capacity to vary theseaction agendas once they have been put in place?

Mr Crick—No, Senator. The GST issue is a Treasury issue. I would not venture into that.

Senator GEORGE CAMPBELL—Has either the department or the Tourism Commissiontaken any action to counter the negative effects of the GST on inbound tourism? Have youproduced any materials? Have you done anything in this area?

Senator Minchin—You are not obliged to admit to the premise of the question.

Senator GEORGE CAMPBELL—Thank you.

Mr Calderwood—We have not produced any materials as such. Obviously, in the courseof our meetings and discussions with business overseas, there were questions raised but we atthat time gave them, as best we could, a briefing on the impacts of the GST and the offsets inother areas—for example, the cancellation of bed tax in New South Wales. We highlightedmore the ongoing affordability and value of Australia as a tourism destination.

Senator GEORGE CAMPBELL—In these briefings that you did, Mr Calderwood, wasthere any written material used?

Mr Calderwood—No.

Senator GEORGE CAMPBELL—They were all verbal?

Mr Calderwood—Yes.

Senator GEORGE CAMPBELL—Who would they have been to?

Mr Calderwood—They would have been to partners overseas, wholesale and retailpartners in each of the five major regions in which we have a presence.

Senator GEORGE CAMPBELL—And how would they have been conducted?

Mr Calderwood—They would have been conducted in a series of either one-to-onemeetings or in a series of seminars which we had, but which were not totally devoted towardstalking about GST—they were seminars talking about building inbound tourism intoAustralia.

Senator GEORGE CAMPBELL—Were they done here or done in the region?


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Mr Calderwood—The majority would have been done in the region, but also there wereopportunities here, for example, at such major events as the Australian Tourism Exchange,which we hold on an annual basis.

Senator GEORGE CAMPBELL—Who would have carried out those briefings?

Mr Calderwood—It would have been senior management within the ATC— regionaldirectors, trademarking directors and also senior management who were based in Australia.

Senator GEORGE CAMPBELL—Your partners in the five regions were happy with theexplanation?

Mr Calderwood—I think the best way I can answer that is to say that in the year 2000 weachieved 11 per cent growth from overseas, a figure well in excess of expectations.

Senator GEORGE CAMPBELL—Does that include the Olympic period?

Mr Calderwood—Yes, including the Olympic period. So for the full calendar year of2000, it was 10.9 per cent, and so we gauge our success on that as an indicator.

Senator GEORGE CAMPBELL—Have you done any assessment of the impact on theperiod, excluding the Olympics?

Mr Calderwood—In the Olympic period—the month of September—the actual increasewas 15 per cent. However, if we look at the actual growth which we achieved right throughthe year, there was very healthy growth for the balance of the year. From memory I thinkthere was only one month when we actually showed a decline during the year 2000, so therewas a good, consistent inbound growth into Australia.

Senator GEORGE CAMPBELL—What has been the experience in the year to date?

Mr Calderwood—For the first three months of the year—for the March quarter 2001—theincrease was just under eight per cent. For the first four months it is 5.5 per cent, which wehave seen, and that is based on the preliminary figures.

Senator FAULKNER—Thank you for directing me, Mr Mackey, to the 1999-2000 budgetPBS. I did find the relevant page, page 30. Could someone outline for me, please, the decisionmaking process behind the appropriation.

Mr Crick—Senator, this was an election commitment going back to 1998. Thegovernment fulfilled that commitment by providing a grant of $2 million for the constructionof the multipurpose facility.

Senator FAULKNER—I understand that, Mr Crick. Thank you for that information. Iassume it is reasonably standard practice, is it, to pay moneys and have the appropriationreflected in the next year’s PBS?

Mr Crick—Certainly the money that is paid out is reflected in the PBS. There are someoccasions—and there are some in this current year—where decisions are made for budgetarypurposes to pay the money out of one year, but it is sometimes reflected in the followingyear’s PBS.

Senator FAULKNER—That would be particularly common in an election year, I wouldhave thought, wouldn’t it?

Mr Crick—That is an opinion I would not care to comment on, Senator.

Senator FAULKNER—In relation to this portfolio, do you know if it is more common inan election year? I would have thought it would be.


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Mr Crick—I have no grounds for making that comment, Senator.

Senator FAULKNER—Anyway, I understand what you have told me. That was the limitof the information I had available to me. Now I want to know what the decision makingprocess was for the department—the authorisation of the expenditure, how it workedinternally—so if someone could explain that to me, that would be really helpful.

Mr Crick—Once a decision had been made that there should be a grant to fund thisproject—

Senator FAULKNER—Who made that decision? Let us try and nail it down into reallybite-sized chunks. Who made the decision?

Mr Crick—It was certainly made outside my division, so it was a decision made at ahigher level in government. I cannot say for certain whether it was a cabinet decision or aministerial decision. We were just informed that the government wanted to fund that project,and then we took on the responsibility of managing the project.

Senator FAULKNER—Can you help us with that, Mr Mackey—where the initiative camefrom? I do appreciate it was an election commitment. I do understand that and I have read theinformation that is contained within the 1999-2000 PBS, so I have that level of background.Now I am trying to find out where the initiative came from that the department acted upon.

Mr Mackey—I will help you to the extent I can. As you suggest, this would normally bethe case in the budget following an election. The government moves to implement its electionpromises, and this is generally done through a vehicle of cabinet submission and decision. Inthis particular case, I just do not know for sure if that was the precise decision point and, tothe extent that we can find out, given the general convention of cabinet confidentiality, we canendeavour to do that.

Senator FAULKNER—The convention of cabinet confidentiality does not go to whetheran issue is cabinet-in-confidence or not. If you are canvassing the issue of whether it wasdetermined by cabinet, it is not cabinet-in-confidence to suggest that it was a matter whichwas determined—I am sure the minister would acknowledge that. That is notcabinet-in-confidence.

Mr Mackey—No.

Senator FAULKNER—All I am trying to find out in the first instance is: was the guidanceministerial or was it cabinet? Someone must know that, surely.

Mr Crick—I do not know that at this stage, Senator. I would have to go back and checkfiles.

Mr Mackey—Basically we have to go back and check our files.

Senator FAULKNER—Do you know, Minister.

Senator Minchin—I do not, I am sorry, Senator Faulkner.

Mr Mackey—I can give you some more guidance, though, Senator. If you have a look atthe 1999-2000 PBS, the one where this is referred to in page 30, I can take you to a later tablewhich is on page 41.


Mr Mackey—As you can see, there is a table there, and it shows estimated payments for1998-99 in the left column, and estimated expenses under accrual in the right column.


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Mr Mackey—I am advised that the $2 million for that centre was funded out of the sportand recreation program item, which is seven from the top of page 41.

Senator FAULKNER—Yes, coded 380-07-00.

Mr Mackey—Correct.

Senator FAULKNER—I assumed that that was the case, but thanks for that information.It was your division in the department, Mr Crick, that acted upon the instruction that youreceived?


Senator FAULKNER—Were you there at that time?

Mr Crick—I guess I was, yes, Senator.

Senator FAULKNER—But at this stage we do not know whether it is a ministerialdirection or a cabinet direction?

Mr Crick—As Mr Mackey has said, I do not recall where the decision point was made, butwhether it was made through ministerial consultations and by the minister or by cabinet, themoney was allocated through that sport and recreation program. We then had the task ofnegotiating the contract with the grantee and monitoring it and making sure that it wasdelivered and that audited accounts were produced, et cetera.

Senator FAULKNER—Prior to that process taking place, which is understandable, did thedepartment make any assessment of the merits of this particular project at all?

Mr Crick—We would have ensured, in negotiating the contract, that the terms of thecontract were able to be delivered by the grantee. But the actual reasons why the decision wastaken to fund the project in the first place would have been part of that cabinet or ministerialconsideration.

Senator FAULKNER—Yes, but does that mean no other project proponents would havebeen given an opportunity to bid for funding?

Mr Crick—It was not part of a competitive bid, Senator. It was part of fulfilling anelection commitment.

Senator FAULKNER—So it is just once-off in relation to this?

Mr Crick—For that particular project, yes.

Senator FAULKNER—Was there any other competition for the funds that were availablefor this?

Mr Crick—The funds were allocated to us specifically to fulfil that commitment.

Senator FAULKNER—They were allocated to you when—in 1998-99?

Mr Crick—In the 1998-99 PBS, yes.

Senator FAULKNER—Specifically for that commitment?

Mr Crick—Specifically for that commitment, as is set out in that explanation paragraph.

Senator FAULKNER—Yes. I am not quite sure it says that, but I take your word for it.


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Mr Crick—The bigger program is, of course, a large sum of money, as Mr Mackeypointed out, but in that earlier reference in the explanation paragraph it explained where the$2 million was going.

Senator FAULKNER—Yes, it explains where it was going—to the Maitland FederationCentre.

Mr Crick—Yes.

Senator FAULKNER—I do not know that it necessarily explains from whence it cameand how it came, which is the purpose of my questioning.

Mr Crick—How it came, of course, was through an allocation or the budget putting the$2 million into that sport and recreation program.

Senator FAULKNER—What role did the department play in the planning andconstruction of this stadium? What was your oversighting role that you mentioned?

Mr Crick—No, I think I probably used the word ‘project’ a little loosely. Ourresponsibility was negotiating the contract with the basketball association and oversightingthe contract.

Senator FAULKNER—Who negotiated this contract on behalf of the department? Was itone of your officers?

Mr Crick—One of my officers, yes.

Senator FAULKNER—Who did they negotiate it with?

Mr Crick—With the Maitland Basketball Association.

Senator FAULKNER—Was there a tender process for the construction?

Mr Crick—I understand that the Maitland Basketball Association put out tenders, yes.

Senator FAULKNER—That would be part of your oversight and negotiating, wouldn’t it?

Mr Crick—Yes. They did put out tenders and there was something like eight expressionsof interest, from recollection.

Senator FAULKNER—Did the Maitland Basketball Association supervise the tenderprocess?

Mr Crick—Yes. There were eight expressions of interest and I think three companies putin a tender in the end.

Senator FAULKNER—Yes. But it was the Maitland Basketball Association who oversawthe tender process. Is that right?

Mr Crick—That is my understanding, yes.

Senator FAULKNER—Thank you very much. What about supervising the construction?Did the department have any role there, or was that again the Maitland BasketballAssociation?

Mr Crick—We certainly would not have provided any engineering expertise to that. Wewould have had a contract that asked the Maitland Basketball Association to demonstrate thatthe funds were being properly spent. We had an officer who visited at one stage to make surethe stadium was there, or the building was there. We had the accounts audited to make surethey were all in order.


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Senator FAULKNER—But how did the department satisfy itself that the tender processwas transparent and fair?

Mr Crick—I think you end up doing that by getting the assurance of the grantee that thetender followed proper procedures and getting them to assert to that. I think there is only somuch you can do to guarantee that there was nothing untoward. But as far as we could judgeeverything was in proper order.

Senator FAULKNER—That is fair enough, but I am interested to know how you madethat judgment. That is all.

Mr Crick—How we made that judgment?

Senator FAULKNER—How did you make that judgment?

Mr Crick—You make that judgment by, I guess, satisfying yourself in discussions with thegrantee that the documents were properly processed and that the process was in accordancewith normal tendering arrangements. As I say, there is only so far you can go into looking intothe minute detail.

Senator FAULKNER—That was all done to the satisfaction of the department, was it?

Mr Crick—We did that to our satisfaction and then paid the money on that basis.

Senator FAULKNER—Do you know who the Maitland Basketball Association contractedwith in relation to building this stadium?

Mr Crick—I do not know that offhand. No, I do not have that detail here, Senator. I cantake it on notice.

Senator FAULKNER—Do you have it in the department?

Mr Crick—I cannot say for sure, but I can check that for you.

Senator FAULKNER—Wouldn’t that be part of any sort of proper oversight of such aprocess?

Mr Crick—I would have to check to see what detail we have in that regard.

Senator FAULKNER—But wouldn’t having such detail be part of proper oversight of anysuch process?

Mr Crick—I think the fact that the successful tenderer may or may not appear on ourdocuments would be another issue, Senator.

Senator FAULKNER—Have the Commonwealth funds been fully expended?

Mr Crick—They have. We have had audited accounts produced.

Senator FAULKNER—What are the internal processes that apply in this case for acquittalof the funds? How does that work at the departmental level?

Mr Crick—Normally in a case like this, Senator, the contract will include certainoutcomes that are being funded. The acquittal process is the grantee producing a final reportdemonstrating or indicating that those funds have been expended according to the originalpurpose. In some cases it may involve inspection.

Senator FAULKNER—Do you know whether it did and do you know what thedepartment’s role was in this particular one?


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Mr Crick—We had an officer visit the premises. I do not know offhand at what particularstage that was. Of course, they were opened, I think, last month some time.

Senator FAULKNER—Yes, I noticed that. That did not actually pass me by. But surelythe officer would have visited well before the opening ceremony for the stadium.

Mr Crick—Absolutely. I do not know offhand at what particular stage of construction thevisit was made.

Senator FAULKNER—I might return to this. By the way, has the Maitland BasketballAssociation acknowledged the department’s $2 million grant?

Mr Crick—Publicly?

Senator FAULKNER—In any way. Was that a requirement of the grant?

Mr Crick—Seemingly not a requirement in the contract, Senator.

Senator FAULKNER—I want to ask one other general question and it is probably bestdirected to you, Mr Mackey. I had read some media speculation that a Mr Santo Santoromight have been receiving some contract work from your department and I wondered if youcould confirm whether there was any basis to those rumours or not. This would be SantoroConsulting, I think, established in March of this year.

Mr Mackey—I do not know of any, Senator, but I will double-check for you and let youknow if that is not the case.

Senator FAULKNER—I would be interested in knowing whether Santoro Consulting, orMr Santoro individually, has tendered for—either successfully or not—or been considered forany work for the department. You read these things in the media, and it would be interestingto have it confirmed.

Senator GEORGE CAMPBELL—Mr Crick, when we left off, I asked you—

Mr Crick—Senator, there was an outstanding question you put to me about funding the IT,the online forum.

Senator GEORGE CAMPBELL—Online tourism, yes.

Mr Crick—That is a forum, as you would well know, with industry and government. Wehave held three meetings of that forum, and each meeting cost somewhere between $6,000and $7,000, so we have spent up to $21,000 on the forum meetings themselves.

Senator GEORGE CAMPBELL—Where has that money been sourced from—out ofadministrative funds?

Mr Crick—That has come out of the administrative funds within the division.

Senator GEORGE CAMPBELL—What do you expect the government’s contribution tobe to this forum, in simply the costs of attendance?

Mr Crick—Well, certainly it includes the cost of attendance. The government is seeking tobring together the various elements of the industry and work with them in order to facilitatetheir progress to more sophisticated online and e-commerce. We are not only putting in afinancial element to manage the forum, but we are injecting into it a certain amount ofleadership, policy, drive.

Senator GEORGE CAMPBELL—Are you providing the secretariat resources for it?

Mr Crick—Yes, we manage that process.


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Senator GEORGE CAMPBELL—Who is on the forum? Can you give us an outline?‘Forum’ is a pretty broad term.

Mr Crick—It is.

Senator GEORGE CAMPBELL—Is it a committee?

Mr Crick—We chose the word ‘forum’ to get away from some of the sort of baggage thatcomes with words like ‘committee’. It is a loose coming together of interested players in theIT industry with interested players in the tourism industry in order to provide some sort ofleadership and drive for the industry to move quicker to e-commerce and online technology.

Senator GEORGE CAMPBELL—And the costs are going to be recurrent costs?

Mr Crick—Those costs were the meetings that have been held so far, and recently, and weare prepared to continue to fund what we think is reasonable till that forum comes to somesort of effective outcome.

Senator GEORGE CAMPBELL—When you say you are prepared to fund what isreasonable, what do you regard as being reasonable?

Mr Crick—Given the government’s catalytic role—we are not putting millions of dollarsinto setting up hardware; we are funding these meetings—what it might take to facilitate andcoordinate the work of industry.

Senator GEORGE CAMPBELL—So the costs associated with the online forum—youmeet the cost of government representatives or participants?

Mr Crick—Yes.

Senator GEORGE CAMPBELL—The private sector meets the cost of their ownparticipation?

Mr Crick—Yes.

Senator GEORGE CAMPBELL—Is NOIE involved in these meetings?

Mr Crick—I think they are. I can clarify that for you. If they are not physically involved,we certainly do a lot of close consultation with NOIE in the preparation of all our online stuff.

Senator GEORGE CAMPBELL—Could you take that on notice and clarify it for us, justas to the extent of their participation in the process.

Mr Crick—Yes.

Senator GEORGE CAMPBELL—I think that deals with all of the tourism questions.Can we move on to the output 1.3, TCF industry.

Mr Mackey—Chairman, could we just confirm that that is the end of all the tourism issuesas far as you are concerned, including the ATC and not just the department?

CHAIRMAN—I think Senator Faulkner might want to come back.

Mr Mackey—If there is any doubt, we will have people wait.

CHAIRMAN—I think we had better wait until he comes back, Mr Mackey.

Mr Mackey—Yes.


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[2.34 p.m.]

Senator GEORGE CAMPBELL—Mr Peel, can you tell us where the TCF SIP scheme isup to.

Mr Peel—Yes, Senator. The registrations have closed for the first three years of thescheme, and we are ready to receive applications for grants from 1 July.

Senator GEORGE CAMPBELL—Are there still 437 firms?

Mr Peel—Four hundred and thirty-seven have registered for the first portion of thescheme. We have since received registrations for the next year, and they look like beingaround 459 registrations.

Senator GEORGE CAMPBELL—That is for the second year?

Mr Peel—Yes.

Senator GEORGE CAMPBELL—So the 437 are for the period, what, 1 July 2000?

Mr Peel—Yes, plus, you may recall, there are two pre-program years for the scheme.


Mr Peel—So the 437 is for this year and the previous two years, and the 459 orthereabouts is for next year.

Senator GEORGE CAMPBELL—So that is 2001. Does the 459 include the 437, plusanother 22?

Mr Peel—Yes. Just to clarify that, of the 437 original registrants for the scheme, 371 havereregistered. Of the remaining 66, we expect about half of those to put in late registrations andthe other half are not expected to reregister. There have been 55 new registrants.

Senator GEORGE CAMPBELL—So there are an additional 55 new entrants.

Mr Peel—Yes.

Senator GEORGE CAMPBELL—Can we get a list of the 55 new entrants?

Mr Peel—I think I answered that question at the last estimates about the confidentiality ofthe information. You subsequently got it anyway. I think we tabled a legal advice that we hadat that time.

Senator GEORGE CAMPBELL—Yes, you did.

Mr Peel—I am sure you will understand that we cannot act contrary to the legal advice.

Senator GEORGE CAMPBELL—Mr Peel, are you aware of the ANO report?

Mr Peel—The ANO report?

Senator GEORGE CAMPBELL—Yes, on commercial-in-confidence?

Mr Peel—No, Senator.

Senator GEORGE CAMPBELL—The recent report by the Auditor-General.

Mr Peel—On TCF SIP, Senator?

Senator GEORGE CAMPBELL—No, into the confidentiality provisions in governmentcontracts.


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Mr Peel—I have heard of it, but I have not looked at it in any depth.

Senator GEORGE CAMPBELL—Has the department examined it, Mr Mackey?

Mr Mackey—I have not looked at it myself; I have seen the press reports.

Mr Dainer—We will start to go through the process of being looked at in terms of whatour practices are.

Senator GEORGE CAMPBELL—When do you expect to make a decision, either toadopt the status quo in your practices or to change them?

Mr Mackey—Normally in these cases there would be a whole of government response tothose reports, and we would provide an input to that.

Senator GEORGE CAMPBELL—There has been a response by a number ofdepartments. I do not know if there has been a whole of government response. When is itlikely that the department would have completed its internal processes of examining theimpact of—

Senator Minchin—Sorry, I am not right across this issue and I am not sure what you arereferring to when you refer to ‘other departments’ saying something, but I would have thoughtthat the proper process would be a whole of government response based on advice from,particularly, the department of finance in a submission to cabinet as to what, if any, changesshould be made to normal government procedures in the light of the auditor’s comments.

Senator GEORGE CAMPBELL—I do not know whether you can call it a whole ofgovernment response but there has been a response to the recommendations, and only theDepartment of Finance and Administration rejected two out of the three recommendations.There have been some suggestions in the Auditor-General’s report as to what ought to be donein terms of developing guidelines to deal with these issues. To what extent that may finish upin a whole of government response, I am not sure. I will mark the spot on that. I am really justtrying to test to what extent and when the department will have finalised its views about it. Itmay not be in a position to give us their views.

Mr Mackey—I could say in about a month, I guess. From our individual department’spoint of view we have an internal audit committee which would normally examine thesereports and provide a recommendation to the secretary and, if necessary, the minister aboutthem. That would happen about a month from now.

Senator GEORGE CAMPBELL—In respect to this latest round, why are we going to gothrough another charade? I can understand Mr Peel being a bit defensive, but, Minister, whywe are going to go through another series of processes to get to these 55 names, given that weprobably already know 33 of the 55?

Senator Minchin—Senator Campbell, you know my view in relation to any principle thatmight apply here. I saw no particular requirement upon the government—norcommonsense—in the public revelation of mere applicants for registration, given that noparticular and direct benefit derived therefrom, particularly in the light of the legal adviceobtained that, prima facie at least, application for registration was based on the premise ofconfidentiality. The clear advice was that the department was not to release names without theconcurrence of the applicant. Certainly, as I said to you privately, my view was that it wasunreasonable in the circumstances given that nothing was to be gained directly fromregistration. There is, I accept, a subsequent issue about revelation of recipients of grantswhich we do have under active consideration, and I think there is a much stronger case for


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revelation of recipients of grants than there is for the revelation of names of mere applicantsfor registration.

Senator GEORGE CAMPBELL—But I think in the context of the discussion we hadabout this particular issue, as I recall the discussion at the last estimates—you were not there,Minister; it was Senator Abetz—I was told that in fact registration was a prima facie case thatthose companies were eligible for a grant; that registration was based on assessment of theireligibility. It just was not a matter of people listing their name with the department. There wasan assessment made whether or not they met the eligibility criteria and they were thenregistered. That is what I understand Mr Peel said on that day.

Mr Peel—Senator, if I could comment. I hope I did not say that at the last estimateshearings and I am sure that I did not. I think we stressed, in fact, that registration did not givea guarantee of a grant and that there was a further process of the assessment of a grantapplication before a grant would be made. We will start receiving those grant applications on1 July and they will be going through an assessment process to determine whether or not anyof those companies will receive a grant. To be registered, I think we discussed last time,candidates need to be undertaking that eligible TCF activity. We went through what they wereand gave you details of those. But there is still a further process to go through before grantsare actually paid.

Senator GEORGE CAMPBELL—No, I understand. I suppose it is a fine line ofdistinction that is being drawn here. I understand there to be a final approval process. But Iunderstood, from what was said at the last estimates, the application for registration, the factthat a firm was registered, was a prima facie case they had a legitimate claim.

Mr Peel—No. Sorry, Senator. You need to be registered to make a claim, but then theclaim needs to be fully assessed.

Senator GEORGE CAMPBELL—We might have to go back and check Hansard inrespect of that matter. But that does not get away from the issue of whether or not we aregoing to go through the process again to get these 33 names. I do not mind, but we are askingfor them.

Mr Peel—I have provided you with the legal advice we had. It certainly would be mucheasier on our part to make them available to you, but the advice we have says we cannot dothat without the consent of the applicants.

Senator Minchin—Senator Campbell, I am wondering whether the department hadobtained further legal advice subsequent to the tabling of the original names. I would like thedepartment to consider whether that might be an appropriate course of action—because thefirst lot of names were tabled it might impact upon the legal advice—or whether thedepartment’s position is different from a legal point of view as a result of the fact that theoriginal group of names was tabled. We will pursue that. As I put to you, I do not have anysort of massive objection. My reservations were (a) the legal advice; (b) the fact thatregistration is not an entitlement to a grant. It simply sets hares running unnecessarily. But wewill get further legal advice, subject to discussion with the department, to see if there is anyremaining inhibition, given that all the other registrants have already been tabled.

Senator GEORGE CAMPBELL—Minister, I am happy at this stage, for the departmentto take it on notice. If they want to go and get legal advice, by all means do so. But I put youon notice that we will be pursuing this the same way we got the other 437.

Senator Minchin—No, I would expect you to.


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Senator GEORGE CAMPBELL—I understand partly what you are saying in relation tothat, also. Where there may be some confusion in terms of what has been said here—recollecting the last estimates—I think it was Mr Constable who said there was no discretionin this scheme; that if a firm applied for registration and met the criteria, then it was entitledto the grant. That is setting aside the modulation issue, but if it met the criteria and wasregistered, then it was entitled to the grant. There was no discretion in the department to say,‘Despite the fact that you two firms have met the criteria, we are going to give the grant to Aand we are not going to give it to B.’ Is that as I understand it?

Mr Constable—Yes and no, if I might put it that way.

Senator GEORGE CAMPBELL—Which bit did you say yes to and which bit did yousay no to?

Mr Constable—Certainly I said it was an entitlement program—that companies orparticipants in the program have to meet certain eligibility criteria to enter the program. Thatis the registration process. However, there is a subsequent process that Mr Peel referred to. Interms of actually getting a grant benefit from the program there is the subsequent claimprocess which again has a series of eligibility requirements, assessment requirements, to thataspect as well.

Senator GEORGE CAMPBELL—Can I just take you and Mr Peel back to the discussionat the February meeting. I think it is on page 31 of 67. Mr Peel said:They have registered. Whether they actually get a grant or a benefit under the scheme depends upon anassessment of their actual application. I do not think grant applications come to us until after 1 April thisyear.

Question:So there has been no decision made about any of the 437 companies?

Mr Peel:There has been a decision to register companies on the basis that they are carrying out eligible TCFactivities. There has been no decision as to the quantum of grants to be made to individual companies atthis point.

That seems to me to be pretty clear in terms of, if you were registered, that was an acceptancethat you were carrying out eligible activities; therefore you were entitled to a grant. I acceptthe argument about the actual quantum of the grant, and that was made clear at the time. Isaid:How is a discretion exercised under the scheme in terms of the allocation of moneys to individualcompanies?

Mr Constable answered:There is no discretion; there are requirements under the legislation as to how claims are assessed. Forexample, there is a five per cent cap on the amount that any one firm can receive—five per cent of itssales for the previous year. Another example is that firms which are claiming benefits for the two pre-program years have to indicate how they wish their payments to be pro rata’d over the five years of theprogram. These sorts of provisions in the scheme act to limit the amount of money to any one firm. Onthe basis of this sort of assessment—

Presumably, Mr Constable, that five per cent is an upper threshold for a particular company.

Mr Constable—That is correct, Senator. I do not resile from any of that but that talksabout the claim process, which is the second process that we are referring to. So registration is


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the initial process to enable applicants to enter the scheme and then there is the claimassessment process which I was describing at that point.

Senator GEORGE CAMPBELL—My understanding of what you told me is that if youare registered you are in the gate. It is then a question of how much you get once you are inthe gate. That depends very much on the basis of the claims made and then the application ofthe modulation. I think we put the issue to you at the last estimates that, given the value of theclaims was $1.4 billion and that the cap on the scheme was $750,000, many of thesecompanies could get amounts of money that would be irrelevant in terms of trying to meet theobjectives of what the scheme was set up for in the first place.

Mr Peel—Perhaps I could try and clarify. Companies are registered on the basis that theyare carrying out eligible TCF activities. But the grants are actually for research anddevelopment, for purchasing new plant and equipment and so on. In the claims process, theyneed to demonstrate to us that they have done those things and support that with documentaryevidence, financial reports and so on. We need to go through a separate process before we candetermine whether a grant is payable for those sorts of things. They are not examined in theregistration process as such.

Senator GEORGE CAMPBELL—I understand that, Mr Peel. What I am saying andwhat I understand the scheme’s operation to be is that the fact that you are registered is arecognition that you are carrying out eligible activities. Then there is a question of whetheryou meet the other criteria of the grant. We have to presume that the companies are put in onthe basis they do meet that criteria. As I understood what Mr Constable said on the lastoccasion, if all 437 companies, or 459 as it now is, are meeting that eligible criteria, they areall entitled to a grant. There is no capacity for discriminating between one company andanother.

Mr Peel—That is not quite it, Senator. They are all carrying out eligible TCF activities sothey can be registered for the scheme and they can, therefore, participate in the scheme. Butthey then have to do the things that the grants are payable for—that is, carry out research anddevelopment and so on.

Senator GEORGE CAMPBELL—I understand that. I am working on the basis that theyare all carrying out or performing the functions the grants are for.

Mr Peel—We need to look at that, establish that, and work out any quantum of grant thatmight be payable.

Senator GEORGE CAMPBELL—I understand.

Mr Dean—I need to clarify what my colleagues are saying. The eligible activity is more ofan assertion by the entity themselves.

Senator GEORGE CAMPBELL—Sorry, I did not understand what you said, Mr Dean.

Mr Dean—The fact that an entity is carrying on an eligible activity is essentially anassertion by the entity. There is a low test for the reasons that Mr Peel has outlined. It is quiteclear in section 40.4 that:Registration of an entity does not of itself give rise to an entitlement of a grant.

Therefore, it is wrong to believe that, because a company is registered, it will automaticallyget a grant.


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Senator GEORGE CAMPBELL—I understand that. I accept that. At the end of the day,they have to be performing those functions for which the grants were targeted at but, on theassumption that they all are, then they are all entitled to a grant.

Mr Dean—Yes, but it is a big assumption. It is a very big assumption.

Senator GEORGE CAMPBELL—What if it is true? What if it is a correct assumption?

Mr Dean—My AusIndustry colleagues are in a better place to answer the question, but theinitial work that has been done indicates there is a very large overstatement of the anticipatedeligible expenditure from the registration forms. You quoted an amount of $1.4 billion. I thinkwe made the point in the last estimates that we would be extraordinarily surprised if thatamount of claims were made.

Senator GEORGE CAMPBELL—You may well be right. It may not be $1.4 billion.What if it is $1.3 billion or $1.2 billion? I assume that the $750 million cap was determinedon an assessment of what the likely applications from the industry were going to be or whatwas likely to be needed.

Mr Dean—I think the cap is $678 million and it relates to the amount of benefit that firmswould have received from the Import Credit Scheme if it had continued from 2000 to 2005. Itis not based on what firms might need; it is an amount that was calculated on what benefitsfirms were getting under the arrangement that was previously in place.

Senator GEORGE CAMPBELL—I accept that. That must have been an assessmentmade by the government that that would be adequate to assist the industry to restructure andmeet the challenge of the future. You did not pluck a figure out of the air and hope that thatwould suddenly turn the industry around. You obviously made an assessment and said, ‘That’sthe amount of money that’s there. This will meet the needs of the industry in terms ofrestructuring, put it on the available funding for the future, allow it to amalgamate’—whatever it needed to do to become internationally competitive. On the basis of informationcurrently available that looks like, on the surface, representing half of what the industry isclaiming it is entitled to under that scheme. At the end of the day you may be right. It mightonly be two-thirds but it is going to be beyond the cap.

Senator Minchin—That is not necessarily right. The government did make a decision tocontinue the level of assistance to this industry, following the reasons you know why wecould not continue the Import Credit Scheme, but under the TCF SIP scheme to maintain thesame level of assistance through a scheme deliberately focused on investment and R&D. Youwould inevitably expect companies to make claims frankly way beyond those that are likelyto be, in fact, eligible.

I still remain confident that the scheme will meet the legitimate needs of the industry,within the scope of the scheme, but it does not surprise me that there is a bit of an ambit onthe registration for what might be eligible activities. We have to go through that process. It isa wild assumption to make legitimate eligible claims for assistance, under what is a generousindustry assistance package, will be twice the money available. You just do not know that andI do not expect it.

Inevitably the scheme is relatively tightly targeted, as it needs to be to maximise thebenefit. There will always be people who will complain that they are not eligible, who wantsomething. It is typical of all industries, but this is a relatively generous industry assistancescheme that we have properly targeted and it will meet the legitimate needs and requirementsof the industry.


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Senator GEORGE CAMPBELL—We can argue, Minister, about the extent to which thescheme is going to meet the needs of the industry. I think there is pretty common groundamong the industry that it is going to fall short of meeting their needs, given the way in whichthis whole process has evolved. That is certainly their concern and it is certainly the concernthat has been raised with me and with others. It will remain to be seen what happens with thefinal applications and the final degree of modulation that occurs with these grants. Given thatas at 1 July, the close off date, 437 firms were registered and that is for a two to three-yearperiod, has an assessment started with respect to the registration of those firms to assess thevalidity or otherwise of their registration?

Mr Peel—No, not yet, Senator. They do not submit the claims until July, so we will notstart the assessment process until then.

Senator GEORGE CAMPBELL—How long is it expected that that process will take?

Mr Peel—Sixty days is provided in the scheme. Hopefully, we can do it sooner than that.

Senator GEORGE CAMPBELL—What criteria is that measured against? Is it againstdivision 3, or have you already made that assessment? Division 3 is ‘Registration for thepurposes of the scheme’.

Mr Peel—I think in the scheme there is a requirement for us to process claims for grantswithin 60 days. I am not quite sure where that is precisely laid down there.

Senator GEORGE CAMPBELL—The criteria that are set out in division 3 undersubparagraphs (2) and (3) just relate to the registration?

Mr Constable—Senator, could you just let us know what you are referring to there, whatdocument you are looking at?

Senator GEORGE CAMPBELL—I am referring to the TCF SIP scheme part 2,‘Registration for the purposes of the scheme’, division 3.

Mr Constable—Do you have a page number there?

Senator GEORGE CAMPBELL—Section 16, page 13.

Mr Constable—Is the heading ‘What is a type 2 grant’?

Senator GEORGE CAMPBELL—No, the heading is ‘Division 3: Registration for thepurposes of the scheme’.

Mr Peel—The division 3 that I think you are referring to talks about ‘registration for thepurposes of this scheme’.

Senator GEORGE CAMPBELL—Yes. Are they the criteria that all 437 companies hadto meet?

Mr Peel—Yes.

Senator GEORGE CAMPBELL—Why is there no reference in there to themundertaking TCF activities?

Mr Dean—The act sets out the broad framework of the scheme. The detail of how thisscheme works, is there in a separate document, The Scheme, which sets out the specificrequirements. The act is only a very broad framework that sets some guidance for how thescheme would operate.


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Senator GEORGE CAMPBELL—Where in the act does it say that you have toundertake TCF activities? As defined by what?

Mr Dean—The definition of TCF activities is in the scheme, not in the act. Schedule 1 tothe scheme contains the definition of what the TCF sector is.

Senator GEORGE CAMPBELL—Where did that definition come from, Mr Dean?

Mr Dean—It is derived from the ANZSIC classification, the Australian and New ZealandStandard Industry Classification.

Senator GEORGE CAMPBELL—As I understand it, that classification also includes adefinition of core activities. Did you also adopt that?

Mr Dean—I do not think the ANZSIC classification talks about core activities.

Senator GEORGE CAMPBELL—I understand that it does. I understand that it includesa definition of core activities. Did you adopt a definition of core activities?

Mr Dean—The scheme sets down what is, essentially, core activities. They are theactivities in schedule 1 of the scheme.

Senator Minchin—Senator Campbell, given your line of questioning, I think I shouldinform you that today we have promulgated a slight amendment to the scheme to meet whatyou know and I know is industry concern that the detail of the definitions and descriptions ofthe scheme could lead to a wider eligibility than was ever originally intended. We havepromulgated a change which deletes three words, but a critical three words, that do make itclear that this scheme is tightly targeted and based on that ANZSIC definition. It is really toclarify that that was always the intent of the scheme and that it is the TCF activities as set outin that standard, and no more. That will meet the industry’s concerns about the extent towhich it may have been possible for companies to become eligible for grants beyond thatstandard.

Senator GEORGE CAMPBELL—Has that been publicly announced, Minister?

Senator Minchin—It will be today, yes. As I said, it was only presented at 2 o’clock.

Senator GEORGE CAMPBELL—Can we get a copy? It might help us to refocus.

Mr Dean—I am sure we can get you a copy. I do not have one here, but I can get you acopy.

Senator GEORGE CAMPBELL—You did not bring one along, Mr Dean?

Mr Dean—No.

Senator GEORGE CAMPBELL—Didn’t you think this was going to come up again?

Mr Dean—You surprised me, Senator.

Senator GEORGE CAMPBELL—You should know me better than that!

Senator Minchin—He forgot how astute you were, Senator Campbell!

Mr Dean—The primary part of the amendment is to remove from part G the words‘Textile products manufacturing not elsewhere classified’. There has been a discussion withthe industry and I think that that will meet their concerns.

Senator GEORGE CAMPBELL—When you say ‘a discussion with the industry’, whendid these discussions take place and who was involved?


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Mr Dean—Discussions have taken place since March with the Council of Textile andFashion Industries of Australia and some other firms and that was identified as being themajor issue of concern.

Senator GEORGE CAMPBELL—Did that involve the TFIA?

Mr Dean—Yes.

Senator GEORGE CAMPBELL—I am just looking at the document. Can you gothrough again what the change is.

Mr Dean—It is part G of schedule 1, the second-last item there on the dot points. On mineit is page 58, but yours might be different.

Senator GEORGE CAMPBELL—What document are we looking at?

Mr Dean—This is the scheme, not the act. I do not believe that you have the document,Senator.

Senator GEORGE CAMPBELL—No. What I have looks like the application. Howquickly can we get a copy of the promulgation? It is a regulation, I presume, Minister, is it?

Senator Minchin—It is a regulation, isn’t it?

Mr Dean—Yes. We should be able to get it in 15 minutes or so, Senator.

Senator GEORGE CAMPBELL—What is the effect of that? Does that now put in placethe full ANZSIC definition?

Mr Dean—Let me say that I think the government’s intent here was clear, and I think thisis a clarification of intent. It is actually a reduction of the risk that people might have beenable to put in claims that are outside what was intended, and the intent is not to test thatthrough the court system but to provide clarity now. What this item allowed was thepossibility that companies could have made an argument that items that are covered elsewherein the ANZSIC classification that might come under other broad groupings were textiles. Soby removing this item basically it makes clear that, unless an item is specifically mentioned insubdivision 22, it is not covered by the TCF scheme.

Senator GEORGE CAMPBELL—Which essentially tightens it up to the ANZSICdefinition?

Mr Dean—Yes.

Senator GEORGE CAMPBELL—And that would effectively would exclude theKimberley Clarks and the Wimbledon on real grass company?

Senator Minchin—Senator, we would prefer not to—

Senator GEORGE CAMPBELL—I am not asking you to—

Senator Minchin—We do not want to indicate that this is going to affect anybody inparticular. Certainly, I was persuaded that, to allay any concerns that were existing in theindustry about items of production that clearly were never within the intent of the schememight be eligible, we should clarify it.

Mr Dean—It is very important to understand that this is not targeted at any individualcompany. There are probably 37 or 38 companies that it affects, so it is not about—


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Senator GEORGE CAMPBELL—Yes, I am not suggesting that mine was an exhaustivelist, either—just a few of the more outrageous examples. When was the industry notified ofthis change?

Mr Dean—That will happen today.

Senator GEORGE CAMPBELL—They have not been notified, up until 2 o’clock,anyway.

Mr Dean—I am aware that the TFIA intends to strongly support it, but outside of that theyare not aware of it. So that will happen later today.

Senator GEORGE CAMPBELL—I suppose we can leave that there until we see whatthe regulation is that has been promulgated and its effect. Can we just go to the early accessscheme that has been introduced? This is the early access scheme to SIP funding. That wasintroduced, I assume, as a result of the Bradmill experience. Is it entirely based on theBradmill experience?

Mr Dean—No, it is the result of representations that have been made to the governmentabout problems that could arise where a firm gets into difficulty and, for the sake of access tofunds which the firm expects, the government has provided a facility where it is actually anadvance payment against an expected grant. The firm can get earlier access to that payment.

Senator GEORGE CAMPBELL—And are you aware of any companies other thanBradmill that are in this set of circumstances?

Mr Dean—I am aware of a number of companies that are in receivership or haveadministrators, which is the criteria. I do not think I could comment on which companiesmight make application under that provision.

Senator Minchin—Senator Campbell, to be eligible they have to have clear entitlementunder the scheme, and that has to be assessed. So we do not know if anybody is clearly andunambiguously entitled to it. It is to ensure that companies can bring forward, in a sense, theirclaims for entitlement and be paid out in advance if their entitlement is legitimate.

Senator GEORGE CAMPBELL—I understand what you are saying, Minister. What I amconcerned about is why it took so long and it took such a public demonstration with theBradmill experience to have this change made to the operation of funding the scheme, giventhat I have raised this issue with you back in May last year at estimates, and you asked me notto name the company. I think privately I told you it was Bradmill. Nothing was done about it.Bradmill then got into subsequent difficulties and, as a consequence presumably of that andother activities in the industry, we have now brought this forward. It seems that had someaction been initiated then people would have been in a better position today than theynecessarily are.

Senator Minchin—My understanding from the receivers is that this matter would not haveaffected the receivership one way or the other. I was very keen to ensure that this schemeremained based on a payment in arrears for eligible expenditure by firms that were investingin their own futures—that they invest the money and at the end of that financial year in whichthe expenditure took place they then make a claim for, in a sense, a reimbursement and thatthat was the proper basis on which the scheme should operate, and it should not be or be seento be, frankly, about bailing out firms going under. It was not; it was about firms investing intheir own futures and firms with a future.


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However, we have been persuaded, after consultation with the industry, that where a firm is(a) in difficulty but (b), on the balance of probability, will be able to trade its way out of thosedifficulties and (c) has an entitlement under the scheme that payment can be brought forward.I think it is a sensible moderation of the scheme but not contrary to the original intent, whichis not for the scheme to be seen to be just a subsidy for firms going out the door but one that isvery much based on firms investing in their own futures.

Senator GEORGE CAMPBELL—But is that not a request, Minister, that was made byBradmill at the end of last year?

Senator Minchin—I cannot recall off the top of my head whether at what point, if any,they specifically requested their payment to be brought forward. I am happy to take that onnotice, and I had a number of—

Senator GEORGE CAMPBELL—My knowledge is that they made the request and theywere denied it, and that would have avoided the receivers coming in. In fact, my informationis that the ANZ Bank specifically told Bradmill that that would have avoided the receiverscoming in.

Senator Minchin—That is certainly not the advice I have had—that it would not havemade any difference to the question of receivership, that the amounts involved would not havemade any difference to receivership. I am not denying the company may have sought anadvance payment; I will have to check on that. But at that stage it was contrary to the schemeand I had no discretion under the scheme to bring a payment forward. As I say, the advice tome at that stage was that it would not have made a difference per se. But I will check on asand when the company may or may not have—

Senator GEORGE CAMPBELL—My understanding at the time was that the ANZ Banktold Bradmill that they would not have put them into receivership had they been able toguarantee that funding was available to them under the SIP scheme, and that that was thebasis upon which the request was made. That is what I have been told.

Mr Dean—Senator, I think there might be two things here. I think there are ambit claimsfor support from SIP, which the scheme is not designed to provide, and what the firm isentitled to. It may well be the case that if Bradmill had been able to put in an ambit claim itmay have made a difference, but what the firm is actually entitled to will be much less thanwould have made a difference to receivership.

Senator GEORGE CAMPBELL—I suppose it is a point of argument, Mr Dean. I am toldthat the request was based on what their expectation was out of the SIP scheme.

Mr Dean—I have had a fair bit of interaction with the receiver. I would be very surprisedif what I am saying is not—

Senator GEORGE CAMPBELL—I am not talking about the receiver; I am talking aboutthe ANZ Bank.

Mr Dean—Yes, but I think that the problems with Bradmill go back a long time. I do notthink a payment of the size that they may get from SIP would have made any difference to theoutcome for the company.

Senator GEORGE CAMPBELL—Were the TCF industry associations adequatelyconsulted on this scheme?

Mr Dean—You mean the amendment for advanced special payments?


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Mr Dean—There has been quite a bit of discussion with them.

Senator GEORGE CAMPBELL—What does that mean?

Senator Minchin—Senator, there was a lot of discussion with them about it, because theindustry was, frankly, itself concerned to ensure that this scheme did not become one that wasjust seen as a bail-out scheme for firms going under. They did not want us to do anything todissipate the scheme and, along similar lines to what we were discussing before about—makesure you don’t spread the thing too wide—they were keen to ensure that we did not doanything to act contrary to that intent. That is why this amendment is designed, yes, to giveflexibility but also to ensure that it is only in relation to claimants who are otherwise eligible.It does not extend the eligibility at all. It simply says, ‘If you were eligible at any point in afinancial year, you can make a claim immediately to the extent to which you are eligible. Youdon’t have wait until the end of the financial year.’ Industry was pretty closely involved in thisissue.

Senator GEORGE CAMPBELL—Why do you think they have not publicly come outand endorsed this scheme?

Mr Dean—I believe that the industry would like to see advance payments available to allfirms, not just to those who are distressed.

Senator GEORGE CAMPBELL—And that is the main reason why they have notpublicly endorsed it?

Mr Dean—I believe that is the main issue.

Senator GEORGE CAMPBELL—In light of the number of registrations that have beenreceived for access to the scheme, what mechanisms are there to discourage firms from goinginto receivership to get access to the moneys and also to prevent a firm going intoreceivership coming out of it?

Mr Dean—To go into receivership as a ploy to get advance payment of their SIP moneywould be a very risky move, because you would basically destroy confidence in yourbusiness. I do not think we run a large risk of firms going into administration or receivershipjust to get their SIP money. There have to be a lot of other issues there.

Senator GEORGE CAMPBELL—But that is an assumption.

Senator Minchin—I think it is a reasonable assumption, Senator Campbell. I would bestaggered if anybody would actually drive their company into receivership to pick up a fewmillion dollars from the government and then come out of it. That would be extraordinary. Wewill be monitoring applications for this, and the behaviour of this—

Senator GEORGE CAMPBELL—You should read the newspapers. Company directorshave been doing extraordinary things in the past few weeks.

Senator Minchin—That is certainly true, Senator Campbell; I cannot deny that. Certainlywe will monitor the change to ensure that that sort of activity does not occur. I would bestaggered if it did, and it would reflect even more adversely on the Australian businesscommunity if that sort of activity was engaged in.

Senator GEORGE CAMPBELL—Can you enlighten me as to what sort of processcompanies would have to go through to get access to this early advance?


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Mr Dean—They basically have to make the same application as they would ordinarily, andthey need to provide a statement that gives evidence that there is some future for the businessand that paying the money earlier will help the business and help the community which itoperates in.

Senator GEORGE CAMPBELL—At the end of the day, is there still a discretion withthe minister as to whether it gets paid or not?

Mr Dean—Yes, that is with the minister.

Senator Minchin—The department would make the decision about whether their claim foreligibility in the scheme was valid, but it would then be a ministerial discretion as to whetherto bring that payment forward, based on advice from the department.

Senator GEORGE CAMPBELL—So it is still at the discretion of the minister as towhether or not companies can access it, even if they meet all the other criteria.

Senator Minchin—The discretion would be as to the timing of the payment, not thescheme itself.

Senator GEORGE CAMPBELL—The only issue in question here is whether you bringthe payment forward or not, isn’t it?

Senator Minchin—Yes, that is right. That is what I am saying: the ministerial discretionwould be in relation to the bringing forward of the payment.

Senator GEORGE CAMPBELL—Are there any obligations on a firm that gets access tothe early funding?

Mr Dean—There are the normal program obligations.

Senator GEORGE CAMPBELL—Is there any obligation with respect to the expenditureof the moneys? For example, could they use it to pay entitlements to employees who are maderedundant?

Mr Dean—The way it works is that if you are under receivership you lose control overhow those moneys are paid. I think that becomes the receiver’s responsibility. However, somereceivers might negotiate with other creditors and choose to use that money towardsemployees’ entitlements, but that is a matter for the receiver, not for us.

Senator GEORGE CAMPBELL—To what extent is there a capacity for this top-up—Iuse the term ‘top-up funding’ but the pull-forward of their entitlements—to be used to simplytrick a company out for a sale?

Mr Dean—We have to be very careful. It is not a top-up. It is an advance payment on agrant that has already accrued, and we need to be very clear about that. There is no additionalpayment being made. If what is happening is that you are transferring a potential asset into anactual asset, that will help facilitate the sale of the company. I would have thought that wouldbe a good thing in terms of moving it into ongoing viability.

Senator GEORGE CAMPBELL—But are there any safeguards in there to prevent itfrom being a sale to simply asset strip?

Mr Dean—I do not know how we would be able to do that, except that someonesomewhere has to say that they believe that the business has an ongoing future. If we foundthat those sorts of statements had been made in poor faith, I guess we would have a recallagainst whoever had made them.


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Senator GEORGE CAMPBELL—But wouldn’t it seem reasonable to have somecommitment from the company to continue operations, at least for a period of time?

Mr Dean—I think you need to be pretty careful in putting lots of constraints in theseoperations. What is really in the company’s interests and in the employees’ interests is to getthe company, the business, back on a secure footing with certainty about its future. One of themajor benefits in providing these sorts of advanced payments would be that you wouldexpedite that. Companies can carry a potential SIP payment on their books and, until the thingis assessed, nobody really knows whether they will get a grant. But they might be holdingsomething on their books as a potential asset of several million dollars, and so that createsuncertainty about the value of the company.

Senator GEORGE CAMPBELL—But presumably the provision of early access is toprovide funding to enable the company to continue operation. So we are not looking toproviding funding to companies that are going to go under anyway.

Mr Dean—No, Senator.

Senator GEORGE CAMPBELL—So it is about the continued viability of the company.The question I am asking is: what measures are being put in place to ensure that, where theearly payment is made, there are commitments by the company to continue operating as aviable entity?

Mr Dean—I think that would be pretty difficult to do, because in a lot of these cases whatwill happen is that the company will be sold to other owners. So you are starting to putcovenants around people who may not have emerged yet as buyers, and that would probablydamage the business, rather than encourage it to keep going in a viable form.

Senator GEORGE CAMPBELL—But, at the end of the day, the issue is not aboutownership. It might actually be a good thing for ownership to change if a company is goingunder.

Mr Dean—Yes, absolutely.

Senator GEORGE CAMPBELL—The issue is whether or not there is a commitment tothe ongoing operation of that company as a TCF company, rather than simply being sold offfor the purpose of stripping the assets out of the company.

Mr Dean—It is a requirement that someone within the company is able to give a statementthat the business will be operating in the future at the point in time that they ordinarily wouldhave made the claim.

Senator Minchin—Excuse me, Mr Chairman. I have this notification. I do not knowwhether I have to table it or just give you a copy or whatever. It is the notification of thechange to the TCF SIP scheme that was gazetted today.

CHAIRMAN—We will accept a copy for tabling. Thanks, Minister. Perhaps we will havea 10-minute break now while Senator Campbell has a look at that.

Proceedings suspended from 3.30 p.m. to 3.46 p.m.Senator GEORGE CAMPBELL—We were talking about the administration in relation

to the early access scheme for TCF. The reason I raised some concerns about the potential forthe scheme to be misused or abused is in relation to a company or organisation called theSupreme Three group. Are you aware of this company, Minister? Is the department aware ofit?


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Mr Dean—We are aware of the company.

Senator GEORGE CAMPBELL—As I understand it, this group had a turnover of$35 million last June and now it is in receivership. What processes do you think are in placethat would stop a company like that, which I understand is under investigation for its businesspractices, actually accessing the early entry scheme?

Mr Dean—The first thing is that the receiver would have to certify that he or she believesthat the company will be in a position to have made the claim at the time that it ordinarilywould have. Just going on press articles, I do not think that is the case that Supreme Three isgoing to be in.

Senator GEORGE CAMPBELL—As I understand it, they tried earlier on this year to geta backdoor listing on the exchange, despite the fact that they owed $10 million to creditorsand $3 million in employee entitlements. Have they approached you at all, or the department,in relation to the SIP scheme. Have they made any overtures to you? Do you simply know ofthem from press reports?

Mr Dean—No, Senator. They did make an inquiry of us, but we did not believe they hadundertaken any eligible expenditure. Therefore, they would not have been entitled to a grant,so we did not explore that any further.

Senator GEORGE CAMPBELL—When you say they made an inquiry of you, what typeof inquiry? Was it about access to the SIP scheme?

Mr Dean—Yes.

Senator GEORGE CAMPBELL—Was that the only matter they inquired about?

Mr Dean—I believe so, Senator.

Senator GEORGE CAMPBELL—Why did you feel they would not be entitled to agrant? Were they not carrying out eligible TCF activity?

Mr Dean—My information is that they were not. Therefore, they would not have benefitedfrom the scheme.

Senator GEORGE CAMPBELL—Did the department make that assessment, or did thiscompany self-assess?

Mr Dean—They advised us that they had not made any capital expenditure. This is a type1 grant. Therefore, they would not have qualified for any SIP payments.

Senator GEORGE CAMPBELL—So you actually ran through the terms of qualificationfor registration with them.

Mr Dean—I think they approached us from a policy perspective because they had aparticular set of issues. Ordinarily, inquiries would be dealt with by AusIndustry and that isthe process they would go through.

Senator GEORGE CAMPBELL—So they did not go through AusIndustry?

Mr Peel—Senator, the name of the company you are talking about is Supreme Three, is it?

Senator GEORGE CAMPBELL—Supreme Three group, yes.

Mr Peel—I do not have any information on the company, Senator, but I do note that in thelist of the entities registered under the TCF SIP scheme, which was tabled in the parliament,Supreme Three Ltd is actually on that list. I would assume, therefore, there was some


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assessment of their eligibility for registration by AusIndustry, but I do not have any particulardetails of that company.

Senator GEORGE CAMPBELL—So we have an apparent or inherent contradiction heresomewhere.

Mr Dean—No, not at all. It is quite possible that the company planned to have eligibleexpenditure in doing eligible activities, but at the point in time when they approached us theyhad not done that. Therefore, at that point in time, they would have not have been eligible fora payment.

Senator GEORGE CAMPBELL—Why did they approach you, Mr Dean?

Mr Dean—They did not approach me.

Senator GEORGE CAMPBELL—In addition to AusIndustry?

Mr Dean—They had previous contact with us. That was the reason there was arelationship there.

Senator GEORGE CAMPBELL—There was a relationship there.

Mr Dean—I do not mean a deep relationship. I mean there had been contact and, in theinterests of providing good service to companies, they just continued the contact they hadalready made.

Senator GEORGE CAMPBELL—Was the application to AusIndustry madeindependently or did you advise them at some stage—

Mr Dean—I do not know whether there was ever an application or a claim. The companywas registered. It has not put in a claim.

Senator GEORGE CAMPBELL—But how did it get registered if it did not put in aclaim?

Mr Mackey—It is the first step, Senator, in the two-stage process. The first step isregistration. The second step, which Mr Dean was talking about, is the claim and theassessment of it.

Senator GEORGE CAMPBELL—We come back to this chicken and egg one again. Iunderstood the process is that you put in an application with your claim and you are assessedagainst a set of criteria. You are then registered as having eligible TCF activity. Is that right?

Mr Peel—You register on the basis that you are carrying out an eligible TCF activity,Senator. Not all companies will, but I guess most will, put in a claim for research anddevelopment that they have undertaken, or equipment they have purchased. That will need tobe backed up by evidence that they actually did those things.

Senator GEORGE CAMPBELL—But I thought you put in the claim at the point ofregistration.

Mr Dean—No.

Mr Peel—You put in the claim from 1 July this year, as I mentioned earlier, Senator.

Senator GEORGE CAMPBELL—How did you make the judgment before that it was$1.3 billion, the claim on the scheme?

Mr Dean—Because all companies are required to put a projection of their eligibleexpenditure for the next five years. That is why we can be confident that even with perfect—


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Senator GEORGE CAMPBELL—And they would have done this?

Mr Dean—All companies would have done that.

Senator GEORGE CAMPBELL—They still are on the list.

Mr Peel—They have been registered for the scheme, Senator. They are on the list that wastabled in the parliament some time ago.

Senator GEORGE CAMPBELL—And they have not, to your knowledge, withdrawn theapplication?

Mr Peel—Not to my knowledge but I could take that on notice and check it for you,Senator.

Mr Dean—Senator, in the case of Supreme Three, they will not be eligible because theyare no longer trading, so they are not now carrying out an eligible TCF activity. There is noquestion of them making a claim further down the track.

Senator GEORGE CAMPBELL—But you might be right. Presumably they will not getaccess to funding.

Mr Dean—They will not get it. That is correct.

Senator GEORGE CAMPBELL—I am interested in why they are still on the list.

Mr Dean—Because this was registration as of 1 April, or whatever the date was, and atthat stage they were still trading.

Senator GEORGE CAMPBELL—When did you advise them they would not be eligiblefor funding?

Mr Dean—I cannot answer the question. The staff member is not here. It was informaladvice over the phone. It was not written advice. It was just a discussion about what would beeligible.

Senator GEORGE CAMPBELL—Was it a week ago, a month ago?

Mr Dean—It was some time ago.

Senator GEORGE CAMPBELL—Some time ago?

Mr Dean—Yes.

Senator GEORGE CAMPBELL—Can you take that on notice, Mr Dean, and provide uswith advice of when they were actually advised they would not be eligible for the scheme.

Mr Dean—Certainly, Senator.

Senator GEORGE CAMPBELL—Minister, are you aware of general concerns in theindustry about the administration of the SIP scheme; complaints about the administration ofthe SIP scheme?

Senator Minchin—I have seen assertions that there is some concern. I would refute anysuggestion that there are any difficulties. I think the department has done an admirable job ofdealing with a complex scheme and putting a complex scheme in place, so I am not at allmoved by assertions to the contrary.

The government and the department have consulted extraordinarily closely and over a verylong period with the industry. The industry at all times—and I guess inevitably—wanted a lotmore than the government could ever provide. It was my job to remind this industry that it


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remains the most protected industry in the country, with a level of support which many otherindustries would dearly love. We had to work together to make sure it maximised the benefitsand the future of this industry.

As you would know, it is a complex industry. It is not an easy one to deal with in thatsense, with different agendas in different parts of the industry. Through our action agenda,through this scheme, and all those sorts of things, we have worked quite well with theindustry to give it much more of a focus and a single voice. The industry is now much betterstructured in that sense. I have a lot of sympathy for those departmental officials who havehad the very difficult task of putting a complex scheme in place—one that ensures theintegrity of the scheme and ensures that taxpayers’ funds are used properly and that is abusefree while dealing with an industry that obviously wants to get as much out of the scheme andout of the government as it possibly can. It is a difficult balancing act and they have done itwell.

Senator GEORGE CAMPBELL—The only context in which I am raising it is whether ornot, given that there has been some public criticism of the administration of the scheme, therehave been consultations with the department about these issues, and an attempt to try and dealwith some of the issues that have been raised. I understand that there are two differentimperatives here. There is the imperative of the industry, which is to get their problems fixedup as soon as possible or get rid of them, and there is the responsibility of the department toensure that taxpayers’ money is spent in accordance with the wishes of the parliament, thegovernment. But at the end of the day there also can be things done which help alleviatedifficulties, differences and pressures. I am really posing the question of whether or not thedepartment is satisfied it has done everything it can to make the thing work as effectively andstreamlined as possible.

Mr Dean—Senator, there are two issues here. One is that it is the department’sresponsibility to manage the scheme proficiently. The other is whether there is a limited poolof funding available. Obviously, people who have high expectations of the financial supportthat they might like to have will not necessarily be happy with the scheme. That is a differentissue to whether the department is marketing the scheme well, explaining it to the people andbeing helpful in managing the scheme. The concerns that are expressed to me are very mucharound those other sorts of issues—

Senator Minchin—You mean the quantum.

Mr Dean—Yes. I am not saying that everybody is absolutely happy, but in general thescheme has been managed well. As applications start to come in it will settle down a littlemore and people will be more comfortable. They will have a better hands-on feel for how thescheme is going.

Mr Peel—We have undertaken a number of seminars with the industry to explain thescheme as best we can. We have followed up any inquiries that we have received from theindustry on the scheme. We are in regular contact with the relevant industry associations andwe are always ready to talk to them about any perceived difficulties with the scheme.

Mr Wall—We have regular meetings, on about a monthly basis, with the industry toidentify those problems and, where appropriate, take action on them. We are conscious thatthis is a new set of arrangements and, as well as the briefings and seminars, we want toidentify any issues of concern that can be dealt with, and deal with them appropriately.


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Senator GEORGE CAMPBELL—And access to those seminars or conferences isavailable to the whole of the industry, or representatives of the industry groups? Who is theconsultation taking place with?

Mr Peel—It is generally available to the whole of the industry, Senator.

Mr Dean—There are two levels of consultation. There is an educative function, whichAusIndustry is doing, which is generally available. And we are meeting—as Mr Wall said—regularly with the president and executive director of TFIA and other industry leaders. Inaddition, they sometimes make representations to the minister. They are very well covered interms of their access to the decision-making process.

Senator GEORGE CAMPBELL—Some of the issues I have seen go to theadministration of the scheme but some of them go to the design elements of the scheme aswell. Have you had consultations about those aspects?

Mr Dean—My understanding, Senator—and I was not here at the time—is that theindustry was intimately involved in designing the scheme. Perhaps it is true that none of uscan always see all the complexities that we are dealing with. It is a hard call when, essentially,you have been consulted and you sign off on one set of circumstances, to be too critical aboutthe way it ends up operating.

Senator GEORGE CAMPBELL—Except that nothing is ever static, Mr Dean.

Mr Dean—True.

Senator GEORGE CAMPBELL—Things do move along. The last statement is aclassical example.

Mr Dean—That is why we continue the consultation process with them, Senator.

Senator Minchin—And why we make changes, as we did today, in response to sensiblesuggestions put to us.

Senator GEORGE CAMPBELL—If you had notified me at 2 o’clock you would havesaved me an hour’s questioning.

Senator Minchin—I had to make certain a couple of things were in place, Senator. I wasanxious to tell you as soon as possible.

Senator GEORGE CAMPBELL—We will still claim responsibility for it.

Senator Minchin—I am sure you will!

Senator GEORGE CAMPBELL—I have exhausted that area for the moment.

Senator Minchin—I will look forward to your press statement congratulating thegovernment on its wisdom.

Senator GEORGE CAMPBELL—The reactive approach!

Senator Minchin—Consultative.

CHAIRMAN—Does that mean that we have finished with output 1.3?

Senator GEORGE CAMPBELL—No. I just want to deal with the ACIS scheme. Howmuch money is available in the ASIS scheme for this financial year?

Mr Peel—Last time we had estimates, Senator, we indicated it was $2 billion overall. Forthis year it is $200 million, from memory.


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Senator GEORGE CAMPBELL—Do you have the forward estimates projections onthat?

Mr Peel—The estimates, as we indicated last time, Senator, were basically determined ondividing the number of years of the scheme by the $2 billion. It was approximately$400 million a year but this year, being a part of a year, it is $200 million. As the schemeprogresses, we will refine the estimates more.

Senator GEORGE CAMPBELL—And presumably those figures are flexible.

Mr Peel—Yes, Senator.

Senator GEORGE CAMPBELL—How many firms have registered for the ACISscheme?

Mr Peel—We have currently 194 participants, Senator.

Senator GEORGE CAMPBELL—I ask you to provide me with the names of the 194participants.

Mr Peel—Is that a question, Senator?

Senator GEORGE CAMPBELL—It is a request.

Senator Minchin—Take it on notice.

Mr Peel—Yes, we will take it on notice, Senator.

Senator GEORGE CAMPBELL—The five-year forecast is $2 billion, you say?

Mr Peel—That is right.

Senator GEORGE CAMPBELL—Is that capped at $2 billion?


Senator GEORGE CAMPBELL—The same application as the TCF.

Mr Peel—Yes, I think so.

Senator GEORGE CAMPBELL—Do the administrative costs of the scheme come out ofthat fund, or are they provided separately out of the department’s administrative costs?

Mr Peel—I think they are separate, Senator. I would have to double-check on that.

Senator GEORGE CAMPBELL—Would that be the same for TCF as well?

Mr Wall—I cannot speak for TCF, Senator, but with ACIS the administrative costs areadditional to the $2 billion.

Senator GEORGE CAMPBELL—Can you tell us what those administrative costs are forthe next four financial years?

Mr Peel—I have to take that on notice, Senator, and provide it to you.

Senator GEORGE CAMPBELL—Do you have the costs for the next financial year2001-02?

Mr Peel—I do not have them with me.

Senator GEORGE CAMPBELL—Has the government had meetings with Mitsubishi inthe last six months?

Senator Minchin—I see Tom Phillips regularly.


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Senator GEORGE CAMPBELL—Do you meet them on a regular basis?

Senator Minchin—Yes, I see them around Adelaide, Senator Campbell. I have regularmeetings with—

Senator GEORGE CAMPBELL—Formal meetings.

Senator Minchin—The department can speak for itself but I have had three or four formalmeetings with Mitsubishi this year. As you know, I was just in Tokyo and met formally withMr Eckrodt.

Senator GEORGE CAMPBELL—Have there been any proposals or are you consideringany proposals for assistance for Mitsubishi in the current environment?

Senator Minchin—We are not considering anything, Senator Campbell. My role has beento ensure that Mitsubishi and the department maximise the company’s capacity to benefitfrom the ASIS scheme. We have, as I announced in Tokyo, joined with the South Australiangovernment in providing half a million dollars to enable the Australian company to conduct aprofessional feasibility study on the issue of the production of a complete new vehicle at theTonsley plant. That was a one-off discretionary contribution.

I have said publicly that I think the current policy settings for the automotive industry aregenerous and provide Mitsubishi with the foundations for confidence about its future. If thereis any matter beyond that they want to raise with me, they should of course feel free to discussthat with me. They have not raised any other issue. There was press speculation aboutMr Eckrodt raising the issue of tariffs. He did not raise that with me in our Tokyo meeting. Itook the opportunity to remind him of the decisions we had made but he did not seek in thatmeeting to suggest that we should change that policy position.

Senator GEORGE CAMPBELL—Minister, you referred to half a million dollars. Is thatthe only money that is being provided to Mitsubishi?

Senator Minchin—I have said publicly that our estimate of their potential eligibility underACIS is at least $200 million. That is variable upwards, depending on production andinvestment. That is the baseline position. The only moneys above and beyond or outsideACIS that have been provided is that half a million dollars.

Senator GEORGE CAMPBELL—Which part of the department’s budget has that comeout of?

Senator Minchin—I think it is out of running expenses.

Senator GEORGE CAMPBELL—Out of administration?

Senator Minchin—Yes.

Senator GEORGE CAMPBELL—Of course.

Senator Minchin—It is not taken out of ACIS or anything like that.

Senator GEORGE CAMPBELL—Does that have any impact upon the department’scapacity to fund other programs?

Mr Wall—I think the correct answer is that it is $500,000 that would be spent on otheractivities, so it comes at a cost in terms of activity forgone.

Senator GEORGE CAMPBELL—Would it be automotive type activities or generalactivities across the department?


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Mr Mackey—It comes out of departmental expenses, Senator. Therefore, it reduces theamount which is otherwise available to be spent on—

Senator GEORGE CAMPBELL—All programs in the department would be affected.

Mr Mackey—Under departmental expenses but not administered items.

Senator GEORGE CAMPBELL—‘Programs’ is the wrong terminology but it wouldimpact across the whole of the department. Have there been any jobs affected by the provisionof $500,000?

Mr Wall—Senator, could you repeat the question?

Senator GEORGE CAMPBELL—Have there been any jobs affected by the provision ofthe $500,000. Have there been any redundancies?

Senator Minchin—With the department?

Senator GEORGE CAMPBELL—Within the department.

Senator Minchin—There have not been.

Mr Wall—It has been managed within the existing divisional allocation, Senator.

Senator GEORGE CAMPBELL—How do you absorb half a million dollars?

Senator Minchin—It was management of the staples and paperclips.

Senator GEORGE CAMPBELL—Not easily, Mr Wall.

Mr Mackey—It is always a difficult problem, Senator. Elsewhere in the PBS there aresome other programs which have been absorbed in departmental expenses. They are relativelysmall amounts. It is basically a job for the departmental executive to manage that slightlysmaller amount which the government gives us to run the department.

Senator Minchin—I was just asking what pot the half a million dollars comes out of andhow big is the pot—and what is it?

Mr Mackey—$217 million.

Senator GEORGE CAMPBELL—That puts it in a better perspective.

Senator Minchin—Exactly. It is about one-quarter of one per cent of the running costs. Itis worth keeping that in perspective.

Senator GEORGE CAMPBELL—The average employee of your department would notnotice the one-quarter of one per cent impact.

Senator Minchin—I would not have thought so.

Senator GEORGE CAMPBELL—Minister, has Mitsubishi given any indication to thegovernment about its ongoing commitment to maintaining a production facility in Australia?

Senator Minchin—That, of course, was the whole point of my visit to Tokyo: to ensurethat they understood the government’s strong support for them maintaining their operationshere and the policy decisions we were making that were very conducive to such a decision.Mitsubishi’s general position has been abundantly clear. It is no different privately to thepublic position and that is that Mitsubishi worldwide is undergoing a total review of its globalstrategy. Decisions about the long-term future in Australia are subject to that global review. Itis a worldwide corporation that, as you know, lost $4 billion last year. They have tostreamline, restructure and reduce costs.


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I visited a plant in Tokyo that has been cut back to 50 per cent and there was another plantnearby that had been shut down. The company is in some difficulty on a worldwide basis, sothe issues surrounding Australia have to be seen in that context. They indicated to me that adecision on the question of what they call a facelift for the existing model would be madefairly shortly. I remain optimistic that that will be a favourable decision. That would, in asense, guarantee the company through to the life of this model which is timed for 2004.

The decision the company has to make, and which is why this contribution of half a milliondollars is so relevant, is the question of a replacement car to be made at the Adelaide facilityfrom 2005 onwards. That is a decision to be made by the company on a global basis, takingaccount of its product strategy, going forward 10 to 15 years. Our embassy, the industrycounsellor in Tokyo and others, including myself, will continue to do everything they possiblycan to impress upon the company the virtues of making a positive decision about theproduction of a model to replace the current Magna Verada post 2005, and why that is in thecompany’s interests.

Senator GEORGE CAMPBELL—Have they given you any indication about this outertime frame for making this decision? I thought I read something about October or September.

Senator Minchin—Their public position is the same as their private one. They expect tomake the decision in this calendar year; in other words, by the end of 2001. As I said, inTokyo I really do believe they will commit to the investment in the facelift to take this modelthrough to the end of 2004. I am quietly confident that they will see the wisdom of continuingto produce automobiles in Australia beyond that time. They made it clear to me that alloptions in the sense of product are on the table, including Daimler, Chrysler and Mitsubishiproducts. That is why I have said and I continue to believe that the investment by DaimlerChrysler in the company is a very good one from Australia’s point of view. It adds to ourreasons for being cautiously optimistic.

Senator GEORGE CAMPBELL—Has the department assessed the likely impact on thelocal producers of the re-entry of Renault into the Australian vehicle market?

Mr Wall—No, Senator.

Senator GEORGE CAMPBELL—Why, Mr Wall?

Mr Wall—I am not aware that they are re-entering the market in any significant way,Senator.

Senator GEORGE CAMPBELL—All the indications are that they are and that they areentering into a fairly aggressive marketing campaign to do so.

Mr Wall—It is a very aggressive market and many of the import brands approach it in thatfashion, so it will not be any different to what we currently see.

Senator GEORGE CAMPBELL—It will not be?

Senator Minchin—Senator Campbell, I am not sure the department should be spendingtime, money and resources analysing in detail the impacts of every decision made by everyimporter on a regular basis. Importers adjust their strategies for the Australian market: somewithdraw, some re-enter, some upgrade, some change. Unless there was a fundamentalchange, or a quite substantial change, I am not sure the department should be spending timeanalysing every single importer’s strategy.

We have all seen Renault are certainly spending a lot of money advertising their re-entry tothis market. It is a market of around 800,000 units now and the industry itself expects it to be


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a million by 2004-05. I have seen Renault’s target sales figures as to what they would beexpecting to achieve. They are in the low thousands.

Senator GEORGE CAMPBELL—In the initial stages.

Senator Minchin—Sure, but this is quite overtly an open market, apart from a 15 per centtariff. There are the Australian design rules which industry often complains about and the15 per cent tariff, but it is otherwise an open and competitive market. That is in the interestsof Australian consumers and it does mean that the local manufacturers need to ensure theymaintain their standard of product. It also is an important driver for them in seeking exportmarkets. As you know, at least two of them have been very successful in that. It is acompetitive market and so it should be.

Senator GEORGE CAMPBELL—But it also is true, Minister, that the Australian publicis spending $2 billion to try and attain car production capacity in this country, albeitcompetitive on a global market without tariffs. We have had to intervene in the market. Youhave done it in terms of imports of second-hand vehicles in order to protect it. I am notsuggesting there ought to be any necessity for intervention in terms of Renault, but I wouldhave thought it was in our interests to know in a general sense what was happening in themarketplace to ensure the taxpayers’ investment in the industry was not being eroded as aresult of activities by importers. I would have thought that was a reasonable expectation forthe department of industry to have at least a view, an overall understanding of what washappening in the marketplace.

Senator Minchin—Obviously they monitor the marketplace, but to do an analysis of themarketing activities of one particular company is not—

Senator GEORGE CAMPBELL—I do not think I asked for an analysis. I think I askedwhether they had done an assessment of the likely impact on the industry.

Senator Minchin—Again, it is entirely hypothetical. We do not know what sort of marketimpact Renault will have, whether they will achieve their own sales targets.

Senator GEORGE CAMPBELL—I got the impression from Mr Wall that he was almostunaware they were even intending to come into our marketplace.

Mr Mackey—I do not think that is true, Senator.

Senator Minchin—He is very astute but shy.

Mr Mackey—A good test is whether the Australian manufacturers are makingrepresentations to the department that they are seriously concerned about the entrant of aparticular competitor.

Senator GEORGE CAMPBELL—You mean they have not?

Mr Mackey—They have not been in this case.

Senator Minchin—The point, Senator Campbell, is one that I think you are as consciousof as I am: Australian manufacturing is concentrated in a market segment—that is, the familysedan—and it is probably still the biggest single segment of the market. It is not a growthsegment. The growth has been in the smaller vehicles and the four-wheel drives which we arenot making. Renault’s product range is essentially in those sort of markets. I think they arebringing the Laguna in, which might be prima facie a competitor. I think it will be moreexpensive.


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Renault, it seems to me, are targeting the four-wheel drive and the small vehicle market,which is not where Australian manufacturers are positioned. It is simply a reflection of thegeneral statement that that is where recent growth has been in the market. While Australiadominates that mid-range segment of the market, it has not been a growth segment. All theAustralian manufacturers, in thinking through their product strategies over the next 10 to 20years, are going to have to take account of those circumstances. But, as I say, Renault is notbringing here a product that is a direct and overt and serious competitor to the Commodore,Falcon, Magna, Avalon or Camry.

Senator GEORGE CAMPBELL—We hope that is the case.

Senator Minchin—That is my understanding of the nature of their strategy.

Senator GEORGE CAMPBELL—Output 1.3, the Bounty Ships Act. How much hasbeen spent on the ships bounty scheme so far?

Mr Peel—So far this year?

Senator GEORGE CAMPBELL—So far in total.

Mr Peel—I just need to check. In 1998-99, Senator, $24.3 million; in 1999-00,$18.5 million; so far this financial year, $11.9 million.

Senator GEORGE CAMPBELL—Do you have an expected figure for the full financialyear?

Mr Peel—I think it is $11.7 million, Senator.

Senator GEORGE CAMPBELL—So it is slightly over the—

Mr Peel—Sorry, $13.1 million in the PBS statements.

Senator GEORGE CAMPBELL—Is it on track? It varies a bit, doesn’t it?

Mr Peel—Yes. If it is $11.9 million at the end of April and it is going to be $13.1 million,it sounds as if it is pretty well on track.

Senator GEORGE CAMPBELL—Do you have estimates for 2002-03?


Senator GEORGE CAMPBELL—For the outward three years.

Mr Peel—No, Senator. I will have to take that on notice. Sorry, which years were youafter?

Senator GEORGE CAMPBELL—I am after 2002-03 and 2003-04.

Mr Peel—Yes, I do. Sorry, Senator, that is $11 million.

Senator GEORGE CAMPBELL—And for 2003-04?

Mr Peel—It is $3 million.

Senator GEORGE CAMPBELL—And for 2004-05?

Mr Peel—That is as far as I go, sorry.

Senator GEORGE CAMPBELL—Can you explain the sudden drop from $11 million to$3 million in that period?

Mr Peel—The bounty is essentially phasing out, Senator. There is a three-year phase-outperiod. It is gradually tapering down to the end of that period.


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Senator GEORGE CAMPBELL—Is the government intending to extend the bounty,Minister, or not?

Senator Minchin—Senator, we made it clear at the time that the bounty would ceaseeffectively from 2000, with a phase-out down to 2003 for orders in place—or whatever it is.We did make the point that our decision was based on European commitments. We accept thatthis is a corrupt worldwide market, that is why there was a rationale—

Senator GEORGE CAMPBELL—Historically corrupt.

Senator Minchin—Exactly. There was, therefore, a rationale for a bounty system based onwhat was going on in Europe. We did say publicly that any evidence that Europe wasretreating from its commitments to phase out bounties would lead to our reconsideration ofour position. I have followed with interest the discussions between Europe and South Koreain relation to South Korean activity—although it tends to be in a range of vessels that we donot make—but certainly my instructions to the department are to watch the Europeans veryclosely and alert me to any suggestions of retreat in relation to subsidies that affect ourproducers.

Senator GEORGE CAMPBELL—Are the administration costs separate? divisions.

Mr Peel—Yes, I believe so, Senator.

Senator GEORGE CAMPBELL—Do you have any figures on the costs of theadministration of this scheme?

Mr Peel—No, but they would be relatively small, Senator. We only have three or four staffwho administer the scheme, so there would be a relatively small amount of money, a fewhundred thousand dollars.

Senator GEORGE CAMPBELL—How many companies are registered under thescheme? Do they have to register? They used to have to register when I was around.

Mr Peel—I think there are about eight customers, Senator.

Senator GEORGE CAMPBELL—Are the bulk of them in Western Australia?

Mr Peel—There is a major customer in Western Australia, Austal, and in Tasmania, Incat,and I think there are some in Queensland.

Senator GEORGE CAMPBELL—Do NQEA still operate?

Mr Peel—I can take it on notice and provide that information, Senator.

Senator GEORGE CAMPBELL—Can you give us a list of the companies?

Mr Peel—Yes, I can in this case.

Senator GEORGE CAMPBELL—Printing Industry Competitiveness Scheme: thebudget paper shows that it is $5.9 million for 1999-2000 and an estimate of $3.4 million for2000-01. Can you tell us how many manufacturers are currently involved in this scheme?

Mr Peel—Seventy-two currently.

Senator GEORGE CAMPBELL—And can you give us the details of the expenditure forthis financial year?

Mr Peel—$1.4 million to 7 May, Senator.

Senator GEORGE CAMPBELL—$1.4 million out of $3.4 million?


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Mr Peel—Out of $3.5 million.

Senator GEORGE CAMPBELL—Have you any estimates for the outgoing years?

Mr Peel—Yes, Senator—$3.7 million for next year. I do not have it for subsequent yearsbut I can take it on notice and provide it.

Mr Dainer—2002-03 is $3.97 million.

Senator GEORGE CAMPBELL—2003-04?

Mr Dainer—No, that is the last year.

Senator GEORGE CAMPBELL—And again I presume the administrative costs areseparate?

Mr Dainer—Yes, Senator.

Senator GEORGE CAMPBELL—Are they small also, Mr Peel?

Mr Peel—Yes, Senator. We have just a small number of staff in Sydney, essentially, thatadminister this program; so it is relatively small, but I can provide that information to you.

Senator GEORGE CAMPBELL—Can you take that on notice?

Mr Peel—Shall do.

Senator GEORGE CAMPBELL—This scheme is not due to phase out, is it?

Mr Peel—No, it is funded until 30 June 2003 at present. No doubt it will need to bereviewed before then.

Senator GEORGE CAMPBELL—With regard to R&D syndicates, as a result of thequestioning last time, Mr Clarke, I put on notice a question of the ATO. They havesubsequently advised us that there are 111 R&D syndicates that are being or have been woundup. They say the early wind-up of some of these syndicates, with claims of up to$103 million, has added $31 million to revenue. Presumably that has saved $31 million torevenue. Can you tell us how many syndicates have been wound up over and above the 111?

Mr Clarke—Senator, let me give you the top-down from the total number of registeredsyndicates through to the situation today and perhaps we can work through from there. Therewere 246 syndicates created in the life of the program. Fourteen of those were abandoned ordid not proceed and, as at 31 March, 151 had been wound up.

Senator GEORGE CAMPBELL—That is 31 March this year?

Mr Clarke—Yes. My notes tell me that a further two were wound up in April, so 153wound up to the end of April.

Senator GEORGE CAMPBELL—How many are still in existence?

Mr Clarke—As at the end of April, there were 79 active syndicates. Forty of those wehave no agreement to wind up; 39 of those we have an agreement or an indication in writingthat they intend to wind up prior to 30 June this year.

Senator GEORGE CAMPBELL—For the 40 where there is no agreement, what is thebasis of no agreement there?

Mr Clarke—Those 40 are either continuing their research and development orcommercialisation, or have not responded to our request that they wind up.

Senator GEORGE CAMPBELL—Have you requested all syndicates to wind up?


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Mr Clarke—Not necessarily. There are some that we would judge are continuinglegitimate activity.

Senator GEORGE CAMPBELL—How many have not been requested to wind up?

Mr Clarke—I would have to take that on notice, Senator.

Senator GEORGE CAMPBELL—Do you know what the dollar exposure is of theCommonwealth on syndicates at this stage, or post 30 June when the other 39 wind up?

Mr Clarke—We are estimating $150 million.

Senator GEORGE CAMPBELL—That is in revenue?

Mr Clarke—Yes. That equates to $50 million in actual cost to revenue.

Senator GEORGE CAMPBELL—That would be on top of the $31 million?

Mr Clarke—Sorry, I do not recall a $31 million figure.

Senator GEORGE CAMPBELL—The ATO said that there had been 111 wound up,which had reduced the tax claim to $103 million, which added $31 million to revenue.

Mr Clarke—Senator, I am reluctant to draw direct associations between the advice that thetax office has given you and what I can. Because we do not administer the actual tax claimside of this scheme, I am sure the tax office advice is spot-on for their administration. Wework off registration numbers which, as in the R&D concession, are not necessarily exactly asclaimed, so my numbers are estimates. The tax office’s, I am sure, are accurate.

Senator GEORGE CAMPBELL—There could be a bit of duplication in the two figures?

Mr Clarke—I fear that there could be, yes.

Senator GEORGE CAMPBELL—There is a committee of the R&D tax—sorry, what isit?

Mr Clarke—The Tax Concession Committee of the IR&D Board is responsible for theongoing monitoring of syndicates.

Senator GEORGE CAMPBELL—And it is continuing to operate?

Mr Clarke—Yes.

Senator GEORGE CAMPBELL—What is the expected life period of the 40 that there isno agreement to wind up, or isn’t there any?

Mr Clarke—It is variable, Senator. There is no single answer to that question. We wouldhave to go through it syndicate by syndicate.

Senator GEORGE CAMPBELL—Is it possible, Mr Clarke, to put a total dollar exposurecost on these syndicates?

Mr Clarke—Perhaps I could give you them.

Senator GEORGE CAMPBELL—There was a lot of noise made four or five years agoabout this.

Mr Clarke—I would be happy to give you the global numbers to date. Would that assist?


Mr Clarke—As I indicated, 246 syndicates were registered over the life of the programfrom 1987 to 1996. Their expenditure on research and development was around $1.5 billion,


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with a claimed core technology valuation of $2.3 billion. Gross cost to revenue, tax forgoneduring the registration period, was estimated at $1.7 billion. The addition of other costs suchas interest deductions, the total gross cost to revenue, was at least $2 billion. That calculatesout at about a 133 per cent subsidy. But I must emphasise that that calculation ignoresspillovers and alternative taxation outcomes in the absence of syndication.

Total commercial sales forecast by syndicates at their registration was $70 billion. Actualsales to 30 June 1998 were over $400 million and are still estimated to be less than $1 billionagainst that original $70 billion forecast. The majority of those sales are attributed to a smallnumber of genuinely commercially successful syndicates. To give you an idea of the scale ofsyndication, only 143 research agencies and companies used syndication—some many timesover. Indeed, just 39 agencies and companies accounted for around 60 per cent of the value ofclaims. And I think I have updated you as to the status of the syndicate portfolio as at the endof April.

Senator GEORGE CAMPBELL—They are obviously costs. Do those figures that youhave just outlined also take into account the benefits of the syndicate program?

Mr Clarke—No, they do not, Senator. They are the gross numbers that go through. As Iindicate, one tangible indication of benefit is that handful of genuinely commerciallysuccessful syndicates, some of which have built world-class companies; I readilyacknowledge that.

Senator GEORGE CAMPBELL—But we do not have a net cost of syndication?

Mr Clarke—I think the net cost is extremely high and clearly negative.

Senator GEORGE CAMPBELL—Irrespective of whether it is negative or high, we donot have a net cost?

Mr Clarke—I think the net cost comes out of that 133 per cent subsidy for every dollar insyndication.

Senator GEORGE CAMPBELL—You simply looked at the cost side of it; you did notlook at the benefit side of it?

Mr Clarke—And the best indication of benefit is commercial success. That was the wholepremise of the program. The commercial success was $1 billion of sales out of a forecast$70 billion.

Senator GEORGE CAMPBELL—A lot of companies who have applied for governmentgrants have inflated their outcome.

Mr Clarke—Our success rate in something like R&D Start is closer to 70 per cent,Senator.

Senator GEORGE CAMPBELL—I also was involved in the TelecommunicationsIndustry Development Authority, and I think at that time Optus was forecasting through theirOSS a return of $200 billion to the Australian economy, of which I do not think we got $1. Iam saying it is not unusual for companies to inflate the forecast of their outcomes on some ofthese programs, but it is not the point of my question. What I am trying to get at is whether ornot there actually is capacity to have a net figure cost to the Commonwealth of thesyndication experience. Whilst I think it is probably easy to do what you have done on thecost side, it is a lot harder to equate that against the benefits and to come up with a net figure,saying, ‘Well, that’s what it actually did cost in total.’


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Mr Clarke—All historical analysis of this kind of program is based on indicators andassumptions. I am giving you the recorded facts about the syndicate portfolio. I acknowledgeyour point that there may well be other tangible or intangible benefits that I have not relayed.

Senator GEORGE CAMPBELL—And it may well be that some of the benefits may notmaterialise anyway for some considerable period of time.

Mr Clarke—The contention that comes to my mind in looking at these headline numbers,though, is that the cost to the taxpayer was enormous relative to the benefits on the record.

Senator GEORGE CAMPBELL—And the short-term benefits?

Mr Clarke—We are talking about a program that wound up five years ago now, and Ithink it is fair to look at these numbers in aggregate.

Senator GEORGE CAMPBELL—But, to be fair, in the area of research anddevelopment five years is a pretty short time span.

Mr Clarke—We are also talking about a program that commenced 14 years ago andwound up then. The mere fact that at the end of this financial year we only expect 40 activesyndicates is a fair indication that we are looking at the tail of the program now.

Senator GEORGE CAMPBELL—Yes, but syndication did not become a big issue until1995. There were considerable changes made to the program then. Is the photonics syndicatestill going?

Mr Clarke—I do not know, Senator.

Senator GEORGE CAMPBELL—The one that Mr Staley is associated with.

Mr Clarke—No. The syndicates that Mr Staley was previously associated with are allwound up.

Senator GEORGE CAMPBELL—They have all been wound up.

Mr Clarke—Correct, and I do not believe they were characterised as photonics. I am notcertain about that, but I do not believe that is correct.

Senator GEORGE CAMPBELL—I thought he was involved in a photonics one inMelbourne.

Mr Clarke—I am not certain, Senator, but the core of your question is that the syndicatesthat Mr Staley was previously involved in are all wound up. I am advised that, of the foursyndicates, three have wound up and one is on the verge of winding up.

Senator GEORGE CAMPBELL—Which one is on the verge of winding up? Thephotonics one?

Mr Clarke—I hope not, Senator. I would prefer not to disclose the business details of anindividual syndicate. This comes under the general provisions of the R&D act, that thedealings of individual companies in the tax concession area, of which syndication is anelement, are not normally disclosed.

Senator GEORGE CAMPBELL—That is another one of thesecommercial-in-confidence arguments.

Senator Minchin—It is a tax matter, rather than commercial.

Senator GEORGE CAMPBELL—I do not think it is.


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Mr Clarke—It is not commercial-in-confidence. I am drawing directly on a provision ofthe Industry Research and Development Act 1986, which prohibits me from revealing thedetails of an individual company dealing under this section.

Senator GEORGE CAMPBELL—I accept that at this point in time, but I think theindication is that one of Mr Staley’s syndicates is still actively in existence.

Mr Clarke—I have acknowledged that, Senator.

Senator GEORGE CAMPBELL—And Mr Staley is still on that committee?

Mr Clarke—And, as per my previous advice, Mr Staley has been diligent in declaring hisconflict of interest and absenting himself from any consideration that might relate to it.

Senator GEORGE CAMPBELL—Having known Mr Staley for some considerable time,I am sure he is. That was not the point of my question. Technology Diffusion Program and thebiotechnology strategy: I note in the budget papers that $4.7 million in 2000-01 and$8 million in 2001-02 have been reallocated from the Technology Diffusion Program into thebiotechnology program. Can you tell me how and why it was decided to divert this moneyfrom the Technology Diffusion Program?

Mr Clarke—Senator, I am not sure that the premise of your question is correct. Could youbear with me while I clarify that, please? Is it the Biotechnology Innovation Fund, BIF, thatyour question relates to?

Senator GEORGE CAMPBELL—Yes. The Technology Diffusion Program, I think—andthis is the purpose of my question—has been rolled over into the biotechnology fund.

Mr Clarke—I do not believe that is correct, Senator.

Senator GEORGE CAMPBELL—Enlighten me.

Mr Clarke—I believe that the funding for the Biotechnology Innovation Fund was newappropriation.

Ms Kelly—I do not believe it is the case that the allocation for the BiotechnologyInnovation Fund in this budget was offset against the Technology Diffusion Program. I willneed to check, but I think that may have been the case for last year’s budget.

Senator Minchin—Certainly the additional $20 million for the Biotechnology InnovationFund is absolutely new and additional funds. I think it would be worth checking thecomposition of the previous $20 million that was allocated to the BIF last year. Myrecollection is that it may have been the case that not all of the TDP had been expended.Rather than it go back to consolidated revenue, we ensured it was put to a good purpose—thatwas into the innovation fund. We will check that. It certainly does not relate to this year, but itmay have been an issue last year.

Senator GEORGE CAMPBELL—I am just trying to pick it up, Minister.

Mr Mackey—Do you have a copy of last year’s portfolio budget statements there?

Senator GEORGE CAMPBELL—No, I do not.

Mr Dainer—The Biotechnology Innovation Fund in last year’s PBS refers to an offset thatcame out of the TDP.

Senator GEORGE CAMPBELL—That was $4.7 million.

Mr Dainer—Yes, $4.7 million this financial year and $8 million next financial year.


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Senator GEORGE CAMPBELL—My question is not related to the BiotechnologyInnovation Fund but the Technology Diffusion Program. My understanding on reading theportfolio budget statements was that all of the moneys that had been allocated to the TDP hadbeen transferred into the biotechnology strategy.

Mr Dainer—Not all of it. In fact, the $12.7 million was not transferred completely tobiotechnology.

Senator GEORGE CAMPBELL—Can you tell me what page it is on in the currentportfolio?

Mr Dainer—No. It is in last year’s portfolio.

Senator GEORGE CAMPBELL—There is nothing in this year?

Mr Dainer—No, because this was a measure last year; $12.7 million in total of TDP fundswas offered up as a saving to fund the biotech strategy, which is—

Senator GEORGE CAMPBELL—What is the ongoing funding for the TDP?

Mr Dainer—TDP funding in 2000-01 is $19.946 million or just under $20 million.


Mr Dainer—Next year it will be $17½ million. There is a tail of $4.1 million in thefollowing year.

Senator GEORGE CAMPBELL—Is it then going to phase out?

Mr Dainer—As I understand it, there is a replacement program called the InnovationAccess Program which kicks in.

Senator GEORGE CAMPBELL—Why is there a shift away from the TechnologyDiffusion Program? I can understand the need to fund some of these other areas, but why theshift away from the TDP? Has it been found not to be successful?

Mr Cook—The TDP will be taken over by the Innovation Access Program, whichcontinues most of the elements of the TDP but broadens it to give more emphasis to issuessuch as international collaboration.

Senator GEORGE CAMPBELL—Wasn’t that also a feature of the TDP?

Mr Cook—Yes, but—

Senator GEORGE CAMPBELL—I remember talking to Dr Wellings, was it, about allthese experts we were going to bring from overseas to tell us what technologies we should putinto our businesses?

Mr Mackey—Senator, perhaps I can refer you to page 59 of this year’s PBS. It shows thenumbers there.

Senator GEORGE CAMPBELL—Sorry, Mr Cook. Tell me what is going to be differentunder the new innovation awareness scheme that we were not doing under the TDP.

Mr Cook—The Innovation Access Program?


Mr Cook—On page 52, Senator, there is a description of the Innovation Access Program.What it is doing is taking the international collaboration aspect further than we did under theTDP.


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Senator GEORGE CAMPBELL—What are we doing that we did not do under the TDP?

Mr Cook—I might ask Dr Daly to give you the detail.

Dr Daly—The Innovation Access Program will also enable research and developmentactivities to be funded, which currently the TDP does not do. The TDP for internationalcollaboration focuses on travel. The Innovation Access Program will also enable some seedmoney for research activities.

Senator GEORGE CAMPBELL—Can you explain to me how that is going to enableR&D to be funded out of a program that is worth—

Senator Minchin—Senator, it is a $20 million per year program. I have had the frustrationas the minister that we have not really had the capacity to enter into substantive internationalagreements with other countries to engage in joint R&D projects, scientific projects. We reallyhave not had the capacity to invest in joint research conducted at an international level underthe existing arrangements. We have funded, as has been said, travel and other things but notthe actual collaborative research, some of which may take place in another country but underthe auspices of an agreement involving Australian researchers working collaboratively withIsrael or whatever. We will now be able to do that under this new program.

Senator GEORGE CAMPBELL—Is that exclusively what this scheme’s aim is?

Senator Minchin—No. It is about the diffusion; in other words, it continues thattechnology diffusion role. It is about maximising Australian access to the 98 per cent ofknowledge that is produced outside Australia. A lot of the TDP activities that are conductednow will continue under the new program. In addition, there will be greater flexibility toengage in those sorts of international collaborations I mentioned.

Senator GEORGE CAMPBELL—What proportion of the funding is anticipated to beallocated to joint research and development ventures?

Dr Daly—The new fund is designed so that it is a single fund. Individual proposals willcompete against a common set of guidelines. In a sense, the answer to your question will bethat it will be driven by the quality of the proposals that come into AusIndustry, so it dependson the demand.

Senator GEORGE CAMPBELL—How will they be assessed, Dr Daly? Will you call forproposals at a given point of time during the year or will it be an ongoing rolling process?

Ms Henry—We are currently working through the process of how applications will becalled for the program. Because there will be one program bucket, it is quite likely that wewill call on a continuous basis, but the detail of both the program and the delivery model arestill in development at this point in time.

Senator GEORGE CAMPBELL—So we do not have any guidelines around this programyet. Is that what you are saying?

Ms Henry—We do not have finalised guidelines, no.

Senator GEORGE CAMPBELL—Nothing finalised?

Ms Henry—No.

Senator GEORGE CAMPBELL—So in practice we do not know how it is going towork.

Ms Henry—We are still working through that detail.


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Senator GEORGE CAMPBELL—What about the issue of the devolution of technologyto our existing industries? When the TDP was first introduced, which was 1996-97, I thinkthere was $40 million in it—a wonderful set of ideas on how we were going to makeeverybody technologically literate. It has been very difficult from that point of time to put afinger on examples of where companies have benefited through the TDP. I am sure they have,but it is has been very difficult to put a finger on where they have. How is that going to bebenefited by the transfer of TDP into the Innovation Access Program, given that it appearsfrom what has just been said that the focus is going to be on international activity rather thanon local activity?

Dr Daly—It will be a mixture of international and local activity, Senator.

Senator Minchin—I am sorry, Senator. I did not mean to distort it or give the wrongimpression. We have augmented the TDP by ensuring that under the new program we havegreater flexibility to engage in some international collaboration. But the core activity oftechnology diffusion here will continue. As I understand it, we will work with industryassociations and their programs and plans for ensuring their own industries are accessing themost modern technologies. We will work with them on ways in which we can assist andaugment that process under this scheme.

Mr Cook—What we are trying to do is to get a better integration between poolingtechnology from overseas and its diffusion domestically. The sorts of things that were done inthe past—for example, the establishment of industry networks to help particular groups ofcompanies to facilitate technology transfer, and strategic workshops to discuss the wayforward for particular types of technology such as nanotechnology—will continue, but we arehoping to better integrate the two sides of the program together so there will be a technologypool from overseas and a technology dispersion on the domestic level.

Senator GEORGE CAMPBELL—I just wonder whether or not there is a gap in thisprocess between the scientific end of the market and the practical application of thesetechnologies.

Mr Cook—I am not sure that I understand what you mean.

Dr Daly—Do you want me to answer the question?

Senator GEORGE CAMPBELL—I think Dr Daly understands what I want to say.

Dr Daly—In some areas there is a gap, it is true, and in other areas there is not. In fact, inareas like nanotechnology the research and the industry move together and there is a rapiduptake, and in other areas there is a gap. We envisage in some cases that researchersthemselves will be accessing world’s best knowledge. In other cases, industry itself will beaccessing world’s best knowledge that is well-known internationally but not yet promulgatedin Australia. In other cases, the two will move together. In that case, we are trying toencourage the integration of that third component, but we recognise there will be cases whereit is just the researchers accessing the knowledge; in other cases, it will be the industryaccessing the knowledge.

Senator GEORGE CAMPBELL—When do you expect these guidelines to be publishedand available?

Ms Henry—We are expecting that we will be able to deliver the program from 1 July. Theguidelines are actually being developed as we speak.

Senator GEORGE CAMPBELL—Will they be posted on your web site?


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Ms Henry—Yes, they will be.

Senator GEORGE CAMPBELL—What is the forecast program expenditure forCOMET? Is it still $10 million-$10 million-$10 million? There was a bit of confusion aboutthis in February because there has been an increase and because of where the overlap tookplace. Mr Clarke, you might want to explain that again.

Senator Minchin—Basically we doubled it to a $20 million per year scheme. We put inanother $40 million over four years to make it a $20 million per year program.

Senator GEORGE CAMPBELL—But there was a period when it went down and thenwent up. Or has that been evened out?

Mr Edwards—There was an initial $30 million and a further $40 million. The overlapyear is next year. There will be $20 million next year, which is $10 million of the old moneyand $10 million of the new money. Then it drops down for the three years after that—$10 million, $10 million, $10 million.

Senator GEORGE CAMPBELL—So 2001-02 is $20 million?

Mr Edwards—Yes.

Senator GEORGE CAMPBELL—Then 2002-03 is $10 million; and 2003-04,$10 million.

Mr Edwards—That is right.

Senator Minchin—That is additional money, though. The scheme itself is $20 million peryear.

Senator GEORGE CAMPBELL—So that means it is $30 million in 2001-02.

Senator Minchin—I have doubled it, sorry.

Senator GEORGE CAMPBELL—Come on, I’ll bid you up. Keep going! We could dosomething constructive today.

Mr Edwards—Just to be clear, it is $20 million next year and then it drops down to$10 million for three more years. That is the $40 million.

Senator GEORGE CAMPBELL—It is extended out.

Senator Minchin—My apologies.

Senator GEORGE CAMPBELL—Does that figure include the administration costs forthe programs, or do they come out of the departmental budget?

Mr Edwards—That includes administration as well.

Senator GEORGE CAMPBELL—So that is all included in that. Have you any idea whatthe administration costs are?

Mr Edwards—It depends on how you look at the administration costs. As you know, it isdelivered through a network of 10 business advisers and two national managers. Their costsare collectively around $1.3 million or $1.4 million. The departmental cost to run the programis about eight per cent of the program.

Senator GEORGE CAMPBELL—What does that work out to?

Mr Edwards—Close to $2 million when you add the two together.

Senator GEORGE CAMPBELL—So it is about 20 per cent?


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Mr Edwards—Yes.

Senator GEORGE CAMPBELL—I want to finish this issue. How do you estimate theforward appropriations for this initiative?

Mr Edwards—The new money has been allocated to us and then we work within thatenvelope. How we budget for it each year is that we look at demand—we try to keep demandsmooth over the year to utilise the money in the pattern that it has been given to us. There arealways some adjustments at the edges, because money does not flow as quickly or as slowlyas we anticipate, and then we come through the AE process to re-phase the money within theenvelope that has been provided to us.

Senator GEORGE CAMPBELL—Does that mean there are losers out of the process? Ifsomeone misses out this year, do they go to the top of the queue for the next year? How doyou ensure equality of access as well as keeping it within the envelope?

Mr Edwards—If we keep the phasing of the money equally spaced, as close as we can,that allows us to manage that equality of access. If we do not have significant movementsfrom year to year, it allows us to keep a constant approach to our assessment.

Senator GEORGE CAMPBELL—But this is really all about commercialising Americantechnologies. There is $2.9 billion being thrown at Backing Our Ability, and hopefully wewill get some more American technologies coming out of it. I presume that you have anestimate now of the likely expenditure, but what if there is a growth in demand? How do youmanage that over the out years?

Mr Edwards—There are two ways we can look at that. We can make a decision to hold itto the levels of funding we have available, or we can let the program grow if we think thedemand is worthwhile and then rephase the money across years. At the moment, we areholding the program within the envelope that we have available to us.

Senator GEORGE CAMPBELL—You have approved funding of about $19 million to361 eligible businesses. Do you have a figure on the benefit of that, or the return of that, to theAustralian economy?

Mr Clarke—I remind you that the COMET program has only been operating for 18months, and my data reflects the first 380 businesses—start-ups—to enter the COMETprogram. Of those 380, and over the 18 months so far, some $33 million of capital has beenraised through the business adviser network, 17 strategic joint venture alliances have beensigned and 18 commercial agreements—distribution, manufacturing or marketing—have beenentered into. Twenty of these start-ups have now commenced manufacture or have launchedtheir product, and 30 have completed their commercialisation plans. The $33 million ofcapital raised is the headline, to my mind. This program is very much about these businessadvisers, who you will recall are very commercially experienced people, working with thesestart-ups to raise the capital they need to get their business going. That $33 million of capitalraised is a very promising start to this program.

Senator GEORGE CAMPBELL—Is that the main factor you would use to evaluate thebenefits?

Mr Clarke—It is one of the key performance indicators; it is not the only one, certainly,but it is a good early indicator of the effectiveness of the program.

Senator GEORGE CAMPBELL—How does the program allow for the testing oftechnologies?


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Mr Edwards—Could you put the question another way to help me understand it?

Senator GEORGE CAMPBELL—Presumably someone comes to you and says, ‘I’ve gotan emerging technology.’ How do you actually test whether that proposal, or whatever itmight be—a widget—has got real value or not? Is that a cost that is met out of the program?Is that a cost that the company has to meet? How do you make that judgment? Do you haveindependent assessors go in to make that assessment?

Mr Edwards—It is a two-phase process: the applicant works with the business adviser towork out what they need as a business to help them grow and to become investment ready.The business adviser then decides what is the most appropriate form of help and puts it to thenational managers. They, with officers of the department, look at the assessment they havemade and make a judgment about whether that project is to be funded.

Senator GEORGE CAMPBELL—Do the business managers prepare an evaluationreport?

Mr Edwards—Yes, they do.

Senator GEORGE CAMPBELL—Can you make a copy of an evaluation reportavailable?

Mr Clarke—With the company name blacked out, just to give you the feel for what itlooks like?

Senator GEORGE CAMPBELL—Yes. I am more interested in the sort of issues that areraised and examined.

Mr Clarke—They are against defined criteria. We would be very pleased to do that.

Senator GEORGE CAMPBELL—Have there been any allegations of impropriety?Given that we are using the private sector to manage this program, what sorts of processes arein place to ensure that there is not a capacity for any of these technologies to be ripped off?That is probably a rough but understandable way of saying it.

Mr Clarke—I am not aware of any allegations about specific appropriation of intellectualproperty. The business advisers operate under a contract.

Senator GEORGE CAMPBELL—Let me make it clear that I am not saying that thereare any, but how would allegations of impropriety be dealt with?

Mr Clarke—The primary mechanisms in place are, initially, the contracts under which thebusiness advisers operate. They prescribe what they can do in that role. The second layer isthe national managers, the two other people we have employed who sit over the top of thebusiness advisers and who provide that quality assurance, mentoring role across the whole ofthe program and the customer base.

Senator GEORGE CAMPBELL—I think we talked about who the private managerswere on the last occasion. There are two, aren’t there?


Senator GEORGE CAMPBELL—Are there any changes between the original COMETprogram and the expanded one, other than the funding?

Mr Edwards—At this stage, Senator, there are no changes at all.

Senator GEORGE CAMPBELL—So it is essentially the same program except withadditional funding.


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Mr Clarke—We will be looking at the number, location, et cetera, of the business advisers.That big ramp-up will require some administrative restructuring, but the core criteria, theeligibility criteria, of the program are unchanged.

Senator GEORGE CAMPBELL—Are there any regional or rural areas which willbenefit from this program? Are there any specific provisions that target regional and ruralAustralia?

Mr Clarke—We are still working that one through.

Senator GEORGE CAMPBELL—So there is nothing specifically in the program nowthat gives a weighting to regional and rural areas?

Mr Clarke—There are a number of COMET customers that come from rural and regionalAustralia. The program has reached outside the major urban areas. Whether we can do thatmore effectively is an issue that we are currently addressing.

Senator GEORGE CAMPBELL—When do you expect to have completed that?

Mr Clarke—In time to start the program in the new financial year which is only weeksaway.

Senator GEORGE CAMPBELL—Would that be something you would put up on yourweb site?

Mr Clarke—Yes.

Senator GEORGE CAMPBELL—Have you done any modelling on the demands for theprogram over the next few years, or have you done any assessment about the program’seffectiveness?

Mr Clarke—As Dr Edwards said, the demand for the program is largely regulated by theway in which we promote the program. We have certainly found that good promotionprovides us with a good flow of high-quality applicants. In terms of outcomes it is earlystages. Those headline indicators that I gave you before are simply lead indicators. In terms ofactual program evaluation, we are a year or two off the time to do that.

Senator GEORGE CAMPBELL—Is it simply that management issue that allows you todeal with a flat allocation of $10 million a year over the four-year period?

Mr Clarke—Yes. The workload of those business advisers is the rate limiting step. It is theavailability of funds and the business advisers. We have them matched about right at themoment for the way in which we promote the program and the load they are carrying.

Senator GEORGE CAMPBELL—Has this program been growing exponentially as aresult?

Mr Clarke—It had a slow start. We had to get the awareness into the marketplace. We hadto recruit the business advisers, obviously. But, after the first three months or so, it has been ina relatively steady state.

Senator GEORGE CAMPBELL—But, as it becomes more known out in themarketplace, can you expect an exponential demand for these programs?

Mr Clarke—I do not think I would have characterised the curve as exponential, but thereis certainly strong demand for this kind of support.


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CHAIRMAN—We might have a two-minute break to have a private meeting of thecommittee to look at the rest of the program for this afternoon and this evening. We can thenlet people know what we expect.

Proceedings suspended from 5.12 p.m. to 5.22 p.m.CHAIRMAN—We will now move to output 2.1—Strategic science and innovation

leadership; output 2.2—Science innovation and policy development and implementation;output 2.3—Science and innovation program design and management.

Senator GEORGE CAMPBELL—Mr Dainer, in relation to outcome 2, outputs 2.1, 2.2and 2.3—an expansion of the cooperative research centres program—can you give us theforecast program expenditure for CRCs for 2001-02 through to 2004-05?

Mr Dainer—The CRCs are $142.5 million in 2001-02, $144.5 million in the followingyear, $198.9 million the year after that, $198.5 million the year after that.

Senator GEORGE CAMPBELL—Are the administrative costs included in those figures?

Mr Dainer—No.

Senator GEORGE CAMPBELL—The administrative costs are on top of that?

Mr Dainer—That is right.

Senator GEORGE CAMPBELL—Do you have any idea what the administration costsare?

Mr Dainer—About $1 million a year.

Senator GEORGE CAMPBELL—When does the department intend to call the nextround of CRC applications?

Ms Henry—If all goes to plan, we would be looking to announce the next round towardsthe end of the year, possibly late October, early November.

Senator GEORGE CAMPBELL—What would be the timetable for the applicationassessment of the program for next financial year?

Ms Henry—The timetable normally lasts for a period of approximately 12 months fromopening of applications through to final assessment and decision. In this case, we werelooking to bring the process forward slightly, so it would probably be October untilapproximately November next year.

Senator GEORGE CAMPBELL—So it is effectively 12 months?

Ms Henry—Correct.

Senator GEORGE CAMPBELL—How many new CRCs have been established?

Ms Henry—Out of the last selection round 19 were selected of which 12 were new andseven were refunded.

Senator GEORGE CAMPBELL—What industry areas were the 12 new ones in?

Ms Henry—I have the list here. The 19 are diagnostics, plant based management of drysalinity, railway engineering technologies, water quality and treatment, innovative dairyproducts, tropical savannas management, smart Internet technologies, constructioninnovation, landscape environments and mineral exploration, technology enabled capitalmarkets, coal in sustainable development, chronic inflammatory diseases, innovative woodmanufacturing, predictive mineral discovery, Australian weed management, Australian sheep


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industry, functional communication surfaces, valued added wheat, and sustainable aquacultureof fin fish.

Senator GEORGE CAMPBELL—Ms Henry, what is the geographical spread of those bystate and region?

Ms Henry—Do you want established or just new?

Senator GEORGE CAMPBELL—The 19. Do you have a total figure?

Ms Henry—Yes, I have. The total centres operating as at July 2002, which will be the sumtotal with the new round in it, are: 15 in New South Wales, 15 in Victoria, 13 in Queensland,seven in South Australia, six in Western Australia, two in Tasmania, two in the NorthernTerritory and four in the ACT, which is a total of 64.

Senator GEORGE CAMPBELL—Out of those, what are non-metropolitan? Do youhave a figure on that?

Ms Henry—No, I am sorry, I do not have that. I could take that on notice.

Senator GEORGE CAMPBELL—Could you do that, please?

Mr Clarke—In taking that on notice, because the very nature of CRCs is that they aremulti-nodes—they have multiple sites that are part of a CRC; they are not just one facility orone location—it would be most helpful to you if we looked at where each of the individualCRC sites are.

Senator GEORGE CAMPBELL—Yes, sure, and you might indicate that it is the oneCRC with multiple sites.

Mr Clarke—The list that Rhonda read to you is where the headquarters of the CRC is but,of course, their actual research locations can be far more diverse than that.


Ms Henry—The current compendium for CRCs, which is a publicly available document,indicates for the existing CRCs all of that information. I would be very happy to provide youwith a copy of that.

Senator GEORGE CAMPBELL—Does that include the 19?

Ms Henry—Not at this stage.

Senator GEORGE CAMPBELL—I am happy for you to give me that, plus the 19.

Ms Henry—I am happy to do that.

Senator GEORGE CAMPBELL—That will be fine. Do we have a breakdown on theamount of money that has been spent on the implementation and administration of theprogram until now?

Mr Clarke—We would need to take that on notice. I am sure we can provide that for you.

Senator GEORGE CAMPBELL—Have there been any problems with the program interms of processes?

Mr Clarke—I am not sure of the level at which you ask the question. AusIndustry deliversthe program. We are the delivery agent, of course. We go out and ask our customers—in thiscase the CRCs themselves—how they feel we are going, where we are doing well and wherewe can do better. We in fact used the CRCs as our pilot customer satisfaction survey some 15months ago and have just done a follow-up survey of them in the last month. That has


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identified areas where we can improve delivery. A particular example was promotion of theprogram, where the CRCs were of the view that we needed to do more to promote theprogram as a whole to complement the work that the individual centres were doing topromote their own particular activities. As a result of that, we have created a national CRCmarketing program. It is cofunded by the CRCs themselves and the government throughAusIndustry, and we are looking at ramping up that overall promotion.

Senator GEORGE CAMPBELL—What about the other administrative aspects—theapplication processes and so forth?

Mr Clarke—We received a lot of feedback on how we could simplify the guidelines. Theguidelines were rewritten in the last round as a result of that feedback—issues like contractdetails and administration. I would characterise them as tuning the program rather than sayingthat there were any major problems. This program has been pretty thoroughly reviewed and itis really in that tuning mode.

Senator GEORGE CAMPBELL—And you feel reasonably satisfied with the way inwhich the program is functioning at the moment?

Ms Henry—Yes. I might add, though, that in that lead-up to the new selection round wewould of course take the opportunity to again refine any of the processes and procedures atthat point.

Senator GEORGE CAMPBELL—To what extent does AusIndustry get involved withthe centres in terms of commercialisation and new technologies that come out of productdevelopment, et cetera? Apart from the other raft of programs you have, is there a hands-oninvolvement with the centres about getting some of these projects up and running?

Mr Clarke—That sort of issue is a good example of the sort of tuning of our delivery thatwe are looking at. These centres are established through a contract with the Commonwealthand that contract has certain terms and conditions, one of which relates to commercialisation.One of the issues that we discussed with the CRCs a couple of weeks ago at their annualconference was whether or not we could streamline that very provision. So that is the sort ofthing we are looking at.

In the broad, whether you characterise the relationship as hands on or hands off is a littleproblematic. It is certainly not at the extreme of either. Two years after establishment, theCRC’s progress is reviewed; they are reviewed again at five years. So there is a fairly constantinteraction between the CRCs themselves and AusIndustry as the administrators.

Senator GEORGE CAMPBELL—I suppose what I am trying to get at, Mr Clarke, is towhat extent there is collaboration, cooperation and coordination between the various elementsthat are running around in our economy dealing with the issue of research and development.You have the CRCs, you have this innovative investment program and you have thetechnology parks—there is a whole raft of bits and pieces out there. To what extent is there anoverall view, if indeed anyone has an overall view, about what is in the pots; what is mixingaround?

Mr Clarke—I am certainly happy to speak for the programs that AusIndustry delivers,which are many of the ones that you mentioned. When the government restructuredAusIndustry to be exclusively program delivery and separated the policy function back intothe core department, one of our mandates was to provide better service to all of the researchagencies and companies that can access the programs. One way in which we have done that isto try and train all of our staff to have basic knowledge of all of the programs that we can


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deliver. For example, the people that are working with an individual CRC now have a basicworking understanding of R&D Start, IIF, COMET and the other potential programs. Incommercial terms you might characterise it as cross-selling or at least making sure that wecan advise a CRC or a company of other potential programs.

Senator GEORGE CAMPBELL—How effective is that? I used to sit on the old NIASboard, going back a few years, and the thing that struck me was the fact that a lot ofcompanies had benefited by the raft of NIAS programs but, in many respects, they were notaware that NIAS had other programs. They picked out one program—I forget the programsnow, but investment ready or whatever it was—but they were not aware of the other programsthat NIAS was delivering which were complementary to those programs.

Mr Clarke—Indeed, and it is a constant battle and we do it through our marketing andtraining. For example, you have probably seen that when AusIndustry advertises or makespresentations at conferences and seminars and so on, we try and talk about the whole range ofprograms. Our pitch is more like: ‘If you’re a company that’s interested in or doinginnovation, come and talk to us and we’ll help pick the right program that might meet yourneeds.’ We can even do a theoretical case study that might show that a company could enterwith COMET, receive venture capital through IIF, receive research expansion through Startand then join a CRC. In principle, one company could migrate across all of those competitiveinnovation programs, and so we are very much trying to support companies by picking outwhere they fit at any point in time in their business cycle.

Senator GEORGE CAMPBELL—Have you produced any publications which pull allthis together? Do you have a publication in AusIndustry which says, ‘This is the total packageof innovative programs we have available and this is the link between COMET andinvestment awareness programs, CRCs, et cetera’?

Mr Clarke—As a single publication, no, but it is the way we are rounding up ourpresentations. It is the way in which, for example, we are looking at redesigning our web site,which is now a primary communication means to go through it. Historically, in a way it hastended to be, ‘Open the door and pick a program,’ whereas we now want the new mode to be,‘Open the door, tell us about yourself and we’ll advise you which program might be best.’That is the direction that we have been moving in.

Senator GEORGE CAMPBELL—One of the concerns I have—and I do not knowwhether this has been addressed in the context of the new programs—concerns a visit I madeto a CRC in Sydney two or three years ago that had just developed a fairly radical newproduct in the biomedical field. While we were actually visiting them, having a look at thenew product, so also were two marketeers from St Jude and another British company, buyingthe IP rights to produce the product overseas. I do not know whether that was because theproduct was incapable of being manufactured here—I suspect it was, given that the prototypewas done here, and it was quite revolutionary—or whether we were a victim of the fact thatthe people who had produced the product had no idea where else to take it in terms of puttingit into production within Australian companies. It always worries me that there seems to be agap.

Mr Clarke—It is, and sometimes I think the CRCs are—in the literal sense of the word—unique structures, with this combination of industry, universities and often the CSIRO. It doespose challenges for us in terms of their eligibility for various other forms of support. Indeed,at the last meeting of the Industry Research and Development Board a couple of weeks agowe had a discussion about this. The chair of the CRC committee is now a member, and one of


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the reasons that the minister appointed Dr Vaughan to the IR&D Board was to better integrateand create awareness of how the programs work together. One of the decisions of the board afew weeks ago was that we need to customise a marketing program for CRCs to raise theirawareness about the terms and conditions for things like COMET, IIF, Start and so on—thewhole range of programs.

Senator GEORGE CAMPBELL—Does that also include the links into the technologyparks around the place?

Mr Clarke—I can really only speak for the programs that AusIndustry delivers, and that isnot within our domain.

Senator GEORGE CAMPBELL—I accept that, but it seems to me that that is anotherelement of the package that needs to be put together, because there is a lot of good stuff goingon out in those technology parks. The experience, from what I have seen, is that where theyhave been successful it is because they have been able to mix and match various elements oftechnology. It has been by simply bringing them together that they have got outcomes.

Mr Clarke—Indeed. In a sense, that is what CRCs themselves are: sorts of minitechnology parks with those multiple players under one umbrella.

Senator GEORGE CAMPBELL—They are, and the argument I am simply putting is thatwe ought to be looking to broaden the contact range as much and as widely as possible.

Mr Clarke—Yes.

Mr Mackey—While you are gathering your thoughts, can I interrupt just to clarify acouple of points in relation to the arrangements. From where I sit, it seems that yourcommittee may have finished all the questions in relation to outcome 1 as far as thedepartment is concerned. Is that the case? If it is the case, there are people still waiting, andwe will send them away.

Senator GEORGE CAMPBELL—I will tell you what I have left and then you can tellme who can go. There is always a bit of confusion about what we are in. I have the InnovationAccess Program to go.

Mr Mackey—That is outcome 2.

Senator GEORGE CAMPBELL—I have world-class centres of excellence.

Mr Mackey—Same.

Senator GEORGE CAMPBELL—I have Major National Research Facilities.

Mr Mackey—And again.

Senator GEORGE CAMPBELL—I have the National Innovation Awareness Strategy.

Mr Mackey—Yes, again.

Senator GEORGE CAMPBELL—I have pre-seed funding.

Mr Mackey—Yes.

Senator GEORGE CAMPBELL—I have R&D.

Mr Mackey—Yes.

Senator GEORGE CAMPBELL—I have R&D Start, general R&D investment, theenhanced R&D, rebate for small companies and total business R&D—so it is all output 2.


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Mr Mackey—In that case, then, I can say to the people from the department who are onlyhere to answer questions on outcome 1 that they can go now.

Senator GEORGE CAMPBELL—Yes, except I think Mr Dainer should stay becausethere will be some questions about funding.

Mr Mackey—He will be here unto the death, metaphorically speaking!

Senator GEORGE CAMPBELL—Back on the CRCs, Mr Clarke, do you have a recordor do you keep a scorecard of the number of successful new technologies or innovations thathave been developed and commercialised out of the CRCs?

Mr Clarke—The most recent outcome review of the CRC program was undertaken byDon Mercer and John Stocker in 1998. I am aware that my policy colleagues have announcedthat they have commenced a new qualitative and quantitative outcomes review, but as oftoday $1.8 billion of Commonwealth funds had leveraged some $5.4 billion of matchingfunding. It is a three to one leverage in the program, which is the highest in our range—over300 patents, over 700 research contracts and over 1,000 graduates and $700 million of directbenefits from eight technologies alone and a further $1.3 billion of benefits forecast from sixother technologies. That was the 1998 Mercer Stocker review. Perhaps Mr Cook might advisewhen the next review is due to be published.

Mr Clarke—I should emphasise that the numbers that I mentioned have a commercialorientation. Many of the CRCs are not commercial in their orientation at all; they are morepublic good CRCs. A few weeks ago at the CRC conference, there were some absolutelystunning results in areas like weed and pest control, water quality, health and medical areas. Itis a very diverse set of outcomes, not just the commercial numbers that I indicated.

Senator GEORGE CAMPBELL—I visited the one in Albury. The work that is beingdone on water pollution and algae growth is quite impressive.

Mr Clarke—Outcome analysis is both qualitative and quantitative. The theme of the CRCassociations conference a few weeks ago was just that: how do you measure the success ofthese programs? There is a need to have a range of performance metrics to really encompassthe huge variety.

Senator GEORGE CAMPBELL—On that issue, was that conference you keep referringto a public conference?

Mr Clarke—It is the CRC associations conference, not ours.

Senator GEORGE CAMPBELL—Was it open to the public?

Ms Henry—No. It is open more to the CRCs themselves, visitors and those engageddirectly in the program. But businesses did attend the forum as well.

Senator Minchin—It is open to the media though.

Ms Henry—Absolutely.

Senator GEORGE CAMPBELL—Was a set of papers produced? Are those papersavailable?

Ms Henry—There will be a summary, which will go onto the web site.

Mr Clarke—You would characterise those at that conference as the CRC community in itsbroader sense.

Ms Henry—Correct.


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Mr Irwin—The qualitative and quantitative outcome study is not a review of the programper se. It is an attempt to deal with the issue you have raised regarding the ongoinginformation that is provided for the ongoing monitoring of CRC activity, to try and get abetter framework in place to measure that in the future. It is not a one-off, comprehensivereview of the program in the way the Mercer Stocker review was in 1998. It is an attempt toput a better system in place so that we will get better data along those lines in the future.

Senator GEORGE CAMPBELL—At the end of the day, will that give us the sort ofoutcomes we are looking for? The amount of investment, commercialisation taking place andjobs created?

Mr Irwin—It is an attempt to get at some of these indirect benefits.

Senator GEORGE CAMPBELL—And do that on an ongoing basis.

Mr Irwin—Yes.

Senator GEORGE CAMPBELL—When is that likely to be up and running?

Mr Irwin—Our hope is that the process will be concluded by about October of this year.At that point, we will move to doing surveys on a two- or three-yearly basis. It is still to bedecided if we will try and pick up this extra qualitative data for the program.

Senator GEORGE CAMPBELL—Are you aware that other OECD countries haveintroduced programs to evaluate public R&D units?

Mr Irwin—Not personally.

Senator GEORGE CAMPBELL—What sort of accounting process is put in place indealing with the CRCs, ensuring that the funds allocated to them are spent in the areas forwhich they originally were applied?

Ms Henry—Internally, we have a process whereby we monitor the expenditure, andpayments are made on a quarterly basis to CRCs. The internal spending of the funding withina CRC is a matter for the CRC itself. We schedule with them, over a period of time, thepayment schedule for the seven-year period.

Senator GEORGE CAMPBELL—Do you do any auditing to ensure the moneys arebeing spent in the areas that—

Ms Henry—Yes. They must provide us with annual reports and audited statements. Weneed to get clearance each quarter before the payment can be made.

Senator GEORGE CAMPBELL—It is more a question not so much of the amounts ofmoney but of the money provided being spent in the targeted areas.

Mr Clarke—The primary mechanism is the contract that does it. The CRCs themselves allhave boards, so it really drops down to the normal commercial responsibility of the board anddirectors under the contract that they have with the Commonwealth.

Senator GEORGE CAMPBELL—You rely on what they provide.

Mr Clarke—Plus annual reports, a two-year review and a five-year review, and so on. It ispretty comprehensive.

Senator GEORGE CAMPBELL—Do the evaluations that you make in this area have animpact on future funding for CRCs—in other words, your evaluation of how they areadministering the funding that is available to them?


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Mr Clarke—Are we talking at an individual CRC level?


Mr Clarke—In an extreme case it could. The two-year and five-year reviews are the majormonitoring mechanisms for whether the CRC is performing in accordance with its plan andthe Commonwealth’s expectations. Those review mechanisms are overwhelmingly aboutgiving some advice and guidance on the area of keeping them on track. The contact is soregular that there is really not a question of withdrawing funding or anything of that nature.

Senator GEORGE CAMPBELL—I am interested in the reasons why the expandedfunding program does not kick in until 2003-04.

Mr Clarke—It is essentially a phasing issue with the selection process. As Ms Henry said,we will start the selection process this year. It is an exhaustive process in every sense of theword. Having selected the CRCs, they then have a small first year to phase in. The fundingsimply matches the selection process.

Senator GEORGE CAMPBELL—Effectively, the selection process finishes in Octobernext year. Then the first funding is available in the July after that?

Mr Clarke—That reflects the ramp-up from the decision where I have announced to youthat the Senator Campbell CRC has won support. The time it takes you to get all of thesystems and structures together pretty much matches that funding. At the margin, we canreprofile slightly, of course, but it is basically timing driven.

Senator GEORGE CAMPBELL—I can understand that for a new CRC but what aboutfor existing CRCs? Does that not cause a problem in terms of a funding gap?

Mr Clarke—The department of finance has always allowed us, where necessary, toreprofile the cash between financial years to cope with those sorts of swings and roundabouts.

Senator GEORGE CAMPBELL—So, in effect, a CRC that is up for renewal of itsfunding would not be confronted with having to shut its doors for seven or eight months?

Mr Clarke—No, it would not. One of the reasons is that, where a CRC is successful inwinning a renewal, as you call it, that actually cuts in before the expiry of its seven-yearcontract. There is an overlap, so it tends to be fund neutral for that overlap period.

Senator GEORGE CAMPBELL—Would that be the case of all 12 in this round of 19?

Ms Henry—Yes.

Senator GEORGE CAMPBELL—They would all have been refunded before theirexisting funding expired?

Ms Henry—Essentially, the last year of funding is rolled into the first year of funding forthe next round.

Senator GEORGE CAMPBELL—Is there any specific targeting by the CRC program ofparticular industry sectors, or is it just a matter of what comes forward?

Mr Clarke—That is a matter for the minister to decide in making his announcement of theCRC round. In the most recent round which AusIndustry administered, there was noexpressed sectoral priority. Of course, the program has guidelines that put a boundary aroundthe eligible sectors.

Senator Minchin—My inclination, which is consistent with the origins and operation ofthe scheme, is to ensure that we fund CRCs based on merit and not seek to arbitrarily at


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government level say, ‘These are good or bad areas for CRCs to be engaged in.’ We have avery good committee that oversees the process. Almost invariably, I accept that committee’srecommendations. That committee has a very exhaustive and very good process of assessmentof CRCs. It is competitive and merit based. That is appropriate, and I am not inclined to takethe view that we should ab initio indicate areas of preference for CRCs.

Senator GEORGE CAMPBELL—Are you saying, Minister, that in this current round IT,for example, was not targeted for preferential treatment over other industry—

Senator Minchin—No, it was not. I, from time to time—and my ministerial colleagueswith interests in particular sectors—encourage the formation of groups and applications forCRC funding in particular areas. I know my colleague Senator Alston is very keen to seemore and more CRCs dedicated to IT. But my message to him, as it is to any other minister,is: make sure there are good applications, that there are quality CRC applications put into thecommittee. If they are good enough, they will get up. But they have to compete withapplications from other areas, and that has to be the test.

Senator GEORGE CAMPBELL—How much of the current funding for CRCs is spenton the IT discipline?

Mr Clarke—Senator, perhaps I could give you the broad profile of the current 64 CRCs inthe six broad sectors that we keep the statistics for. Of the current 64, nine are in the miningand energy sector, 16 are in the environment sector, nine for medical, 13 for agriculture, ninefor manufacturing technology and eight for information and communication. It is oftenpointed out, however, that the eight in the ITC sector could be a bit misleading because in thesectors above much of the research may be ITC based.

Senator GEORGE CAMPBELL—Has there been any sort of assessment done of that? Ipresume the nine in the manufacturing sector are ITC based.

Mr Clarke—Many of the research programs in those sectors are information,communication, technology based, yes.

Senator Minchin—The mining and energy one—I know several of them are heavily IToriented. This is the trouble—and this is the argument I have with my colleague SenatorAlston. This is a bit arbitrary and the development of IT is a big part of most of these. Weshould not assume that on the face of those six there is not a heavy emphasis on IT throughoutthe CRC program.

Senator GEORGE CAMPBELL—I think sometimes what is not understood is that ITCis an enabling technology.

Senator Minchin—Yes, exactly.

Senator GEORGE CAMPBELL—What is being done to link the CRCs into theinternational research network? I know we talked before about the innovative awarenessprogram, whatever the TDP was rolled into.

Ms Henry—Innovation Access Program.

Senator GEORGE CAMPBELL—What is being done in the CRC area in terms ofbuilding networks internationally?

Mr Cook—Senator, from the policy perspective, that is one of the objectives of trying toencourage greater international networks in the new round of CRCs. It already occurs andthere are international partners, I understand, in a number of CRCs. But the international trend


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is to put more and more emphasis on international collaboration and, indeed, that is the mosteffective way of leveraging up your own skill base. We are keen to see in the next round ofapplications a greater emphasis on those international research networks and also on small-medium enterprise participation in CRCs.

Senator GEORGE CAMPBELL—What sort of concrete goals and objectives have beenestablished in that area?

Mr Cook—That will be worked out as part of the process of firming up the guidelines,Senator.

Senator GEORGE CAMPBELL—When will those guidelines be available, Mr Cook?

Mr Clarke—That is the process that Ms Henry mentioned. The publication of theguidelines commences the application period for the next round, so later this calendar year.

Senator GEORGE CAMPBELL—Sorry, I am getting confused here. Is Mr Cook talkingabout the innovative awareness program or something separate in terms of CRCs?

Mr Cook—No, I am talking about the CRCs program itself, Senator. If you look onpage 57 of the PBS, you will see there that in the expanded funding for the CRC programthere is an emphasis on looking at enhanced opportunities for small and medium enterprisesand increased collaboration with international research networks.

Senator GEORGE CAMPBELL—I assumed that that was something separate anddistinct from the innovation awareness program. Is that right?

Mr Cook—That is correct.

Senator GEORGE CAMPBELL—Maybe I am getting confused. Are the guidelines forthis going to be the same as for the innovative awareness program or is this going to besomething separate? If it is separate, when are those guidelines going to be publicly available?

Mr Cook—These objectives will be built into the guidelines for the CRC program thatMs Henry has talked about earlier, which is quite separate from the Innovation AccessProgram.

Senator GEORGE CAMPBELL—They will be available when?

Ms Henry—Depending on the progress made, they definitely need to be ready by the timethe round is announced. We would be expecting that perhaps around August or September theguidelines will be available. We usually like to make them available a little earlier than theannouncement of the round.

Senator GEORGE CAMPBELL—They will form part of the guidelines for funding.

Ms Henry—Correct.

Senator GEORGE CAMPBELL—The international cooperation—

Ms Henry—Yes, that is right.

Senator GEORGE CAMPBELL—And that will be a factor taken into considerationwhen you make a decision about funding.

Mr Clarke—Can we just summarise to make this clear? Our policy colleagues areworking on new guidelines for the next CRC round, which takes up the expanded funding forCRCs in Backing Australia’s Ability. Those guidelines will have different criteria but not


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radically different. They will be a development of the previous CRC guidelines. One of theareas that they are flagging is international collaboration.

Senator GEORGE CAMPBELL—And that will be—

Mr Clarke—That will be the basis of the next selection round.

Senator GEORGE CAMPBELL—That is what I am trying to get at.

Mr Clarke—The guidelines form the basis of the selection round.

Senator GEORGE CAMPBELL—Presumably, while it does not preclude you fromaccess to the next round, having something in place for international collaboration will be abeneficial element of your application?

Mr Cook—Yes, Senator.

Senator GEORGE CAMPBELL—What is the patent productivity of CRCs?

Mr Clarke—Over 300 patents have come out of CRCs on the last data I had. Again, that isa very technology specific issue. A lot of the environmental work, for example, would not bepatented. There is one CRC in particular that is very strong in this area: the AustralianPhotonics CRC is a major source of patents in this area. The headline number is over 300.

Senator GEORGE CAMPBELL—How do you resolve the issue of intellectual propertyrights where the CRCs are part funded by private sector and multinational corporations?

Mr Clarke—It is a matter for the CRC. The board of the CRC determines their policy onIP.

Senator GEORGE CAMPBELL—Have there been conflicts?

Ms Henry—Occasionally there have been, Senator, but the requirement is that the CRCcomes and notifies the Commonwealth for a clearance of what activity they are undertaking inthat regard.

Senator GEORGE CAMPBELL—Can you explain how that is resolved, Ms Henry? Ifthere is a conflict, how is it resolved?

Ms Henry—Normally, Senator, it is an internal matter and we try and leave it to the CRCto resolve. On the odd occasion the issue may be raised with us and we try and broker anoutcome, but usually it is left to the centre.

Senator GEORGE CAMPBELL—Have any of these issues ever got into the legal arenafor resolution?

Mr Clarke—Senator, I am just conferring with Ms Henry. I can recall one where we havehad a formal complaint from a former CRC employee that may be encompassed by yourquestion, but it is at that level.

Senator GEORGE CAMPBELL—No, I can assure you it is a general question.

Mr Clarke—The broad answer is no. On the issue you asked me about before—the degreeto which this is a hands-on or hands-off program—this area of IP management is one of theareas, as I have said, that was discussed at the conference with a good cross-section of theCRCs. We are considering backing off. We are not actually adding value there. The boardstructure of the CRCs has proved very robust in making good IP decisions, so perhaps we donot need to even have the degree of reporting and involvement that we currently have.


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Senator GEORGE CAMPBELL—In the main, Mr Clarke, are you saying that theintellectual property remains effectively the property of the board of the CRC?

Mr Clarke—No. The board makes the decision as to the attribution of the IP. In otherwords, it is a CRC issue, not a Commonwealth issue.

Senator GEORGE CAMPBELL—What has been the general approach that CRCs havebeen adopting in dealing with intellectual property rights?

Mr Clarke—Senator, I do not think we can answer that. Some CRCs are incorporated;some are unincorporated joint ventures. There is a range of governance structures. Some arehigh in patenting. In other cases the IP protection is really commercial-in-confidence. It iskeeping the information literally confidential amongst the researchers. It is really a verydiverse approach.

Senator GEORGE CAMPBELL—So you are saying that in fact there is no common ruleapproach.

Mr Clarke—Absolutely not. The CRCs are very diverse in their approach to these issues,just as the CRC community itself is very diverse.

Senator GEORGE CAMPBELL—Can you give us a figure, Mr Dainer, for theInnovation Access Program?

Mr Dainer—The program dollars for the Innovation Access Program are $14.6 million,$17 million, $22.2 million and $24.8 million.

Senator GEORGE CAMPBELL—Does that include the administration costs?

Mr Dainer—No.

Senator GEORGE CAMPBELL—Do you have figures on that?

Mr Dainer—They are $2 million in 2002-03 and the same in the out years, approximately.

Senator GEORGE CAMPBELL—How much has been spent to date on this initiative?

Mr Cook—The Innovation Access Program has not commenced yet.

Mr Mackey—This is the one that takes the place, in a sense, of the TDP, Senator, if yourecall. As the Innovation Access Program, it does not commence until 2002-03.

Senator GEORGE CAMPBELL—Yes, I understand that. How much has the departmentspent to date on the initiative?

Mr Cook—On program design?


Mr Cook—I cannot give you that number, Senator. It falls within the normal responsibilityof Dr Daly’s branch and I do not think we would be able to extract that particular bit ofinformation.

Senator GEORGE CAMPBELL—Do you have that figure available, Dr Daly?

Dr Daly—I do not, Senator.

Senator GEORGE CAMPBELL—Can you take that on notice?

Mr Mackey—We had estimated a proportion of Dr Daly’s branch work was spent on—

Senator GEORGE CAMPBELL—Yes, I understand. Can you tell us what consultationshave been held with the stakeholders in this process and who the actual stakeholders are?


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Dr Daly—We have consulted quite widely, both with the research community and alsowith the business community in terms of business organisations.

Senator GEORGE CAMPBELL—But can you tell us specifically who you haveconsulted with?

Dr Daly—I could provide that information to you, Senator.

Senator GEORGE CAMPBELL—Can you take that on notice, both in terms of thebusiness community and in terms of the wider research community? What consultations havebeen held? Have there been one-on-one consultations? Have there been collectiveconsultations? Have there been joint meetings with the various groups?

Dr Daly—All of those. We have also provided a discussion paper quite widely tostakeholders.

Senator GEORGE CAMPBELL—Can you provide us with a copy of the discussionpaper?

Dr Daly—Yes.

Senator GEORGE CAMPBELL—Can you provide us with a list of the consultations thathave taken place?

Dr Daly—Yes.

Senator GEORGE CAMPBELL—Can anyone tell me where world-class centres ofexcellence are up to?

Ms Kelly—The centre of excellence that is being progressed in this portfolio is the biotechcentre of excellence. We are, this month, proposing to appoint a panel of experts to adviseministers on the guidelines for applications for the biotech centre of excellence. The samepanel would go on to advise ministers on the selection of applications.

Senator GEORGE CAMPBELL—Sorry, I just missed that. Did you say the panel hasbeen established, or you are about to establish a panel?

Ms Kelly—We are about to establish a panel. This month we are proposing that the panelwould be established to advise ministers.

Senator GEORGE CAMPBELL—Can you tell us who will be on that panel?

Ms Kelly—No. The names have not yet been approved by ministers.

Senator GEORGE CAMPBELL—How many WCEs are we looking at establishing?

Ms Kelly—In the biotechnology area, that will be something the panel will advise on.Whether a centralised, nodal or network model should be specified or whether we shouldallow applications to come forward proposing particular models is one of the issues the panelwill consider.

Senator GEORGE CAMPBELL—There is a range of activities that this panel willundertake. Can you outline what they will be?

Ms Kelly—They will be looking at what guidelines should be put in place for applicationsfor the world-class centre. There will be a competitive process which we expect will belaunched in about August-September of this year and go on until about January-February of2002, at which point the panel’s job will switch to assessing the applications that have beenreceived and providing advice to the biotech ministerial council, particularly Minister


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Minchin and Minister Kemp, who make the final decision on this biotech centre of excellenceabout which applications should be successful.

Senator GEORGE CAMPBELL—If they are still ministers in January-February 2002.How much funding has been spent so far on this project?

Ms Kelly—Very little. Once we get the panel together we will begin to spend someadministrative money on meetings, et cetera, but to date very little.

Senator GEORGE CAMPBELL—Do the administrative costs for this program come outof the administrative funds of the department?

Mr Mackey—If you look at the summary table—the relevant page for this program is page30—you can see it is actually split up into admin expenses and departmental outputs. In thatcase, as you can see, there has been a specific allocation for departmental outputs.

Senator GEORGE CAMPBELL—I understand there is $91 million over five years withfunding coming from both your department and the department of communications. Is theadministrative cost included in that $91 million or is it in addition to it? I accept that they aresplit up in terms of the table but it does not tell you whether they are all rolled into the$91 million.

Ms Kelly—It is included in that amount.

Senator GEORGE CAMPBELL—So it is all rolled up in the $91 million.

Ms Kelly—Yes.

Senator GEORGE CAMPBELL—I think that is all in relation to that. Mr Dainer, what isthe forecast program expenditure for the Major National Research Facility Program?

Mr Dainer—For MNRF in 2001-02, it is $3.5 million; 2002-03, $19.4 million; thefollowing year, $29.4 million and $49.4 million.

Senator GEORGE CAMPBELL—In the last year it is $29.4 million?

Mr Dainer—That is excluding the departmental expenses. The departmental expenses forMNRF are $1.5 million next year, then $0.7 million in each of the out years, other than 2004-05 where it is $0.8 million.

Senator GEORGE CAMPBELL—How much has been spent to date on this initiative?

Mr Peel—Very little, Senator. We have commenced the application process only, so wehave not expended any program funds as such, just a small amount of administrative funds toserve the committee that is oversighting the selection process.

Senator GEORGE CAMPBELL—Who is on the committee?

Mr Peel—I have a list here, Senator. I will just go through it. Dr Peter Jonson is thechairman—he is the Chairman of the Melbourne Institute; Dr Robin Batterham, the ChiefScientist; Dr Greg Smith, Director of Genesis Tech Ventures; Professor John Coghlan,Executive Director of the Menzies Foundation and Professorial Fellow in the Department ofAnatomy and Cell Biology, University of Melbourne; Dr Brian Schmidt, Fellow of theAustralian National University Research School of Astronomy and Astrophysics; Dr DeborahRathjen, CEO and Managing Director of Bionomics; Dr Beverley Ronalds, Director of theCentre for Oil and Gas Engineering, University of Western Australia; Professor MarkVon Itzstein, Professor and Founding Director of the Centre for Biomolecular Science andDrug Discovery, Griffith University; Dr Chris Nicol, Head, Wireless Research and


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Development, Bell Laboratories; and Mr Grahame Cook, an ex officio member from thedepartment.

Senator GEORGE CAMPBELL—Is that a committee or a conference? How many timeshas the committee met?

Ms Henry—At this stage I think once.

Mr Peel—They have met for an initial meeting, Senator.

Senator GEORGE CAMPBELL—Did they meet prior to the calling for proposals inMarch?

Mr Peel—From memory, Senator, it was after that, on 10 April.

Senator GEORGE CAMPBELL—Has the committee considered any proposals to date?

Ms Henry—No, not yet.

Mr Peel—Not yet, Senator.

Senator GEORGE CAMPBELL—Have there been minutes kept of the committeemeetings?

Ms Henry—Yes, there have.

Senator GEORGE CAMPBELL—Can we have a copy of the minutes of the committee?

Mr Peel—We will take that on notice, Senator.

Senator GEORGE CAMPBELL—What are the selection criteria for committeemembership?

Senator Minchin—For committee membership? I should respond to that. The departmentmade recommendations to me after consulting with the scientific community about who hadthe relevant skills and experience to serve on such a committee, given its purpose. I think byand large I accepted the departmental advice. We were anxious to select a committee based onmerit that had the relevant skills to assess what inevitably was going to be a wide range ofapplications for funding under this scheme. We always have a quite difficult task of narrowingthat down to the best proposals to fit within this budget. You might be referring tocorrespondence I had from Michael Egan saying he was disappointed there was only oneperson from New South Wales. I have written back to him saying that this was never meant tobe reflective of states or gender or anything else, but just to make sure we had people with therelevant skills and experience.

Senator GEORGE CAMPBELL—I do not want to disappoint you, Minister, but MichaelEgan and I do not have conversations very often.

Senator Minchin—He mentioned something about that. I just thought you may bereferring to the same matter—that New South Wales only has one person on the committee.Can I assure that I was not—and nor was the department—seeking at the outset to have anysort of state based quotas or anything else. This is really an assessment of scientific merit.

Senator GEORGE CAMPBELL—Can you tell us what proposals have been received forthis fund, and in what areas or with what research focus?

Mr Peel—Senator, there have been about 90 separate proposals. I could provide you with alist later, if you wish. They will be published on the department’s web site shortly.


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Senator Minchin—In the spirit of what this department is known for—openness andtransparency.

Senator GEORGE CAMPBELL—On the basis that you are known for your opennessand transparency, Minister, were any people appointed to the committee that were not on thedepartment’s list?

Senator Minchin—I would have to check. I do not know. I exercise my liberty as aminister to identify the best people. I do not know whether the department nominated her, butI certainly was keen, for example, on Deborah Rathjen, who runs Bionomics in SouthAustralia, because I know her to be a highly qualified and competent scientist with businessexperience. I was certainly keen on her appointment but whether that came from thedepartment, I am not sure. But I had no hesitation or reservations about my involvement inthese matters. I sought good input from the department and, as I say, by and large I acceptedtheir recommendations, but Deborah’s may have been one that I put up myself.

Senator GEORGE CAMPBELL—Can you take on notice and advise us of any othersthat were not on the departmental list?

Senator Minchin—Yes, sure.

Senator GEORGE CAMPBELL—Has there been any decision made yet aboutsuccessful bidders?

Mr Peel—No, Senator. We have received around 90 applications, as I mentioned, and thecommittee will be assessing those over the coming weeks.

Senator GEORGE CAMPBELL—When will the committee be in a position to makedecisions about the bids it has received?

Mr Peel—Probably around August, Senator.

Senator GEORGE CAMPBELL—And they would apply from when, the successfulbidders?

Mr Peel—The program ramps up similar to the CRC program. There is a small amount offunding this year, but the major funding kicks in in 2002-2003.

Senator GEORGE CAMPBELL—So effectively the main starting point for the programis next year?

Mr Peel—It will be next year, yes.

Senator GEORGE CAMPBELL—Okay, thank you.

Proceedings suspended from 6.24 p.m. to 8.01 p.m.Senator GEORGE CAMPBELL—Mr Dainer, can you give us the figures for the

National Innovation Awareness Strategy?

Mr Dainer—That is $4.3 million in 2001-02; $5.8 million in the following two years; and$6.4 million in 2004-05.

Senator GEORGE CAMPBELL—Does that include the administration cost?

Mr Dainer—Yes.

Senator GEORGE CAMPBELL—How much has the department spent to date on thisinitiative?


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Mr Cook—It is part of Mr Irwin’s branch and we have an officer working on that, but wewould have to make an estimate of how much we had spent. There are no program costs, justsome departmental funds really.

Senator GEORGE CAMPBELL—Can you give a ballpark figure, Mr Irwin?

Mr Irwin—It might be better if I get back to you after having taken that on notice.

Senator GEORGE CAMPBELL—Thank you. Mr Dainer, what are the figures on pre-seed funding?

Mr Dainer—The administered dollars are 5.88 next financial year; 15.62, 20.16, 20.16 andthen 10.89 in 2005-06. There is half a million dollars on top of that in ‘departmental’ nextyear, $1.3 million the following year, and then $1.6 million a year in the outyears.

Senator GEORGE CAMPBELL—Can you just go over the program expenditure figuresagain?

Mr Dainer—Yes: 5.9, 15.6, 20.2, 20.2 and, in 2005-06, 10.9.

Senator GEORGE CAMPBELL—When is the announcement on the pre-seed fundingexpected?

Mr Cook—We are just in the process of finalising the program design. We would hope thatthe design for the pre-seed fund could be announced in the next month or so.

Senator GEORGE CAMPBELL—Can you outline what results were obtained throughthe consultation process?

Mr Cook—Yes. We have done a summary of the consultation process. I am not surewhether it went on our web site today—that is, the innovation.gov.au web site. If it is not ontoday, it will be there very shortly. There were quite a diverse range of views. We consultedwith over 200 people in each of the capital cities, and we teleconferenced with people inTownsville and Darwin. There was quite a strong support for the concept, a recognition thatthis type of fund was well targeted in the sense that universities and public sector researchagencies have some capital restraints in commercialising their discoveries, and also arecognition that there was some expertise that needed to be brought to bear in thecommercialisation process within those institutions.

Senator GEORGE CAMPBELL—Did you finish up making any changes to the fund’sstructure as a result of the consultations?

Mr Cook—We went to those consultations without any firm structure in mind, and weissued a discussion paper which was the basis for those discussions. It was through thosediscussions that we firmed up our thinking about what the design might look like.

Senator GEORGE CAMPBELL—Is that discussion paper on your web site?

Mr Cook—Yes, it is.

Senator GEORGE CAMPBELL—What progress has been made in respect of appointinga fund manager?

Mr Cook—None yet, because the steps are to finalise the design and get that approved bythe minister. After that, we will call for applications for fund managers. So that is still a littleway off.

Senator GEORGE CAMPBELL—Can you explain to us how the Commonwealthintends to leverage the fund with private sector funds?


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Mr Cook—In a similar way that the Innovation Investment Fund has been able to attractprivate sector contributions, we have found through our consultations that we will be able toget some private sector capital into those funds. So that will leverage the Commonwealthcontribution.

Senator GEORGE CAMPBELL—Will this be on a dollar-for-dollar basis or two-for-onebasis?

Mr Cook—We will have to see what occurs when we go out into the marketplace, but wewill be indicating that we will be looking for private sector contributions.

Senator GEORGE CAMPBELL—What considerations have been given to dealing withpotential conflicts of interest, probity type issues and proper scrutiny through the parliament ifthere is a mix with the private sector on funding?

Mr Cook—It would be dealt with in the same way as the innovation fund. The fundmanager would collect that private sector contribution through their funds to which theCommonwealth contribution would be added, and there are well-worn paths for handlingthose sorts of issues.

Senator GEORGE CAMPBELL—Are you saying it would be done on the same basis asIIF?

Mr Cook—A similar basis, we expect, yes.

Senator GEORGE CAMPBELL—What about the issue of intellectual property?

Mr Cook—Again, that will be an issue for the fund manager and the institutions to workout in respect of the projects they enter into. We would expect, though, that the institutionswould come to the fund manager with their intellectual property arrangements pretty wellsorted out.

Senator GEORGE CAMPBELL—There is a substantial amount of public funding goinginto this initiative. What are you expecting in terms of private sector funding? Are youexpecting it to match these figures?

Mr Cook—We will have to wait and see. We will be encouraging the potential fundmanagers to tell us what they believe is realistic, but we would be hoping for, say, $1 for $3 orperhaps better than that. We will just have to wait and see.

Senator GEORGE CAMPBELL—When you say $1 for $3, do you mean one publicsector dollar for every three private sector dollars?

Mr Cook—About one-third private sector or better for the Commonwealth contribution.

Senator GEORGE CAMPBELL—If it were one-third private sector to theCommonwealth contribution, wouldn’t you want to keep control of the intellectual property?

Mr Cook—The issue of intellectual property will be between the institutions and thepublic sector research agencies and the fund manager. They will come to some arrangement inrespect of their intellectual property.

Senator GEORGE CAMPBELL—Surely, Mr Cook, if the public is funding substantiallythis project and there is intellectual property generated as a result of Commonwealth funding,there would be an expectation that we would have control of the intellectual property, or atleast our share of it.


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Mr Cook—As I say, that will depend on the market arrangements between the institutionsand the fund manager. That will depend on at what point the discovery is, how far advancedthe intellectual property is and exactly what is happening in the pre-seed area.

Senator GEORGE CAMPBELL—It might be a general question for Mr Clarke, but thereis a range of these projects now in place across a raft of programs, all of which have anelement of intellectual property involved in them. It does not seem to me—and I may bewrong—that there is any consistent approach being adopted to deal with this issue. Maybethere is a consistent approach being adopted to deal with this issue, which gives me someconcern as to what security has been put on that intellectual property from the point of viewof the Commonwealth and the Commonwealth’s investment. The responses I am getting seemto be very obscure in terms of dealing with this issue. It does not seem to be very well thoughtout.

Mr Irwin—I do not believe that is the case, Senator. I think the approach, certainly in theprograms that are up and running today—and listening to Mr Cook I think it is the samedesign intended for the pre-seed fund—is that you have to go to the objectives of the program.The objective is not to generate IP that is held by the Commonwealth or held by thegovernment; the objective is to commercialise that IP. So it is essentially a market drivenstructure to find what is the appropriate arrangement that will maximise the commercialpotential of that IP. So the Commonwealth does not have an opening position regardingwanting to keep that IP. It wants to ensure that the IP is exploited for the net maximum benefitof the economy.

Senator GEORGE CAMPBELL—Sure, I understand that. And there is very little pointin having them unless you do exploit it. But the issue that seems to be eluding me, in thediscussion we have had so far across them, is the issue of the Commonwealth ensuring it getsits rightful return on the intellectual property that is generated.

Mr Clarke—That presumes that the concept of rightful return on the IP—

Senator GEORGE CAMPBELL—But it is also a question of whether you sellintellectual property off, the rights of it, or you get a royalty for it or you actually get equity inthe commercialisation of that IP. Equity could be much more valuable in the longer term thana royalty. I understand this is an age-old argument in terms of this area.

Mr Clarke—I guess my observation as the deliverer of many of these programs is that thepolicy setting is about letting the market determine which IP arrangement will maximise thecommercial potential of the IP, rather than saying that the objective is for the Commonwealthto get a direct return. The IIF program, which we have discussed before, is a good example.There is a Commonwealth return mechanism through there. The Commonwealth is taking avery small share of that. The objective is all about the venture capital market andcommercialising those technologies.

Senator GEORGE CAMPBELL—That is right, and in the generation of thosetechnologies. But in some of the stuff that is here, the Commonwealth is actually becoming apartner in the generation of those technologies, which seems to me a bit different from the IIFfunds, whereby it is a partner in funding private sector activity. In some of these projects it isa partner in the activity itself.

Mr Clarke—Which ones are you referring to, Senator?

Senator GEORGE CAMPBELL—I get the impression that with this pre-seed fundingand the other ones we discussed—oral class centres of excellence—


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Mr Cook—In the pre-seed fund, Senator, the Commonwealth is not a direct party in IP.The IP is held by the institutions, the university or the public sector research agency. What thefund will bring to them is the cash and the know-how to bring their discovery to a point in thecommercialisation process where another financier may well pick it up.

Senator GEORGE CAMPBELL—But it is a question of the rate of the return, I suppose,that the Commonwealth gets on that investment.

Mr Cook—The Commonwealth will get its return, mostly, through the enhancedcommercialisation process of the IP which resides within the universities and public sectorresearch agencies.

Senator GEORGE CAMPBELL—Maybe I am just having difficulty understanding whatyou are saying or you are having difficulty explaining to me what it is you mean—I am nottoo sure. I would assume that with a program such as this, which is pretty similar to the IIFfund structure in concept, you would be expecting a rate of return on the investment. How doyou get that rate of return? I understand how you get the rate of return in the IIF funds. Thereis a guaranteed rate of return which is lower than the speculator, but nevertheless it is there,and you get first call on the dollar. How do you get the rate of return out of this? Is it the sameprinciple?

Mr Cook—It could be the same principle, Senator. That is one aspect of the design.

Senator GEORGE CAMPBELL—You said ‘could be’.

Mr Cook—As I mentioned, the design has not been finalised yet and that is still an issuethat we have not finalised our thinking on.

Senator GEORGE CAMPBELL—So at this stage you actually do not know?

Mr Cook—There are arguments for and against doing it in a similar way to the IIF fundand we are still weighing up those. That is in terms of a direct return to the Commonwealth.

Senator GEORGE CAMPBELL—So that I understand what you are saying, Mr Cook,you have not yet developed your thinking in terms of this program to the stage where there isa definitive model?

Mr Cook—No, Senator, that is correct.

Senator GEORGE CAMPBELL—So who is going to develop that definitive model?

Mr Cook—We will be finalising our thinking on that over the next several weeks.

Senator GEORGE CAMPBELL—When you say ‘we will be’, who is ‘we’ in thatcontext?

Mr Cook—The department, and we will then advise the minister.

Senator GEORGE CAMPBELL—When do you expect to be in a position to advise theminister?

Mr Cook—As I said, I think over the next several weeks.

Senator GEORGE CAMPBELL—That is the end of June, beginning of July?

Mr Cook—I would imagine by then, yes.

Senator GEORGE CAMPBELL—Can we just move onto the R&D streamliningmeasures that were announced in the innovation statement? Can you just run through the


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figures for us now, Mr Dainer—or maybe it is better that Ms Berman does it—for the changesthat were announced in January?

Ms Berman—Yes, Senator. As you would be aware, in January a figure of $345 millionover five years was announced in the budget papers. That figure was revised to $415 million.That was done by Treasury.

Senator GEORGE CAMPBELL—We have different figures. The figures I have for theR&D Start—

Ms Berman—I beg your pardon, I thought you were talking about streamlining in the taxconcession. You are talking about Start?

Senator GEORGE CAMPBELL—Just come to streamlining. The figure I have onstreamlining in January was $5 million in 2001-02.

Ms Berman—Just a minute.

Mr Clarke—Senator, we are just trying to clarify. That $5 million for 2001-02 isstreamlining the R&D tax concession.

Senator GEORGE CAMPBELL—Yes. I have a series of figures. Forget about Start forthe moment. Let us come back to the R&D and the streamlining. Let us talk aboutstreamlining first.

Ms Berman—The original figure was 335 over five years. That has been revised byTreasury to $415 million over five years.

Senator GEORGE CAMPBELL—$415 million?

Ms Berman—Yes.

Senator GEORGE CAMPBELL—So that is an additional $80 million?

Ms Berman—Correct.

Senator GEORGE CAMPBELL—That is the $80 million that was announced in theminister’s statement the day after budget or the day of the budget?

Ms Berman—No, that is a different quantum, Senator. The additional money that wasannounced after the budget related to the 175 per cent premium tax concession. The fundingfor that was increased by $80 million over the $460 million that was previously announced.Instead of $460 million, it becomes $540 million over the five years.

Senator GEORGE CAMPBELL—We seem to be at a bit of odds in terms of thesefigures, Ms Berman, which may be in part my fault. The R&D premium is the 175 per cent.

Ms Berman—That is correct.

Senator GEORGE CAMPBELL—You are saying that that is now $415 million?

Ms Berman—No, that was announced as $460 million in January. It has now beenmodified by an additional $80 million, which gives it $540 million in total over five years.That would not be in the budget papers, though, because that extra $80 million was post thebudget.

Senator GEORGE CAMPBELL—What do you say that is now?

Ms Berman—The 135 premium is a total of $540 million over five years. Thestreamlining total is $415 million over five years.


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Senator GEORGE CAMPBELL—Up from what—$330 million?

Ms Berman—$335 million.

Senator GEORGE CAMPBELL—Could you just explain again what the $80 millionwas for?

Senator Minchin—Senator Campbell, the government decided to, in a sense, relax thestructure of the 175 concession by removing the original intent of an intensity scheme; that is,eligibility would be based on an increase in the proportion of R&D to turnover, which is theway the Americans base their system for providing incentive for additional R&D. Afterextensive consultation with industry, we have decided to base this scheme on a simplemeasure of an increase in R&D expenditure, so there would be no measure against turnover.A company increases its R&D expenditure against a three-year rolling average. That extraexpenditure will qualify for the 175 incentive. That will cost the revenue; in other words, it isa more generous scheme to the tune of $80 million over the five years.

Senator GEORGE CAMPBELL—More companies will qualify for it?

Senator Minchin—A 20 per cent increase in the number of companies we expect.

Senator GEORGE CAMPBELL—And that avoids the picking losers syndrome wetalked about in February?

Senator Minchin—There was industry comment that companies that were reducing theirown expenditure but their turnover was falling faster would qualify and vice versa. As I say,in my advocacy of a scheme of this kind, we were looking for international models. The US isquite rightly widely regarded as successful in its stimulation of technology and R&D. It usesthis approach. However, it is quite complex and it has that perception—it has those illeffects—so we have adopted a system that was basically what was used in Europe for thosecountries that have such a methodology, a system of incentives for extra R&D.

Senator GEORGE CAMPBELL—Ms Berman, can you go through the streamliningfigures with me again?

Ms Berman—Yes, I have made a mistake, Senator. I should have said $345 million, not$335 million, for the original announcement in January for streamlining. So it is an additionof $70 million not $80 million—to $415 million.

Senator GEORGE CAMPBELL—We seem to be at odds on the figures for some reasonor other. You are saying it was $335 million in January?

Ms Berman—No, it was $345 million in January. It has been changed by Treasury to $415million, which is an addition of $70 million. I previously said $80 million.

Senator GEORGE CAMPBELL—Why the additional $70 million?

Ms Berman—Treasury do make adjustments to their estimates and they advised us of that.

Senator Minchin—Senator Campbell, as this department operates on what estimatesTreasury makes of the effective policy changes, when the government made thisannouncement back in January the Treasury estimate of the savings that would produce in theforward years—and remember we are talking about a reduction in revenue forgone—was$345 million. In the meantime, they have revised their estimates of the impact of this andsimply informed us that they now estimate that over the five-year period going out, becausethis is only an estimate, they are assuming that it will reduce revenue forgone by theadditional $70 million.


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The major driver of this is the government’s decision to bring the R&D tax concession intoline with the Ralph reforms in relation to, as you would recall, the removal of accelerateddepreciation and the reduction in the company tax rate. In a sense, there was an anomaly leftout; that is, that accelerated depreciation remain in place for the R&D under the taxconcession—R&D plant. The strong advice of the R&D board was that this had a real risk ofperverting the R&D tax concession by the artificial driving of plant expenditure by creativeaccounting into the tax concession in order to retain the benefits of accelerated depreciation.We will worry about that as well as wanting to ensure consistency in relation to the questionof depreciation. Obviously that does involve some revenue savings by that move, but wehave, in a sense, more than returned those savings to the R&D system by the introduction ofwhat is now an even more generous 175 per cent concession.

Senator GEORGE CAMPBELL—Can you just give us the figures, Ms Berman, for thestreamlining for this year and the subsequent years?

Ms Berman—Per year?


Ms Berman—Using the adjusted figure?


Ms Berman—It is $25 million in the first year, that is 2001-02; $95 million in 2002-03;$115 million in 2003-04; $95 million in 2004-05; and $85 million in 2005-06.

Senator GEORGE CAMPBELL—Now I understand my figures. You have an extra yearon them.

Ms Berman—Yes, the budget goes for four years whereas we have the five years.

Senator GEORGE CAMPBELL—Yes, the January figure only carries through.

Ms Berman—That is right, yes.

Senator GEORGE CAMPBELL—The outlay under the figures in January was $5million. What is the net outlay now?

Ms Berman—In the first year, 2001-02, it is $5 million in January. It is now $25 million inthe first year. It was $45 million in the second year; it is now $95 million. It was $85 millionin the third year; it is now $115 million. It was $115 million in the fourth year; it is now $95million. It has dropped. And in the last year, it was $95 million, and it is back to $85 million.

Senator GEORGE CAMPBELL—So that effectively puts $85 million back into R&D?

Ms Berman—$85 million? It is adding an additional $70 million for the effective life.There is a $70 million additional saving but an $80 million additional cost because of thechange to the premium which over the five years is an additional $10 million.

Senator GEORGE CAMPBELL—$10 million?

Ms Berman—Yes, it is an additional $10 million, which gives a total of $125 million ifyou look at the two figures together over the five years.

Senator GEORGE CAMPBELL—So in effect the real cost to the government is $10million not $80 million.

Ms Berman—There is a difference of $10 million between those two figures, yes. Inrelation to the effective life, it is important to note that the return to the person who claims is,


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over time, the same as they would have got previously. It is simply not accelerated up front.So this spans over a number of years instead of having a return in three years, which waspreviously the case. They are not actually losing support; it is simply over a longer period oftime—in fact, in relation to when they are actually using the plant or constructing the plant.

Senator GEORGE CAMPBELL—Except the way in which this $80 million waspresented last week was that it was an $80 million boost, when in fact the effective boost is$10 million.

Senator Minchin—There are two different schemes. There is a 125 per cent generalconcession. There is a separate scheme now introduced by us which is a 175 per cent taxconcession for those companies which increase their R&D activity. It is a separate scheme andthat is receiving an additional $80 million.

Senator GEORGE CAMPBELL—But it does not. It is only an effect of $10 million.

Senator Minchin—No. The assessment of the cost to revenue of the 125 per cent schemeas adjusted involves a reduction in revenue forgone of $70 million in the first five years.

Senator GEORGE CAMPBELL—I am getting two stories here, Minister. Which one isright?

Senator Minchin—You can net them out. I cannot stop you saying, ‘There is effectivelygoing to be $70 million less in one scheme and $80 million more in the other and thedifference between 80 and 70 is 10.’ I am trying to stress to you that we have introduced acompletely new scheme that is worth $540 million over the five-year period, involving a 175per cent concession for additional expenditure on R&D.

Senator GEORGE CAMPBELL—I understand that.

Senator Minchin—We had operated from our department on a presumption of revenueforgone estimates in relation to the changes to the 125 per cent concession that were revised.We were simply advised of that revision in the budget preparation. As has been said, ofcourse, that is not an effective reduction because depreciation is just a question of over whatperiod you can depreciate your asset.

Senator GEORGE CAMPBELL—So are you saying that the $80 million that youannounced last week did not relate to the 175 per cent tax concession?

Senator Minchin—That is what it does relate to. It does not relate to the 125.

Senator GEORGE CAMPBELL—But that is exactly what I am saying. One of youradvisers said in effect that it was only an additional $10 million. He said that in the Australianon 24 May. That has just been confirmed by Ms Berman. So I am trying to understand.

Senator Minchin—I have said to you: obviously the difference between 80 and 70 is 10,but you are talking about an apple and a pear. The apple is the 125 per cent concession that isa general concession. Treasury have revised their estimates of the revenue forgone in relationto that scheme. Separately, we have amended the 175 per cent scheme in a way that involvesan additional expenditure on that scheme, or revenue forgone, of $80 million.

Senator GEORGE CAMPBELL—But I understood what Ms Berman said—

Senator Minchin—The two were not related. That is what I am saying. In a policy sense,the revision in the estimate is simply something Treasury did. I do not know: they pushedanother button on their model or something.


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Senator GEORGE CAMPBELL—About five buttons in this model. That is the problem.We are trying to understand which button has been pushed when, or what combination ofbuttons has been pushed.

Senator Minchin—In January the government announced changes to the 125 per cent taxconcession primarily involving the removal of accelerated depreciation, which resulted in areduction in revenue forgone and a figure that was released then. The Treasury subsequentlyrevised their estimate of the effect of that change on the 125 per cent concession. We alsoannounced at that time a new, separate 175 per cent concession for additional R&D and put acosting on that. In the meantime, we have consulted widely with industry about the detailedimplementation of the 175 per cent scheme. We changed that scheme in a way that will meanan increase in revenue forgone of $80 million. We have not changed our position on the 125concession at all since January. All that has happened is that Treasury have gone back anddone another assessment of what they believe will be the revenue forgone from the changeswe announced in January.

Senator GEORGE CAMPBELL—Let us get back to basics. The streamlining essentiallyis about cutting firms out of the R&D concession process, based on the definition.

Senator Minchin—There are two issues. The major change in terms of revenue was theremoval of accelerated depreciation. So that does not remove claimants. It simply means thatwhen they have an eligible R&D plant they depreciate it over the life of the asset, notaccelerate it.

Senator GEORGE CAMPBELL—But you also changed the definition of—

Senator Minchin—On the specific advice of the R&D board, we changed the definition tobring it into line with what I understand is the European standard, which means using an‘and’, not an ‘or’, in relation to innovation and technical risk. We did not put, as I recall, anyestimate of cost because the assumption was that it would not involve an increase or decreasein the revenue forgone.

Senator GEORGE CAMPBELL—That it would be revenue neutral?

Senator Minchin—The R&D board’s advice to us was very much on the basis that wewere dealing with a few marginal claims at the limits of the scheme and that this would onlyaffect claimants in a few isolated incidences. In their view it was critical to the integrity of thescheme and to ensure that taxpayers’ money was being used to support genuine R&D that wemake this definitional change to bring it into line with the accepted European standard. Thatwas not initiated by me or the department; it was brought to me by what are basically ourexperts, the R&D board, who are the ones who consider these things on a daily basis. Theyput a persuasive case but, as I say, the change in the estimates of the revenue forgone wasdriven by the decision on accelerated depreciation, not this change.

Senator GEORGE CAMPBELL—The truth of the matter is—I think the department saidit at the last estimates—that in fact there was no modelling done in this area to make a valuejudgment as to whether or not it would be revenue neutral or there would be revenue forgoneor there would be additional claims. I specifically asked this question back in February. Thetable was blank.

Mr Clarke—I believe the way I explained it then—and it is best if I give an example—isthat the definition change which, as the minister has said, is different from the plant treatmentchange. Let us say company X registers for R&D. The board forms the view that the activitiesthat are being claimed are not eligible R&D and would deny the claim. Some such companies


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would then proceed to appeal, take us to the AAT, to the Federal Court and so on. We maywin or lose. What the definition change was about was our ability to sustain the policy intentof the program in the appeal courts. So we would have denied that company’s claims.Whether we successfully maintain that denial through the appeal process is moot. But it wason that basis that we were able to say that the only possible way you could count that in therevenue is as zero. It is a claim that we would not have agreed as not consistent with thepolicy intent of the program. And these are a very small number at the margin.

Senator GEORGE CAMPBELL—Have you tried to put a figure on it?

Mr Clarke—Again, we are repeating the debate from February. My response is that it goesto the policy intent of the way in which the program is administered. The intent behind thedefinition change is not to cut eligible R&D, it is to stop ineligible R&D getting through theappeal process.

Senator GEORGE CAMPBELL—So, as I understand it, setting aside the definitions ofthe two different programs, at the end of the day, when you roll together the $125 million andthe $175 million concessions, the net increase is $10 million?

Senator Minchin—If you take both elements, that is the net effect of the changes at thetime of this budget. The change in relation to the overall program is the $10 million plus.

Ms Berman—It is $115 million plus $10 million—that is, $125 million.

Senator Minchin—It is $125 million over the five years as a result of Backing Australia’sAbility and the R&D tax concession. Does that take account of the rebate?

Ms Berman—No, the rebate is an extra $13 million on top of that.

Senator Minchin—Plus $13 million annually, which is our estimate for the revenueforgone in relation to the new R&D tax rebate for small businesses. So you are up to $138million extra as a result of Backing Australia’s Ability.

Senator GEORGE CAMPBELL—In the tax concession area?

Senator Minchin—In the tax concession area.

Senator GEORGE CAMPBELL—I think the calculation we came to is $115 million.

Senator Minchin—Yes, it was $115 million in January. But you have got to add to that the$10 million debt that we just talked about plus the $13 million from the rebate.

Senator GEORGE CAMPBELL—Why do the budget papers refer to streamliningmeasures as revenue raising measures?

Senator Minchin—They are a reduction in revenue forgone. That is how you define them.That means the government retains more of its revenue than it would have otherwise done so.

Senator GEORGE CAMPBELL—So they are defined as revenue raising?

Mr Mackey—Yes, increases in revenue forgone is an outlay and decreases is extra.

Senator Minchin—Revenue raising. The revenue is higher than it otherwise would be inthe absence of the change.

Senator GEORGE CAMPBELL—That is a novel way of putting it. Ms Berman, what isthe total spend on R&D Start from the core program?

Ms Berman—I will pass that to Dr Edwards.

Dr Edwards—Is that for this year?


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Dr Edwards—Our estimates for this year are that we are going to spend all of the moneythat is available to us, which is $170 million or thereabouts. That is a combination of expensesand equity.

Senator GEORGE CAMPBELL—Expenses and equity?

Mr Clarke—It is all elements of Start. That is core, premium, plus, loans and graduate.The total is $170 million now. Could we break that down into the subcomponents of Starttonight, Russell?

Senator GEORGE CAMPBELL—It is $176 million, is it?

Dr Edwards—I can give you a sense of it. It is predominantly core Start, but I do not havethe figures here with me this evening that could disaggregate it for you.

Senator GEORGE CAMPBELL—I will ask you to give us a break-up. But can you giveme the overall figures for the financial years 2001-02, 2002-03? And then I will ask you tobreak them into their components.

Mr Dainer—For 2001-02, the expense component is $144 million and the capitalcomponent or loans component is $19 million. For 2002-03 it is $155.7 million for theexpense component and $21.5 million for the loan component. For 2003-04 it is $170.7million for expense and $23 million for loan. For 2004-05 it is $182.9 million for expense and$23 million for loan.

Senator GEORGE CAMPBELL—That is the capital program?

Mr Dainer—Yes.

Senator GEORGE CAMPBELL—So are the administration costs contained in thosefigures?

Mr Dainer—No.

Senator GEORGE CAMPBELL—What are the administration costs?

Mr Dainer—In 2001-02 there is $3.4 million; in 2003-04, $9.5 million; in 2004-05, $14million. That is additional funding which was announced in Backing Australia’s Ability. Ifyou look at the existing departmental funding, it will be approximately $12 million next year,dropping to about $4 million the following year.

Senator GEORGE CAMPBELL—So, all told, is that $15.4 million next year?

Mr Dainer—No. In 2001-02 it will be around $12 million to $13 million. The followingyear it will be around $8 million. It goes to about $9.5 million and then $14 million the yearafter that.

Senator GEORGE CAMPBELL—There is a deed of agreement that goes along withthese grants. Can we have a copy of the form of the deed of agreement?

Mr Clarke—By all means, Senator. We have recently reviewed that and simplified it so Iwould be pleased to provide you with a copy of the current revised contract, as we refer to it.That is technically a deed of agreement, yes.

Senator GEORGE CAMPBELL—In what way has it been simplified?

Mr Clarke—Reporting obligations have been simplified in it. We are also looking in arelated manner to streamline the way in which we make payments to the companies. The


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document itself went through a legal review just to simplify the language, the structure and soon.

Senator GEORGE CAMPBELL—Is it a considerable improvement on what existedbefore?

Mr Clarke—I believe so, Senator.

Senator GEORGE CAMPBELL—What is the total number of firms that are currentlyaccessing the 125 per cent tax concession?

Dr Edwards—For the last financial year that we have complete data, it was around 3,200or 3,300 firms.

Senator GEORGE CAMPBELL—What was that worth?

Dr Edwards—I have been advised that it is 3,154 to be exact, Senator.

Mr Clarke—With a total reported expenditure of just a touch over $5 billion.

Senator GEORGE CAMPBELL—As a result of the changes, will the number of firmsaccessing the tax concession increase or decrease?

Mr Clarke—We would expect it to increase.

Senator GEORGE CAMPBELL—To increase?

Mr Clarke—We believe that the cash rebate for the smaller companies and the premiumwill enhance our ability to promote the concession program to Australian industry. So wewould expect an increase in the number of firms registering for and obtaining benefits fromthe tax concession.

Senator GEORGE CAMPBELL—I thought at the February estimates you said thereverse.

Mr Clarke—I do not think so. As the marketer and deliverer of the program, I am lookingforward to getting out there and promoting it. The features of the top and bottom of theprogram, including the one just announced after the budget, are very saleable from my pointof view in terms of the value proposition I can put to Australian companies doing R&D.

Senator GEORGE CAMPBELL—At the last estimates I asked you to provide forwardestimates showing the impact that you thought the January statement would have on R&D bybusiness. In your answer you gave us figures up to 1998-99. Are those the latest figures youhave available?

Dr Edwards—Yes. The figures for the following year will not be completed until the endof December this year. Companies have got 10 months after the end of the financial year toregister.

Senator GEORGE CAMPBELL—So they will not be available until the end of the year?

Dr Edwards—That is right.

Senator GEORGE CAMPBELL—And they will be figures up until 30 June?

Dr Edwards—Last year.

Mr Clarke—They are figures for the 1999-2000 year.

Senator GEORGE CAMPBELL—Mr Clarke, I want to go back to the previous answeryou gave me. When you said that you expect the number of companies to increase, is that


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across all of the three packages, because we were talking about the 125 per cent taxconcession?

Mr Clarke—I do not have a view as to what the mix will be within the elements of theconcession. My general view is that we would be able to increase the number of companiesregistering to access the concession with the enhanced package we now have.

Senator GEORGE CAMPBELL—Across all elements?

Mr Clarke—Yes. I think more so at the bottom end, the cash rebate, in terms ofcompanies. Remember that for the premium they need a three-year history of registration. Sobringing companies in at the start will take a little bit longer. I think that is more aboutrewarding the companies that are increasing their R&D that are already users of theconcession. The rebate is really a very attractive option for small companies that are startingto do R&D but that are still making a tax loss.

Ms Berman—In addition to that, we are getting a lot of inquiries about firms wanting tonow register because they see in the fourth year the opportunity to access the premium. So Iwould expect that the 125 generally would have more registrations per year.

Mr Clarke—Yes, people building their history for later access to the 175.

Senator GEORGE CAMPBELL—Is that provided for in the budget figures?

Ms Berman—That was taken into account, yes.

Senator GEORGE CAMPBELL—That is the jump to 182? There was a jump to $110million in the fourth year.

Ms Berman—It certainly builds up over time and continues to build beyond the five years.

Senator GEORGE CAMPBELL—It goes from $30 million in the first year to $90million to $105 million to $110 million. I have a total of $335 million, but there is anotheryear on top of that.

Ms Berman—Indeed, in developing this we looked into years beyond the five and asubstantial increase continues. It continues to rise.

Senator GEORGE CAMPBELL—So you essentially see a situation, Mr Clarke, ofinitially a rise in companies climbing to the 125 and shifting into the premium. What aboutsmall companies? Do you see a transition from them also?

Mr Clarke—Yes. I would see that with the tax rebate the benefit of registering for theconcession is much more immediate than in the current one, obviously for those companies ina tax loss. Hence, it is a better proposition for them to enter the tax concession scheme.

Senator GEORGE CAMPBELL—Have you still not done any modelling in terms of theoverall impact of the innovation statement on R&D?

Ms Berman—I think at the last estimates we advised you that the changes to the taxconcession would support some $4.3 billion of business expenditure. We gave you abreakdown of that over the years out. In terms of that, we have provided you with thatinformation.

Senator GEORGE CAMPBELL—But I asked if you had done any actual modelling. Ithink you said then that, no, you had not.

Ms Berman—There are a number of ways of doing modelling. One issue relates to theinducement effect—in other words, will this cause a large or a small behavioural impact on


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the way in which business decides to fund R&D? Depending on the inducement number thatyou chose, you can get quite a substantial change or you get a more moderate one. We havecertainly done that modelling. As you would appreciate, that is not difficult to do. But it isvery difficult for us to predict exactly what business will do in terms of changing theirbehaviour and doing additional R&D.

Senator GEORGE CAMPBELL—I think at the previous estimates you referred to areport that the department had commissioned or was doing examining the extent of R&Dinvestment by local subsidiaries of 50 foreign owned multinational enterprises.

Ms Berman—Yes.

Senator GEORGE CAMPBELL—Has that report been completed?

Ms Berman—It is not completed, but we expect it to be completed by the end of June.

Senator GEORGE CAMPBELL—Will it be made public?

Ms Berman—It will be made public, yes.

Senator GEORGE CAMPBELL—How can we access that? Can we access it through theweb site?

Ms Berman—We will make sure it is available through the web site, yes.

Senator GEORGE CAMPBELL—Can you give us any indication of what the basicfindings are, or it is too early?

Ms Berman—I am sorry, I have not looked at it recently, but we have been very pleasedwith the response from the companies from which we have sought information. You canappreciate that it is an imposition on them and sometimes it is difficult to get the turnaroundin the time that you want, but they have been very supportive and helpful. We are lookingforward to a useful policy document. Indeed, it was some of those people who contributedtowards the change in the premium. They expressed concern about the complexity of theproposed R&D intensity.

Senator GEORGE CAMPBELL—Are all of these R&D issues involved in the cost ofadministration figures, or is the administration a separate identity? Or did you give me thoseadministration figures before?

Mr Dainer—No, not for the R&D tax concession. They are actually $1 million next year.

Senator GEORGE CAMPBELL—In 2001-02?

Mr Dainer—That is right: $3 million the following year, $3.4 million the following year,$3.6 million the year after. But that is for both schemes.

Senator GEORGE CAMPBELL—Does that include the small business rebate scheme aswell?

Mr Dainer—Yes.

Mr Clarke—The reason for the increase is that, with the tax concession now having threedistinct elements, the administrative costs have gone up.

Senator GEORGE CAMPBELL—And that comes out of your administration?

Mr Dainer—Correct.

Senator GEORGE CAMPBELL—I think at the last estimates, Ms Berman, you said thatyou expected 1,300 companies to qualify for the tax rebate.


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Ms Berman—Correct.

Senator GEORGE CAMPBELL—The rebate for small companies.

Ms Berman—Yes.

Senator GEORGE CAMPBELL—Is that still your calculation?

Ms Berman—Yes, it is 1,300.

Senator GEORGE CAMPBELL—And how did you reach that figure?

Ms Berman—By looking at the previous data that we have on the tax concession and atthose which have a turnover of less than $5 million and have sought support of less than $1million for R&D.

Senator GEORGE CAMPBELL—That assumes that there are no other companies outthere that—

Ms Berman—That is correct. It is based on the information that we had in front of us, so itcould be a greater number coming on board.

Senator GEORGE CAMPBELL—What if there is a substantial jump in the number ofcompanies? Does this impact on the program?

Ms Berman—It would and I think that it would be a very good outcome.

Senator GEORGE CAMPBELL—So the funding is not capped?

Ms Berman—The funding at the moment is based on revenue forgone. On the estimatesthat you have in front of you—or you should have—you will notice the quantum of this is notparticularly large. It is assisting people in that first early build-up stage.

Senator GEORGE CAMPBELL—It is $1.3 million over five years.

Ms Berman—It is $13 million over five years.

Senator Minchin—But it is not capped. At present it is a rebate. It is just an estimate ofrevenue forgone.

Senator GEORGE CAMPBELL—Which is revenue raised.

Mr Mackey—You have got more to spend.

Senator GEORGE CAMPBELL—Less to spend, so it has cost you more.

Senator Minchin—That is right.

Senator GEORGE CAMPBELL—I raised before the business on R&D. Do you haveany estimates for the next four-year period on expected business investment in R&D? I knowthe real, actual figures will not be available until the end of next year, but do you haveprojected figures or not?

Ms Berman—Not really. We have estimated in relation to these particular new incentives.If the numbers accessing the 125 increase, there should be an increase in funding associatedwith that. But we do not have particular estimates that we believe will be targets met. Ouranticipation is that they will rise.

CHAIRMAN—That completes outcome 2 for the department. Thank you, Mr Mackey. Wewill now be able to switch to ANSTO.


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[9.12 p.m.]

Australian Nuclear Science and Technology OrganisationCHAIRMAN—We welcome Professor Garnett and the Australian Nuclear Science and

Technology Organisation today.

Senator GEORGE CAMPBELL—I have a couple of questions, Professor Garnett. In therecent Senate inquiry here into the contract for the new reactor you referred to an additionalagreement being reached between ANSTO and Cogema on the subject of reprocessinguranium silicide fuel. You said, ‘We have agreement with Cogema that they will take certainamounts of silicide fuel.’ You then went on to say:As I have repeatedly said, we have a contract with COGEMA—and had supplementary agreementswith COGEMA—in relation to the handling of certain amounts of silicide fuel.

And further:We note in our submission that processing of spent fuel from the replacement reactor is guaranteed.

Is that supplementary agreement appendix 2 of the ANSTO-Cogema contract, or is it anarrangement additional to the text of the contract and its appendices?

Prof. Garnett—Yes, I did provide various assurances to the Senate select committee aboutthe reprocessing of various quantities of silicide fuel and indicated that there had beenarrangements made with Cogema. I think at each time I made those references I talked aboutthose references being pursuant to the contract. The contract between ANSTO and Cogemawas signed in 1999 and it stated at that time that certain types of fuel were excluded but alsoforeshadowed that, once the fuel for the replacement reactor was actually known, the partieswould revisit the provisions contained in the contract.

The provisions of appendix 2.2, which you mentioned, are indeed the parts of that contractthat state very clearly that, once we have proceeded with the project, we could undertakefurther discussions with Cogema. So ANSTO, in fact, maintains constant interaction withCogema throughout all the processes associated with the replacement reactor project. Oncewe had signed the contract, pursuant to the contract and in particular in accordance with theprovisions of 2.2, there was a subsequent exchange of letters in August-September last yearwhich clarified the conditions associated with the reprocessing of certain amounts of silicidefuel.

Senator GEORGE CAMPBELL—What form did the exchange of letters take?

Prof. Garnett—That was an exchange of letters between ANSTO and Cogema pursuant tothe contract.

Senator GEORGE CAMPBELL—Signed by you?

Prof. Garnett—It was signed by our relevant manager of business collaboration and therelevant parties in Cogema.

Senator GEORGE CAMPBELL—Is that a legally enforceable arrangement in thecontractual sense, or not?

Prof. Garnett—Our understanding with Cogema is that those letters are pursuant to thecontract. They call up that contract and, therefore, they are associated with and areenforceable, yes.


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Senator GEORGE CAMPBELL—Are they saying they form part of the contract?

Prof. Garnett—They are pursuant to the contract. It is like when you have a contract andthe contract allows you to proceed subsequently. If you then proceed pursuant to that contract,then they follow on a part of the agreed arrangement.

Senator GEORGE CAMPBELL—On what date was this arrangement finalised?

Prof. Garnett—The final exchange was in August-September last year.

Senator FORSHAW—There is nothing binding in that arrangement, though, is there?Isn’t it just an arrangement to enter into further arrangements, if that is possible?

Prof. Garnett—No. I will restate that the original contract with Cogema foreshadowedthat, once the fuel types for the reactor were known—and ANSTO maintained dialogue withCogema throughout the relevant processes to be sure that we were sure of the evolutionimpossibilities with regard to Cogema’s ability to handle various fuel types—and indeed oncethe reactor contract was signed, then pursuant to that contract and in accordance with theprovisions of appendix 2.2 and calling up those provisions, the appropriate exchange of lettershas taken place.

Senator FORSHAW—Are we able to be provided with that exchange of letters? Can theybe supplied to the committee?

Prof. Garnett—First of all, I would state that ANSTO, as you know, over a long time hasidentified that we were not in a position to provide elements of the contract, and that is simplybecause of the original contractual obligation. We continually maintained contact withCogema and have observed the provisions of the contract. I am aware that various claimsabout the contract were, in fact, made recently both in a supplementary report to the Senatecommittee report and also in the Senate. I guess we were somewhat surprised anddisappointed that we did not have the opportunity to respond. So I have actually welcomedthe questions tonight to put it clearly on the record that what we initially said was the case.Indeed, in maintaining contact with our French parties only finally last week, Cogema hasagreed that ANSTO can provide the same version of the contract to the Senate as they haverecently provided to the French court, including the exchange of correspondence. I have acopy of that here and will leave it for the Senate committee.

Senator FORSHAW—That is very nice to know. So if the French court makes anotherdecision releasing some further information that they may have access to that we do not, canwe expect to get that, too?

Prof. Garnett—I do not believe that there is any further information that the French courthas, actually. The version of the contract that you have been provided with is the version thatwas handed to the French court.

Senator FORSHAW—What if, for instance, further arrangements are entered intobetween ANSTO and Cogema and they are subsequently—I am not sure what the term is inFrance—subpoenaed or made available to the court?

Prof. Garnett—That is not for me to second guess. I think we have maintained constantcontact with Cogema. The original contract did, in fact, allow the French or the Australians tohand it to a court. Indeed, as it has happened, we have requested from the French—and aftersome time they have agreed—that we can release the contract. We have no other contractualarrangements with Cogema.


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Senator FORSHAW—What was the basis for the agreement initially between ANSTOand Cogema that it should not be made public and, based upon that, as I understand it, notprovided to the parliament or to this Senate committee?

Prof. Garnett—First of all, I would say that the contract complies with requirements forcommercial-in-confidence contracts. As for the information that can be provided to the partiesthat it can be provided to, it does reveal quite a bit about Cogema’s business. Understandably,they did not think it was appropriate for that to be released. Unfortunately, some of theinformation that they provided in confidence has, in fact, been released, and they have nowagreed to us providing this information. I cannot really say anything more.

Senator GEORGE CAMPBELL—That was a request from Cogema that the material bekept confidential?

Prof. Garnett—Yes.

Senator GEORGE CAMPBELL—Was that in writing?

Prof. Garnett—Yes. It is in the contract.

Senator GEORGE CAMPBELL—It is in the contract which we may get a copy of?

Senator FORSHAW—But it was not necessarily something that ANSTO had to agree to,was it? Cogema asked that it be kept confidential. Did that mean that we were automaticallyrequired to keep it confidential?

Prof. Garnett—I think when you are actually doing business—and we, in fact, have somematerial—there is a service that they are delivering, and normally those are the requirements.In fact, it was very much the requirement at the time.

Senator FORSHAW—So ANSTO agreed that it be kept confidential? It was not justbecause Cogema wanted it to be kept confidential; ANSTO wanted it to be kept confidentialas well?

Prof. Garnett—No, that is a misinterpretation of the facts.

Senator FORSHAW—That is why I asked the question. You said in response to SenatorCampbell’s question that Cogema asked for it to be kept confidential. I want to know whatANSTO’s response to that was.

Prof. Garnett—We respect the fact that it contains technical information that they believedshould not be released because it could potentially be detrimental to their business.

Senator Minchin—But the point is it was not a term of the contract that ANSTO sought; itwas a term of the contract that Cogema insisted upon, not one that ANSTO was seeking.

Senator FORSHAW—How could it be detrimental? There are not that many companiesaround the world that are in the business. They are not beating a path to our door to reprocessour spent fuel.

Senator Minchin—You are asking Professor Garnett to speak on behalf of Cogema. Wecan try to call Cogema, if you like. It is not really her role to speak on their behalf. She cangive you her impressions as to why Cogema would insist on such a clause.

Senator FORSHAW—But Professor Garnett just said there was technical information inthere that might be injurious to Cogema. I am intrigued by this notion that a lot of thismaterial that has not been provided to the Senate is classed as commercial-in-confidence,when what we are dealing with here is not the sort of thing that is negotiated daily in the


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business world. This is a very small group of companies which seem to know each other’sbusiness inside out. It certainly raises questions in my mind as to claims of commercial-in-confidence and as to how valid they are. I will come back to that later.

I will take you to the PBS for the coming year, 2001-02. On pages 171 and 172 it outlinesvarious functions that ANSTO carries out. Then on page 173 there is a table referring tooutcome 1, ‘nuclear-based infrastructure’; outcome 2, ‘disposition of spent fuel’; and outcome3, ‘science and technology solutions’. Are you able to advise me as to how many employeesANSTO has in total and then how many would be covered under each of those outcomes?

Prof. Garnett—ANSTO has approximately 780 to 790 employees. As for as the numberagainst each outcome, it varies from year to year; and it varies depending on the needs. Forinstance, if there is a shipment of spent fuel in a particular year, there will be a number ofemployees assigned to undertake tasks associated with that. If there is not a shipment, therewill be very few employees assigned to be associated with it. So people are not in fixedpositions against a particular outcome.

Senator FORSHAW—Has that number remained, or is the total number 780 to 790?

Prof. Garnett—It has varied. It goes up and down between about 780 and 800, dependingon the number of post-doctoral fellows who are employed at any one time. But it hasoscillated between those figures for the last number of years.

Mr Mackey—Also, Senator, you may see there that from pages 179 to 186 outcomeresourcing is shown with an average staffing level at the bottom. So on page 186, forexample, there is the total resources for outcome 3 with an average staffing level at thebottom.

Senator FORSHAW—I was going to come to that. That is why I asked my first question.There are figures for 2000-01, and then the estimate for 2001-02. So was that really theanswer to my first question—those three lots of figures?

Prof. Garnett—The figures there on page 186 relate to an average staffing number foroutcome 3. You asked me the total, and I said it ranges between somewhere around 780 and800, and the others are assigned to other outcomes, and it goes up and down depending on thetasks and the year.

Senator FORSHAW—I would like to be more specific. The PBS, for instance, has onpage 179 the figure of 13 as the average staffing level for outcome 1. Is that essentially thenumber of people who are currently engaged on the new reactor?

Prof. Garnett—That is the number of ANSTO staff that are currently assigned to thereplacement reactor project.

Senator FORSHAW—We are talking ANSTO staff. So we actually do have a figure. Thenon page 182 there is a figure of five.

Prof. Garnett—Correct, and that says ‘average’.

Senator FORSHAW—That is the disposition of spent fuel. Are the 13 staff all employedat Lucas Heights?

Prof. Garnett—Yes, but they go backwards and forwards to Bariloche.

Senator FORSHAW—Where are the five staff referred to on page 182 employed?

Prof. Garnett—They are at Lucas Heights.


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Senator FORSHAW—What is their task, exactly?

Prof. Garnett—Moving fuel, checking the fuel and getting the fuel in containers—all thechecks that have to be done before a shipment to comply with the licence and all thepaperwork that needs to be done.

Senator FORSHAW—So they are on that all of the time? How many shipments havethere been now?

Prof. Garnett—Three recently. Four altogether.

Senator FORSHAW—But these people are permanently assigned?

Prof. Garnett—No, they are not. This is what I am trying to say. It says ‘average’ and theyare not—

Senator FORSHAW—Professor, ‘average’ does not mean ‘not permanent’. Averagemeans that you could have six people assigned or four people assigned, but I don’t knowwhether—

Prof. Garnett—We might actually have 25 people assigned, but they are only assigned forpart of the year, depending on the needs of the task.

Senator FORSHAW—So these figures here really do not tell us the number of people thatare specifically assigned on a full-time basis.

Prof. Garnett—That is correct.

Senator FORSHAW—Then let us go to page 186. Is that the same for the 775 people inrelation to science and technology solutions?

Prof. Garnett—That 775 is the normal business of ANSTO, other than spent fuel and thereactor project. Again, some of those people may well be for part of their time also workingon the replacement reactor project—in fact, almost certainly they are—but it averages outwith the peak number of person hours working in that particular output.

Senator FORSHAW—On that page various amounts are appropriated against each ofthose outputs: 3.1 down to 3.6. With that figure of 775, which is an average—and I appreciatethat they are not necessarily there for whatever number of hours a week times 52 or 48 for theyear or whatever—are you able to tell me how many on average are allocated to each of thoseareas of appropriation?

Prof. Garnett—No, I am not, because all of our staff are multi-tasked. They will assigntheir time depending on a variety of parameters. So a staff member who is working could wellbe working on output 3.1 for 50 per cent of their time, output 3.2 for 10 per cent of their timeand output 3.5 for the remainder of their time. The people are not assigned in that fixed way.

Senator FORSHAW—Doesn’t the appropriation include amounts that would be forsalaries and wages?

Prof. Garnett—Yes, it does.

Senator FORSHAW—So there must be some calculation that is attributable to theproportion of the overall appropriation for, say, 3.1, which is an amount of $53,580,000.

Prof. Garnett—There is a total staffing cost.

Senator FORSHAW—There must be some figure in there which represents wages andsalaries and then that must lead you back to some average number of staff who are employed.


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Prof. Garnett—Correct. It does but, again, they are average numbers.

Senator FORSHAW—That is what I would like to know. That is what I am asking for.

Prof. Garnett—I do not have those numbers.

Senator FORSHAW—What you are a saying is that you can take that figure of 775 andbreak that up on average for an average number of staffing levels for each of those sixoutputs. You must be able to. It is a matter of logic. You cannot have an appropriation thatdoes not include a figure that represents the staffing costs for that area.

Prof. Garnett—Correct.

Senator FORSHAW—If we accept that, then there must be some base figure upon whichthat was calculated.

Prof. Garnett—It is based on the number of hours of people of different kinds andcategories. It is not based just on fixed numbers of staff, and I think that is the position that Iam trying to identify. But clearly there is a salary cost predicted this year and there is a salarythat at the end of this financial year will be associated with each of those outputs, yes.

Senator FORSHAW—Would you take it on notice? I think you understand what I amasking. I would like to know the average number of staff attributable to each of those outputs.I notice there is a slight reduction in the average staffing levels for the coming year comparedwith this current year. According to those figures that are provided in the PBS, it adds up to793: new reactor, 13; spent fuel, five; and science and technology, 775. In the annual reportfor 1999-2000, the total staff was identified as 809. Has there been a reduction in the staff?

Prof. Garnett—There is a difference between total bodies employed and the average staff,and some of the people are part-time. One is average staff over the year versus actual numberson a particular date.

Senator FORSHAW—How many part-time staff are there?

Prof. Garnett—Again, I do not have those figures at my fingertips. There are some part-time staff, but I think it is also important that the figures in the annual report are a snapshot ata particular time, that is, the end of the year, whereas what we have given you is the averagestaff over the year, and it does oscillate.

Senator FORSHAW—The snapshot as at 30 June 2000 was 809, which was made up of32 part-time staff. So that is 777 full-time. I can tell you whether it was male or female, butyou can check the report as well as I can. I am just trying to get clear that there was a figure of809 total staff as at 30 June. Are you able to tell me what the figure will be at 30 June?

Prof. Garnett—No, I cannot, because it depends on who is employed and who resigns upuntil that date.

Senator FORSHAW—You do a head count on 30 June, do you?

Prof. Garnett—It will be in the annual report. It is a difference between the number ofactual bodies, whereas the figure that is in the PBS figures is the average staffing level, and itis in essence an average on a full-time equivalent basis.

Senator FORSHAW—I will follow that up on another occasion. I was intrigued by theminister’s press release where you said—and we can debate this another time, I know—‘TheLabor Party wants to see 800 scientists and other workers at ANSTO made redundant.’ Wouldyou care to tell me what the basis of your statement was?


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Senator Minchin—I will try to resist the temptation to indulge in the political polemic, butI really do find the ALP’s position on the reactor appalling in the extreme and very sad fromthe point of view of Australian science and utterly hypocritical in relation to your professedsupport for a knowledge nation. Several of your frontbenchers have actively said you will notsupport a new reactor. If you do not have a new reactor and you have an obsolete reactor, youdo not have ANSTO. ANSTO is non-existent without a reactor.

This reactor will be obsolete by 2004-05, or whatever it is. If you do not build a new one,which several of your frontbenchers have said you will not—and your leader is remarkablysilent on the subject, as is often the case with many subjects of this kind—therefore it is quitelegitimate for us to assert that in the face of these statements by some of your seniorfrontbenchers this is a direct threat to the livelihoods of the 800 people employed currently atANSTO. You can clarify that immediately by assuring the Australian community that if youare elected to government you will honour the contract and build a new reactor.

Senator FORSHAW—What I can clarify is that at no stage has the Labor Party ever said,nor would it ever say, that it will make 800 jobs redundant.

Senator Minchin—Of course you would not say that directly, but that is the effect of yourpolicy and your statements.

Senator FORSHAW—No, it is not. If you want to, we will debate this another time. Yourassertion is just fundamentally wrong.

Senator Minchin—What are those 800 people going to do if there is no reactor?

Senator FORSHAW—Minister, I take you to the rest of your statement. You state therethat six reports have all established the need for a new reactor. Would you tell me whichreports they were?

Senator Minchin—I do not have that list in front of me, but you know as well as I do thatthis is the most exhaustively studied piece of scientific equipment in this country.

Senator FORSHAW—Minister, I asked you a direct question. I did not ask you to make aspeech. I asked you which of the six reports—

Senator Minchin—I will choose to answer it as I like, Senator Forshaw. You know thenames of those inquiries. I have not got that sort of list in front of me. You know exactly whatinquiries I am referring to when I refer to the six that have been done on this thing. This is justpolitics on your part. You know this has been exhaustively studied time and time again. Everyscientific, medical and industrial organisation in this country says, and says unequivocally,that we must have a new reactor. The only institution that seems to ignore that fact is the ALP.It is about time you caught up with the industrial, scientific and medical opinion in thiscountry and accepted the need for a new reactor, because everybody else does.

Senator FORSHAW—Minister, thank you for your speech. Now let me take you to the sixreports. Do you say that the Australian Science and Technology Council report of 1992 saidthat there should be a new reactor?

Senator Minchin—Which report is that?

Senator FORSHAW—It is in your press release—the Australian Science and TechnologyCouncil report of 1992.

Senator Minchin—I stand by my press release.

Senator FORSHAW—Do you? I can tell you that it did not.


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Senator Minchin—That is your view.

Senator FORSHAW—Well, read it, Minister. The McKinnon review of 1993: did that saythere should be a new reactor?


Senator FORSHAW—The Senate Economics References Committee.


Senator FORSHAW—Well, Minister, your press release is wrong. Let me move on. ThePBS on page 177 shows that funding for the new reactor will increase from $7.082 million in2001 to $15.94 million in 2001-02. No doubt this expenditure is related, as it says, to the newreactor, but can you explain what aspects of the new reactor that funding will be spent on?

Prof. Garnett—Sorry, are you looking at graph 2 on page 177?

Senator FORSHAW—Yes. I must say—

Prof. Garnett—That is simply the capital use charge associated with the department offinance capital use charge parameter. That is not the funding for the reactor.

Senator FORSHAW—Sorry?

Prof. Garnett—That is the capital use charge. It is what comes out —which comes out ofthe appropriation bill—for the reactor. That is simply what that money is. The funds for thereactor are shown as equity injections in other pages.

Senator FORSHAW—Can you take me to where they are shown, because I have to saythat this year’s portfolio statement, with respect to this agency, is not as clear certainly as itwas last year where—

Prof. Garnett—It is in accordance with the department of finance’s parameters.

Senator FORSHAW—That is your defence. I appreciate that and I can understand it. Butcan you tell me how much will be spent on the new reactor in the coming year?

Prof. Garnett—Table 3.4 provides you with those figures.

Senator FORSHAW—I have got table 3.4.

Prof. Garnett—Okay.

Senator FORSHAW—It is the departmental capital budget statement.

Prof. Garnett—Okay. So if you go down under ‘Purchase of non-current assets’.

Senator FORSHAW—So I have to—

Prof. Garnett—There is one funded by capital appropriations and then there are ‘Fundedinternally’. So the figures funded by capital appropriations are the reactor figures.

Senator FORSHAW—So I have to interpret that that means the new reactor, do I?

Prof. Garnett—As I said, these are in accordance with the department of finance’s tablesand requests.

Senator FORSHAW—What? Did they request you not to mention the new reactor?

Prof. Garnett—No, the new reactor is mentioned quite clearly elsewhere. This was theformat that was asked for. Those were the headings and that is what it was put under. It is notmeant to be hiding anything; it is simply totally in compliance with their pro forma.


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Senator FORSHAW—So what we get is a section on ANSTO, in which there is thelargest single item of capital expenditure in this country over the next couple of years, and thetables that are used do not even refer to that project.

Prof. Garnett—Table 3.2 does refer to it as a national facility asset under construction andshows running totals.

Senator FORSHAW—Yes. But why describe it as that? Why don’t you just say‘Replacement reactor’? You have never been shy of saying that before.

Prof. Garnett—No, we are not shy.

Senator FORSHAW—Why not?

Prof. Garnett—As I say, these are in accordance with the requirements of the departmentof finance.

Senator FORSHAW—I have been in estimates committees last week in a number ofportfolio areas and I have got to say that this is notable for its vagueness and its obfuscation.You use the term ‘national facility asset under construction’ instead of the words ‘replacementreactor’ or ‘new reactor’ funded by capital appropriations, $55 million; and we are allsupposed to understand that that is what that refers to, are we?

Prof. Garnett—As I said, that is what it is. They are in compliance with the requirementsof DOFA and that was the way it was put forward.

Mr Mackey—I guess I can say that we can pass on your concerns to DOFA in thepreparation of future portfolio budget statements. They may wish to take that into account forthe reasons that you are outlining.

Senator FORSHAW—Two hours ago I just went to another committee where we wereable to ask questions about a major program in rural Australia, and it is all set out there. It hasidentified what the program is and how much has been funded and spent under it. As I said,you do not have to try to wade through the acronyms or the language of DOFA, or whoever. Ihave not struck this in at least three or four committees except this one, and it is in respect ofthis statutory organisation, particularly when in the earlier pages there is specific reference tothe design and construction of the replacement research reactor and other items such as spentfuel. So what we are talking about then in the coming year is how much: $55 million plus$12.8 million?

Prof. Garnett—No, that figure of $55 million is the potential figure in 2000-01.

Senator FORSHAW—Sorry, $86 million and $28 million.

Prof. Garnett—You are looking at the $86 million, yes.

Senator FORSHAW—Yes. The application for a construction licence has been lodged, Iunderstand?

Prof. Garnett—The application for the construction licence has been lodged, as has asummary of that document. The licence itself is thousands and thousands of pages, but thethree volumes of the summary of that document I also have here. That was lodged withARPANSA last week and will be released, I believe, publicly by ARPANSA tomorrow. It willgo on ANSTO’s web site and ARPANSA’s web site, but I have also got a copy of that if thecommittee is interested in the three volumes.


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Senator FORSHAW—Yes. I will add it to the pile and read it tomorrow. Thank you. Areyou able to just tell me briefly what that $86 million and $28 million—$114 million—will bespent on?

Prof. Garnett—The $28 million is not on the reactor. Only the top line is the reactorfunding; the bottom is other ANSTO equipment, et cetera. That is as it says: ‘fundedinternally from our other appropriations’. Clearly, it is being spent on detailed design. It willbe on various parts, components, the beam line facilities that are under development, the staffcosts associated with those, and the various elements—the principal project furnish materiel,which is making sure that the relevant services are on site and indeed then some of theconstruction costs estimated in there post February next year.

Senator FORSHAW—How much is estimated to be paid to INVAP over the course of thenext year?

Prof. Garnett—I have not got that figure directly with me at the moment.

Senator FORSHAW—That would be within that $86 million?

Prof. Garnett—It is certainly within that figure.

Senator FORSHAW—Would it be the bulk of it?

Prof. Garnett—It will be a reasonable proportion of that figure.

Senator FORSHAW—Would you mind taking on notice—in fact, I want to come back tothis a little bit later—how much has been paid to INVAP to date. It would be useful if youcould give us that figure for the current financial year and how much is anticipated to be paidover the course of the next 12 months, if you do not mind, which means that you have got acouple of weeks before the end of the year. On the reprocessing of spent fuel, I may also beunclear on this because of the nature of these tables, but page 177, on that same graph there,shows a substantial drop in outcome 2 from $13.42 million to $9 million to $0.786 million forthe coming year. Could you explain to me what that is? And if it is not what I think it is,which is expenditure on that aspect of ANSTO’s operations related to the reprocessing andhandling of the spent fuel, then how much will be spent on that area?

Prof. Garnett—In that case it is the appropriation for this particular year. The figure is nothigh, and that is because there will not be a shipment in this coming financial year.

Senator FORSHAW—So I am right in what I—

Prof. Garnett—We are not drawing down any funds, so there is not much funding andthere is not much, really, in other charges.

Senator FORSHAW—It would probably cover the salary of the five people, would it?

Prof. Garnett—And some of the other expenses associated with getting it ready.

Senator FORSHAW—On page 186 there is another entry which I am interested in. Output3.6 shows the exploitation of ANSTO’s intellectual and physical assets and it shows a minusentry for the current year and another minus entry, but lower, for next year. Could you explainto me what those figures represent?

Prof. Garnett—That is the returns on our exploitation of IP, so it is offset. We then use thatmoney for research purposes. So in other words it is not a claim on the appropriation at all.

Senator FORSHAW—You are expecting less return, then? Is that a fair reading?


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Prof. Garnett—That is simply because of one particular project that we were involved inwhich was a big, lumpy project—an international project—so the figures last year weretherefore higher.

Senator FORSHAW—Okay. So the figure for 2000-01 was higher than—

Prof. Garnett—Abnormally high for that particular activity.

Senator FORSHAW—Thank you for that. In the annual report for 1999-2000 there was acomment that ANSTO was generating considerable business development in recent years.This includes titanate ceramic and the dry bed technetium generator Gentech. How muchrevenue does ANSTO generate through the sales of goods and services in general?

Prof. Garnett—That is in yet another figure in this document: ‘total revenue from othersources’. It is the same table that you are looking at. You will see that it is around $33 million.

Senator FORSHAW—Which one was that again?

Prof. Garnett—Table 2.1.3, in the second half of the table, is revenue from other sources.It identifies it in output terms and then gives you the total figures. It is around $33 million.

Senator FORSHAW—Could you just comment on those two that I mentioned that arereferred to in the annual report?

Prof. Garnett—No, I cannot break it down, because the titanate ceramics are part of avariety of contracts. They will predominantly fall under outcome 3.3 but they will not be thefull component of that. The Gentech generator will be a reasonable proportion of output 3.5.

Senator FORSHAW—It is stated under 3.5 that the bulk of the revenue is from the sale ofradiopharmaceuticals. That is the 20 point—

Prof. Garnett—Correct.

Senator FORSHAW—Moving to a new area, the application has been lodged. Thetimetable that is identified on page 180 says February 2002 for the issue of a constructionlicence. Is it your expectation that that timetable will be met?

Prof. Garnett—It is my hope that that timetable will be met, yes.

Senator FORSHAW—Have you been given any indication by ARPANSA as to how longthey will take to assess the application?

Prof. Garnett—ARPANSA have, on my understanding, published a schedule whichidentified that period of time.

Senator FORSHAW—I have asked you this before, so I might as well ask it again today.Do you still believe that the replacement cost which was quoted originally of 286.4 in 1997dollars is still on target?


Senator FORSHAW—Is ANSTO aware of the report of the Auditor-General two weeksago called The use of confidentiality provisions in Commonwealth contracts?


Senator FORSHAW—Have you considered the Auditor-General’s comments in thatreport?

Prof. Garnett—We have had a preliminary review of the Auditor-General’s comments,and yes.


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Senator FORSHAW—Do you think that as a result of his comments there will be a needto change the approach of ANSTO to the release of documentation?

Prof. Garnett—Clearly, as I have already said in relation to issues with documentation,there is always more than one party involved. Certainly as far as we can see so far, theAuditor-General’s report indicates that it is reasonable for appropriate technical information tobe made confidential and for there to be a provision, as appropriate, for disclosure toparliamentary committees on a confidential basis. Indeed, that is exactly the route thatANSTO has taken.

Senator FORSHAW—One of the difficulties, of course, of providing information toSenate committees, for instance, on a confidential basis is that they are not able to refer to thatinformation in their report. It becomes a bit of a circular, self-defeating sort of exercise—acatch-22 is probably a better description. With regard to this issue of the release ofdocumentation by request of the Senate, by order of the Senate or by request of the public,does ANSTO take advice from other sources, such as the department, the Auditor-General’soffice itself or anywhere else, about whether or not it is appropriate to withhold a document?

Prof. Garnett—As I said, initially when we were working on the contract and rightthrough initially the tender process, we consulted with the ANAO about appropriate auditingprocesses, and certainly there was a clause put in the contract which was in compliance withthe ANAO that indeed the ANAO had the right to access the information.

Senator FORSHAW—But that was on that situation. What about some of the requests thathave come in under freedom of information?

Prof. Garnett—ANSTO provides as much information as it can and it takes advice from avariety of quarters.

Senator FORSHAW—Which quarters do they take advice from?

Prof. Garnett—We take advice from legal advisers. We take advice depending on thenature—we have to assess the status of the material.

Senator FORSHAW—Did you take any advice with respect to making a decision as towhat documentation could be provided to the parliament?

Prof. Garnett—We have provided all documentation that we can to the parliament otherthan that which is covered by appropriate confidential requirement and which, I would say, isin accordance in essence with the use of the confidentiality provisions in the recent ANAOreport.

Senator FORSHAW—Was a decision about what documents were to be provided to theSenate taken by ANSTO, or was that something that was ultimately determined by you,Minister, as you were the one who was ordered to produce the documents?

Senator Minchin—I guess ultimately it was my decision, but my recollection is that it wasbased on consultation and cooperative decision making as between the department andANSTO and the Senate requests. But I think ultimately it was my final decision.

Senator FORSHAW—I assume that ANSTO advised you as to what should or should notbe provided.

Senator Minchin—Sure.

Senator FORSHAW—The reports that are to be provided to the minister for theenvironment—I understand a report was submitted back in March of this year, that is, the


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second status report on the conditions: in general, how is ANSTO going with meeting thevarious requirements? I know I can read the report, but what is ANSTO’s view about howthey are progressing with each of those conditions that the minister for the environment laiddown?

Prof. Garnett—Clearly, we have a project associated with ensuring that we meet these inthe appropriate timetable and schedule, and I guess I would say we are on schedule.

Senator FORSHAW—I have just a couple of specific things: with respect to the upgradeof the environmental management systems, what is happening there?

Prof. Garnett—We have an environment management appropriate action plan for the newsister systems, and there have been undertakings as far as the introduction of ISO 14000 andwhen the various things will happen, and that is on schedule.

Senator FORSHAW—The community consultation program?

Prof. Garnett—The community consultation program: we have had focus groups run byexternal consultants in the community. There has been a communication strategy which hasbeen under development. And in compliance with the approval conditions, that has beenprovided through to the minister for the environment, and we are awaiting a response on thatparticular issue at the moment.

Senator FORSHAW—Who manages the consultation program?

Prof. Garnett—ANSTO’s consultation program?

Senator FORSHAW—Yes.

Prof. Garnett—The consultation program associated with the replacement reactor projectwill not just be ANSTO; it will be a team effort between ANSTO, INVAP and the alliancepartners. And there is a team of people which involves representatives from each of thoseinstitutions involved in it. So it is not just an ANSTO activity—the consultation program.

Senator FORSHAW—So there are consultants engaged?

Prof. Garnett—There are representatives from INVAP and the alliance partners as well asANSTO involved. But we have had a consultancy just doing focus group work.

Senator FORSHAW—The review of traffic densities: has that been approved by the NewSouth Wales Roads and Traffic Authority yet?

Prof. Garnett—The studies have been done to identify the impacts, and I believe at thisstage there is not a final approval on whether there is any need to do anything or not to doanything. But that will be sorted out, I believe, in the not-too-distant future.

Senator FORSHAW—I understand INVAP are required to prepare a constructionenvironmental management plan; is that correct?

Prof. Garnett—That is correct.

Senator FORSHAW—Has that been completed yet?

Prof. Garnett—No. That is part of the work that goes on once—in essence, where we arenow with the detailed design being completed and the documentation being lodged, this issomething that would subsequently be done.

Senator FORSHAW—Is there any consultation with Sutherland council with respect tothe development of that environmental management plan?


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Prof. Garnett—At this stage, as I said, it is a ‘to be done’. I could not say yes or no, and Icould not comment on what INVAP’s current intent is in relation to developing that plan.

Senator FORSHAW—On the last occasion, Professor Garnett, I asked you somequestions about giving me a breakdown of the work packages and their cost and payment tobe made to INVAP. You said at the time:No, I could not possibly do that because it comes right down to very, very detailed things which I thinkwould be in conflict with some of our obligations.

And further:… you cannot readily break it down into just design constructs because they are not phases that go

from A to B, and work packages are very complex things.

That is from pages 138 and 139 of Hansard. Is that still your view?

Prof. Garnett—The packages are very complex things. We attempted to provide againstwhat was given at the time—against the PBS statements for last year—the sorts of big pictureissues of what fell into the various components.

Senator FORSHAW—Because I received a response which came from the departmentwhich I thought was very good. It actually provided me with the sort of information that I hadasked for.

Prof. Garnett—That is good, because it came from ANSTO in the first place.

Senator FORSHAW—I was going to ask you whether you had some involvement inpreparing it. I assumed ANSTO would have. That is why I was surprised by your initialanswer, which said it could not possibly be done, it was too complex. Yet I did actually get avery good table with all of the figures set out for the various packages, which is what I wasafter.

Prof. Garnett—I am glad that you were satisfied with that. Initially I envisaged that youmay want further detail, which would have been very difficult. But we attempted to provideyou with the details that we could.

Senator FORSHAW—The point is that it could be done and it was done, and your initialanswer was a little bit pessimistic, shall we say?

Prof. Garnett—Maybe.

Senator FORSHAW—You will recall that, during the Senate inquiry, there was someevidence given by Technicatome but refuted by INVAP and by ANSTO regarding problems,or supposed problems, with the reactor that had been built by INVAP in Egypt. I am sure youwill recall that issue being debated. It seems that this issue will not go away, not because I amgoing to ask further questions about it, but because there are still rumours going around—andindeed, within the nuclear industry itself—that there are problems with the reactor in Egypt.Are you aware of whether there are or there are not some problems that have beenencountered with respect to that reactor?

Prof. Garnett—All we are aware of is that there are some differences of opinion to dowith what we have been advised are contractual issues.

Senator FORSHAW—So you are saying the argument is about whether INVAP did whatthey were supposed to do under the contract?

Prof. Garnett—I do not know enough about it other than that there are contractual issueswhich are really, as I understand it, dollar issues.


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Senator FORSHAW—The reports that I have heard and read are, for instance, that thereactor does not operate or cannot operate at full power because of insufficient coolantcapability or capacity for the reactor core. Have you heard that proposition?

Prof. Garnett—I heard that some time ago. I am also aware that Egypt has used on anumber of occasions IEA teams. I think they have had the IEA teams through now, I am notsure, four or five times. I am aware of an IEA report that indeed signed off on the reactor fromthe point of view of it operating at full power back when it was commissioned.

Senator FORSHAW—We received that report and that evidence during the committee’sinquiry. But this is more recent.

Prof. Garnett—It was signed off as meeting the requirements back in November orDecember 1998.

Senator FORSHAW—But if it were true, and if this is the reason why it is reported thatthe Egyptians will not finalise payment to INVAP, it would be a pretty serious problem, wouldit not?

Prof. Garnett—That depends on whether the reactor is functioning, and the advice that wehave had, as witnessed by the reports by experts who went when the reactor wascommissioned, is that the reactor can function and does function.

Senator FORSHAW—I can have a car that goes, too, but that does not mean it is going aswell as it should and is what I expected to get. If ANSTO has heard these reports, have yousought to ascertain whether there is any truth to them?

Prof. Garnett—We have done what we would need to do, which is to send somebody fromthe point of view of asking, ‘Are there any lessons for us to learn?’ I can clearly say, as wehave said before, that the only lessons for us are the lessons that we had learnt well inadvance, which was to specify very clearly in the request for tender what we wanted deliveredand have the contract written in such a way.

Senator FORSHAW—Did you send somebody over to have a look at this?

Prof. Garnett—We certainly sent people earlier, but we sent somebody earlier this year.

Senator FORSHAW—What, to go to Egypt?

Prof. Garnett—He went through Egypt on another visit, yes.

Senator FORSHAW—Who was that?

Prof. Garnett—The head of our Nuclear Technology Division.

Senator FORSHAW—Who is that?

Prof. Garnett—Professor Horlock.

Senator FORSHAW—Did he investigate this issue?

Prof. Garnett—It was not a matter of investigating it. The issue was a follow-up, as anyorganisation would do when you have a contract with an organisation. You will find that inconstruction, businesspeople will go back to recent customers to identify if there are anylessons learnt that might be appropriate. I have just given you the outcome of that.

Senator FORSHAW—What are you saying to me? Are you saying that you do not thinkthat there is a problem or that there could be a problem but it is not a matter of concern?


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Prof. Garnett—I am saying that at this stage we do not have any evidence of there beingtechnical problems that are problems that shoot home to construction.

Senator FORSHAW—Could what I just mentioned—that it does not operate at full powerbecause of insufficient cooling capability—

Prof. Garnett—I am not aware of that particular allegation.

Senator FORSHAW—If that was to be the case, it would be a problem associated withconstruction surely?

Prof. Garnett—I come back—

Senator FORSHAW—Or design?

Prof. Garnett—No, I come back to the comment that I made earlier that when the reactorwas commissioned it was witnessed to go to full power by third-party people who wrote areport on that which says that the design and construction of it were able to support the fulloperation of it.

Senator FORSHAW—Is it feasible that it could have done that and now that there couldbe a problem along the lines that I have just mentioned? It went to full power when it was firsttested and signed off. You are the expert, Professor Garnett. Is it possible that a problem couldshow up of this magnitude or of this seriousness now?

Prof. Garnett—I think that that statement can be read in three or four or five differentways. What I am saying to you is that I am not aware of that particular issue in the way thatyou have read it out.

Senator FORSHAW—But if it was correct, it would certainly be a serious matter?

Prof. Garnett—If it is due—

Senator FORSHAW—That is why I am about to ask you: wouldn’t it be a serious issuefor a reactor of this type, which is like the new reactor as proposed for Lucas Heights, that is,a pool-type reactor?

Prof. Garnett—I have not got the relevant experts here to answer that question. But fromeverything that I have been advised I would say that there can be an issue to do withoperations.

Senator FORSHAW—Are you aware whether or not the French nuclear safety bureau hasbeen called in or is assisting the Egyptian nuclear authority to address this issue?

Prof. Garnett—No. I am aware that they have used the IEA on numerous occasions. I amalso aware that at least one of their staff previously worked in France.

Senator FORSHAW—It was commented on during the Senate committee, when thewitness from Technicatome appeared, that they had been engaged. That was refuted byINVAP, but it has been reported that in fact Technicatome has been engaged to assist in tryingto resolve this problem with this reactor.

Prof. Garnett—That is not consistent with reports that we have.

Senator FORSHAW—Would you mind taking my questions on notice and just seeing ifthere is any further updated information that you are able to obtain and advise the committee?

Senator Minchin—As far as I am aware, there is absolutely no external evidencewhatsoever that the Egyptian reactor was not built to and is not able to operate according to


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the terms of the contract. Unless and until such evidence is produced, this is all scuttlebutt andrumour mongering by certain people with certain vested interests. When I was in Argentina, Isought a full explanation from INVAP on their view on this. They certainly assured me thatthe thing was built to contractual specifications. Their position on this is that for a wholevariety of reasons—internal reasons involving Egypt—the thing is not being operated at fullcapacity. That is not a matter of technical capacity but of operational arrangements involvingEgypt.

Senator FORSHAW—That is what was put to our committee. I understand precisely whatyou have put and I have heard that myself. My concern is that I keep hearing things to thecontrary. I would not be asking these things if I did not think that these reports were comingfrom sources that were at least reputable. You call it scuttlebutt. It has not been put to me asscuttlebutt. I am trying to ascertain whether it is true or not. One could conceivehypothetically of a situation where it is not in the interests of people to advertise the fact thatthere are problems if they have them. Anyway, we will see what we can find out.

Senator Minchin—But as you would well know, there are a whole variety of reasons whypeople might want to assert there are problems where there are none. As I say, I come back tothe point that as far as I am aware—contradict me if you can—there is no external evidencethat this reactor in Egypt was not built according to the contractual specifications and is notable to operate according to those specifications.

Senator FORSHAW—That is what I am endeavouring to find out. I hope you are right.With respect to the overseas site visits, we asked for copies of the reports but they werewithheld on grounds of confidentiality. We also asked for the cost. Initially we were advisedthat it was approximately $70,000. That was by you, Minister, and also by Professor Garnett.We then received correspondence from ANSTO saying it was $70,000. That was on 2 March.So there were three occasions when that was stated. Then, a month later, we received furthercorrespondence to say the original figure was wrong and that site visits now totalled$127,700. Then in April the department advised the committee that in fact that figure waswrong and the cost of the visit was $130,640. Can somebody please tell me how much thesevisits cost?

Prof. Garnett—The original $70,000 was indeed an error. It was the airfare cost that wasgiven. I think the $127,000 figure was the figure that then subsequently came forward fromANSTO. Indeed, there was also a departmental person associated with the visits. So I believethe figure was then increased to take account of the departmental expenditure as well.

Senator FORSHAW—Was that Mr Dewar? So Mr Dewar was worth the princely sum of$2,900.

Prof. Garnett—No. I think the original figure was the airfares, but there were somedifferences between ANSTO and what was then the total picture. We apologise, but the$70,000 was the airfare cost.

Senator FORSHAW—I am advised that we have to finish at 10.30, and I am nearly there.Is Mr Seaborne here?

Prof. Garnett—Yes, he is.

Senator FORSHAW—Can Mr Seaborne come to the table? Is that possible?



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Senator FORSHAW—Mr Seaborne, do you recall telling the committee on 9 February inresponse to a rather provocative question from me when I said, ‘You did not go over there justfor a holiday?’ and you responded, ‘I certainly did not.’? Do you recall saying that?

Mr Seaborne—I certainly do.

Senator FORSHAW—You do. Good. You still stand by that comment, no doubt.

Mr Seaborne—Yes, I do.

Senator FORSHAW—I want to ask anyone at the table if they saw an article by thejournalist Fred Benchley in the Bulletin in May last year entitled ‘Having a great time. Wishyou were here’ where he refers to one of the reports that was submitted which details all thewonderful sightseeing visits that occurred. Did anybody see that? Professor Garnett, did yousee it?

Prof. Garnett—I remember reading the article, yes.

Senator FORSHAW—Minister, did you see it?

Senator Minchin—I think it was drawn to my attention, Senator Forshaw.

Senator FORSHAW—Was that actually submitted as a report?

Prof. Garnett—My understanding is that the answer to that is absolutely no, it was not areport. All it was was an email from somebody who had not been overseas and who saw a fewthings through on the trip in all honesty to some colleagues. How and why it ended up in theBulletin we will never know.

Senator FORSHAW—He does not say it was just him. It actually says ‘We went here’ and‘We went there’. It said ‘We rode the Metro’ and ‘We visited the Eiffel Tower, the Louvre andNotre Dame,’ et cetera. So he is not just commenting about himself.

Mr Seaborne—If you are asking me, there is a reference in the report that you wereprovided with. There is an agenda in the back of it. If you read it carefully you will see thesorts of times when we arrived and left airports and arrived and left places. There was in factone free day where people could do whatever they wanted to. I actually slept, but some peopletook the opportunity in Paris to see some of the sights. I do not really see a problem with that.

Senator FORSHAW—Good on you.

Mr Seaborne—Good. I am glad you agree.

Senator FORSHAW—I did not necessarily say I agree; I just said good on you. But that iswhat intrigued me, because these were very short visits. It seemed to me that if this report wascorrect there was not much time to be looking at the reactors if they were doing all thissightseeing. I would hate to make these accusations about people, but it was a report that wasin the paper. We actually asked for the field reports. We did not want them for that purpose atall. We did not even know about any of that. We requested these reports some time ago to tryto find out more information about the processes that ANSTO went through in assessing thereference reactors. But we were denied those reports, which is why I have asked thesequestions now, because I can only go on these articles.

Mr Seaborne—The report that we provided to you provided you with information as to thesorts of activities we undertook—not globally but specifically—with each one. I also makethe point that this issue first arose with Technicatome saying that we only spent one day withthem. I pointed out on 9 February that that was in fact incorrect; we spent two and a half dayswith them. I think that needs to be noted. In fact, leaving aside those who found the time on


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the Sunday to go and visit the Louvre or whatever, we spent more time with the Frenchcollectively than we spent with any one of the other tenderers.

Senator FORSHAW—But the report apparently also went on about taxi drivers inIndonesia and visiting the Korean countryside—

Prof. Garnett—Senator, that was not a report.

Senator FORSHAW—The Egyptian museum, the pyramids and all sorts of things. It wasnot just Paris, Mr Seaborne.

Mr Seaborne—I was the leader of the report. The visit was crushing for people. Peoplecomplained about the process. Personally, I have seen the pyramids. I have worked in Egypt. Ihave seen the museum. I slept there as well. I did a bit of sleeping in between all of the work.I mean, the visit was a very important visit. It should not be trivialised. The summary that Iprovided you with gives you the detail of what we did at each place we visited.

Senator FORSHAW—Mr Seaborne, I did not trivialise this. Despite the questions, I didnot trivialise it. This was in a report which was submitted to the department.

Mr Seaborne—It was not a report.

Prof. Garnett—Senator, I made very clear that it was not a report. It was simply an emailby one colleague to another colleague.

Senator FORSHAW—So it was an email?

Prof. Garnett—Mr Dewar is in fact now an ANSTO employee on secondment. He wasthen a departmental employee. I have asked him, and make it very clear that it was not areport; it was simply an email.

Senator FORSHAW—Would you check that, please?

Prof. Garnett—I am saying that that is what I believe it was.

Senator FORSHAW—I am giving you the opportunity to check it. Thank you. I have acouple of quick questions, even though I know it is nearly time for us to finish. There was anarticle in the Bulletin that referred to a report from Access Economics—this was in the samearticle—detailing the positive outlook for medical isotope exports. Can the committee beprovided with a copy of that report? I do not think it is a document we have received before.

Prof. Garnett—A version of the Access Economics report without certain figures in it hasbeen around for the first Senate committee.

Senator FORSHAW—I will check that again. Finally, there was a recent report of aradiation leak at Lucas Heights. Apparently the council complained that it was not notified.Can you tell me why it was not notified, or was it notified of the leak?

Prof. Garnett—The agreement with the council which goes back some time is that thecouncil is notified if there is any potential health impact to the community. There was no leakfrom Lucas Heights. What I believe you are referring to is the fact that a sealed radiographysource dislodged from a radiation shielding. That did not provide any leaks of radiation that inany way threatened the health of the public. Indeed, no worker at ANSTO received a dose inexcess of ANSTO’s normal targets for its doses.

CHAIRMAN—We have run out of time. If you have any further questions, SenatorForshaw, put them on notice, please. I now call to the table the Financial Reporting Council


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representatives. I welcome Mr Ullmer and Mr Kooymans from the Financial ReportingCouncil.

Senator CONROY—Welcome, and thank you for flying up. I appreciate that you were notavailable at any other time this week, and I apologise for the lateness of the hour. Someonealways gets to go last and it is usually me, which means that it is you as well.

Mr Ullmer—Senators, thank you for accommodating my schedule as well.

Senator CONROY—I have a copy of the AASB’s work program for 1 July 2000 to 30June 2001. Was that approved by the FRC?

Mr Ullmer—Yes, it was.

Senator CONROY—Were there any changes to the program or an earlier draft sought bythe FRC?

Mr Ullmer—I am sure a draft may have been provided by the Chairman of the AccountingStandards Board. That would have been the normal process for the discharge by the FRC ofits responsibility to look at overall strategic direction as well as to be satisfied that thepriorities established by the board are consistent with our understanding of what the variousconstituent groups are looking for from the process.

Senator CONROY—Sorry, which constituent groups are you referring to?

Mr Ullmer—The broad constituent groups who have an interest in accounting standardsetting. That would be government, other public sector bodies, the corporate environment,users, preparers, academia. They are the broad range of constituent groups that we seek todraw input from, as does the Accounting Standards Board, to ensure that the processcontinues to be relevant.

Senator CONROY—I have been made aware of a variety of criticisms of the previouspractices. So we are talking about the old AASB, not the current one. Have you heard of suchcriticisms in the past of the old AASB? I stress ‘old’—the previous.

Mr Ullmer—Yes. The issue relevant to the FRC that I am aware of was a question ofaccountability and governance process. It was for that reason, and consistent with practiceoverseas—United States, Canada, the United Kingdom and the international accountingstandards bodies—that there should be the establishment of a body like the FRC to provide anappropriate degree of oversight whilst not interfering in the technical process of standardsetting.

Senator CONROY—Are you aware of any international jurisdictions that have the degreeof influence that your FRC has in terms of the ability to direct the work program?

Mr Ullmer—The model that is being used—it was essentially established for the FRC—isbroadly consistent with the jurisdictions I have mentioned in areas such as looking at strategicdirection, the business plan, budgets, review of performance and monitoring activity. In all ofthose four jurisdictions I have mentioned, the processes adopted here under the governance ofthe FRC are consistent. The one area of difference currently is the issue around reviewingpriorities, where in those other jurisdictions, other than Canada I believe, typically theoversight body makes recommendations. Here in Australia with the FRC, the oversight bodyhas the capacity to ensure that the priorities reflect what it believes are the constituentrequirements.

Senator CONROY—You can direct them, but overseas they can only recommend?


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Mr Ullmer—Overseas other than, I believe, Canada. But in terms of all those otherfunctions the overseas bodies have around approving business plans, budgets and monitoringactivity, what I have been advised is that, in practice, the operational roles differ little fromwhat we have in place here.

Senator CONROY—Are you aware of any conflicts, particularly in the US—any issuesthat have arisen in terms of a conflict between the FRC and the equivalent accountingstandards organisations?

Mr Ullmer—In overseas jurisdictions?

Senator CONROY—Yes, particularly the US.

Mr Ullmer—No, I am not.

Senator CONROY—Are you aware of any argument about the, funnily enough, questionof valuation of options packages and those sorts of things?

Mr Ullmer—When you say ‘argument’, I am aware that this is a very important butdifficult accounting issue that is being grappled with in a number of jurisdictions around theworld.

Senator CONROY—And you are not aware of any disagreements or differences ofopinion between the US FRC and the equivalent accounting standards board?

Mr Ullmer—I am not personally. It is not an issue that has come up before the FRC—

Senator CONROY—It was a little while ago. The US FRC tried to stand over theaccounting standards board over their views on it.

Mr Ullmer—If I can advise, the perspective from the FRC here is that this is an importantissue that quite properly has a high priority on the Accounting Standards Board’s workprogram.

Senator CONROY—You are obviously aware that I follow this one particularly closely.You have used the words ‘high priority’. Using the language of the paper, there are thingsdefined as highest priority, high priorities and other priorities. Despite your description of thisas being a high or highest priority, it actually only rates in the work program you haveapproved as another priority.

Mr Ullmer—This is in terms of what I would call last year’s plan; that is, the plan throughto the end of this month. As it so happens, there was an FRC meeting this morning, which hadbeen scheduled for some time—

Senator CONROY—I am sure it had.

Mr Ullmer——which approved the priorities put forward by the Chairman of theAccounting Standards Board for the 2001-02 year. In that context this issue is a high priorityissue—that is, the highest priority of issues—and I believe an exposure draft is expected toissue in the next quarter on this matter.

Senator CONROY—I hope you are right. I have been promised them now for nearly threeyears, as I am sure you have read or heard me say before. I look forward to seeing that one.You would be conscious that it is becoming an increasingly debated issue in various forums,even today with the argument about One.Tel and executive remuneration and packages. Therewas not an issue of valuation; they got a bonus. But in terms of this issue of the valuation andshareholders’ right to know, you would be conscious that that is a growing issue.


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Mr Ullmer—I am not conscious of the issue with respect to that specific company. Thereis obviously speculation from a more general perspective. I think we have to distinguishbetween executive and director compensation schemes—remuneration option plans—that arequite rightly put to the shareholders for approval, the basis of those plans being put toshareholders and then disclosure in financial statements. There is a secondary issue aroundwhether those schemes in themselves were appropriate, which will not necessarily be dealtwith by accounting standards.

Senator CONROY—No, that is for shareholders at the end of the day to make a judgmenton. I do not want to do it and I would not want to wish it on you. You delineated betweendirectors and executives, I think you said. Can you just take me through that difference fromyour perspective?

Mr Ullmer—I do not wish to delve too deeply into the technical issues of this, becausethat is quite properly the purview of the Accounting Standards Board. But there are a range ofdisclosure requirements with respect to directors and then there are best practice disclosureswith respect to senior executives which, broadly speaking, in Australia tend to be modelled onthe requirements of the SEC in the United States. That is clearly an area that one wouldexpect any exposure draft on this area to examine with respect to seeing whether any of thosebest practice requirements need to be taken further.

Senator CONROY—I appreciate that there has been a practice note, I think, issued byASIC to try to determine this. Having been involved in the debate on the floor of the chamberat the time that these amendments were being moved, I understand why people are confused. Iwas confused and it all moved very quickly in the chamber. I would be keen to understand thedifference, if you are trying to delineate for any reason. The sentiment was to establish who isgetting paid—the top five. I do not mind if it comes to the top 10 or if it is the top 50. But itwas not seeking to delineate between those; it was a question of who is getting paid the most,how the package is working. I am just conscious that you are not deliberately trying to draw aline to separate them. I am just trying to understand why you have drawn a line betweendirectors and senior executives. Is it on the basis that the legislation is confused at themoment?

Mr Ullmer—I would not necessarily use the word ‘confused’, although it is complex. I amsimply making a point that there are specific requirements relating to directors and then thereare a range of best practice requirements that relate to senior executives and typically arefollowed by the large listed companies in Australia. I would imagine that a review of thissituation would seek to see whether that should be codified in the standards, but this really is amatter for the Accounting Standards Board to bring out an exposure draft and then for that togo through due process.

Senator CONROY—No, I would just be very frustrated, I think is probably the word thatI would use, if the debate went all the way down a long track and sorted it out purely fordirectors or purely for senior executives when there was not an attempt by the parliament todelineate necessarily—although I understand, because of the words that were used, there hasbeen some confusion about who was meant to be captured. So I would just be confused if wespent a long time going down this track and got only half of the people who we intended totry to capture. That is something for me to take up with the AASB, but I appreciate youranswer there. Just in terms of the funding of the AASB, what is the FRC doing, if anything, toraise funds for the AASB?


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Mr Ullmer—That is one of the responsibilities of the FRC—to endeavour to get a broadrange of support for the accounting standards setting process. It is important that there is abroad range of support so that no one funding source could be seen to unduly influence theactivities of the board. As it currently stands, just over 50 per cent of the funding comes byway of the Commonwealth, another 18 per cent by way of aggregate states and territories, 23per cent comes from the two main accounting bodies—the Institute of Chartered Accountantsand the CPA Australia—four per cent from the National Institute of Accountants, and thestock exchange provides two per cent.

There has been an issue that the FRC has grappled with, which is around the point ofcorporate Australia more generally increasing its contribution to the accounting standardssetting process. The views that come back from corporate Australia is that that is a very broadgeneric term and, therefore, there are a whole range of individual companies that have varyingdegrees of interest in that matter from very small private companies to very large listedcompanies. A view of a number of corporates is that, through the fees they pay, for example,to the auditing profession, in a sense they are indirectly funding the process through thecontributions that are made by the accounting profession to the activities of the AccountingStandards Board.

Finally, there is quite a strongly held view in a number of quarters in corporate Australiathat they pay very significant registration fees through the corporate registration process toASIC, which significantly exceeds the cost of running activities such as ASIC, and that thereis a significant surplus, a small part of which could be devoted towards the activities of theAccounting Standards Board. So the role of the FRC is to be cognisant of all of those differentviews, but, at the end of the day, we have a responsibility to identify where we can identifysources of funding and at the same time work with the Chairman of the Accounting StandardsBoard to see that the activities of the board are run very efficiently and effectively within whatin global terms is a very modest budget.

Senator CONROY—So it has a very good reputation internationally for the strength ofour accounting? We often describe ourselves in certain areas as punching above our weight.Would you agree that internationally we are reasonably well respected?

Mr Ullmer—That is correct, and I would observe that on two levels. Firstly, on thetechnical level, it is quite unusual for a country of our small relative economic size in a globalcontext to have Ken Spencer appointed to the board of trustees of the newly formedInternational Accounting Standards Board, for Warren McGregor to be appointed to the boarditself, and in a staff, I believe, of around about 17 to 20 permanent staff of the accountingstandards board, for there to be, I understand, a number of Australians likely to be appointed.Similarly, New Zealand has a very high reputation. So on that I mention that it is quiteextraordinary the reputation we have, and that is a reputation that has been earned throughdelivery.

From a second perspective in the role that I have as a chief financial officer, which causesme to regularly visit the international capital markets offshore, there is clearly a very highregard for the standards of corporate governance and disclosure within Australia. Whilst quiteproperly we are always striving to lift those standards, in a relative sense, we will be seenparticularly by Europe and the United States as almost an oasis of reliability in this region.

Senator CONROY—Has the standards board raised concerns with you about its level offunding?


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Mr Ullmer—Yes, that is an issue because, as I have mentioned, it does run on a verymodest budget. We also have to remember that we are coming into the second full year ofoperation. There has been an enormous transition to handle from the sort of combinedactivities within the two main accounting bodies, the research foundation, et cetera.

Senator CONROY—I was going to come to that.

Mr Ullmer—So drawing all of that together has been a very significant operational taskfor the Chairman of the Accounting Standards Board. New premises had to be found, whichwere very generously donated by the Stock Exchange. Situations such as continuity ofemployment, superannuation, et cetera, have all had to be dealt with. The AccountingStandards Board is dealing with the issue and assisting, where possible, on things such aspublications revenue, which has been a source of revenue to the board, and we need tounderstand that going forward in the context of increasingly web-based delivery ofinformation and a reasonable expectation the public have of information being freelyavailable.

Senator CONROY—You mentioned the research foundation. It used to be funded out ofthe AASB separately. I think at one stage there was even a levy to help with a number ofindividualised projects. Is it being funded separately by you, or does the money go into theAASB and then on to them? My next question that flows from that is: is it as large as it was?Has it reduced under the newer structure? What is happening with the research foundation?

Mr Ullmer—Under the new structure, the research foundation no longer has a role in theaccounting standard setting process, so that is not something that comes within the purview ofthe FRC. Therefore, the Accounting Standards Board has its own permanent staff.

Senator CONROY—So they have brought it in house, effectively?

Mr Ullmer—Yes. Effectively the Chairman of the Accounting Standards Board wentthrough a process of reviewing the personnel within the foundation, identified those personnelthat were relevant to the standard-setting process, and those personnel moved over to nowwork directly for the board. You questioned earlier as to areas where perhaps questions havebeen raised in the past as to how this whole process fitted together. Clearly, under the newarrangements there now is a very clear linkage where the relevant staff who do the technicalwork are employed by the board and, through the board, by the FRC.

Senator CONROY—Which areas of the research foundation were considered not to berelevant to the AASB? Have they disbanded? Is there an organisation out there that they havebecome, or have they just drifted away?

Mr Ullmer—I am not across those issues because they are not relevant to the FRC.

Senator CONROY—Sure. It is just that given, as you described to us, a bit of an oasis,part of this reason was the intellectual calibre that we had had which, to some degree—itwould be possible to argue—arose because we had a research foundation that was not justfocused purely on the day-to-day how to implement this; though I appreciate that they arevery much intertwined. Do you think there is a need for a research component?

Mr Ullmer—My understanding is that the majority, if not all, of the accounting standardresearch and technical people within the foundation migrated across. But I would also addthat the reputation that Australia has is also a reflection of the processes of government, thequality of the professional firms and the quality of management in corporate Australiagenerally. So it is the amalgam of all of those things.


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Senator CONROY—I said a component; I was not suggesting the entirety. I am hopingthat the people who did not migrate across are the ones who migrated internationally from thefoundation.

Mr Ullmer—In fact, an important part of the FRC’s role is to ensure that the AccountingStandards Board is working towards international convergence. A key component of that is tobe involved in the process of an international accounting standard setting. To that end—and Iam sure the chairman of the board will elaborate when he meets with you later this week—personnel from the Accounting Standards Board have been seconded across to theinternational accounting standards board.

Senator CONROY—Mr Rizzo resigned some months ago. Unfortunately, he never got toactually make an appearance, despite a couple of attempts along the way. When do you thinka new chair will be appointed, or did you do it this morning?

Mr Ullmer—No, this morning the issue of appointments before the FRC was with respectto a replacement member on the board itself. The question of appointing the chair of the FRCis a matter for the Treasurer. I am not conscious of the status of that. It is a matter for theTreasurer.

Senator CONROY—Any time in the near future? One month, two months, three months,hopefully?

Mr Kooymans—Hopefully, sooner than that.

Senator CONROY—I was hoping that, for any journalists still awake out there, you mighthave given us an exclusive, but we will hang fire.

Mr Ullmer—As the deputy chair, I am acting chair and taking that responsibility until apermanent chairman is identified.

Senator CONROY—You mentioned you were a CFO. Which company?

Mr Ullmer—Commonwealth Bank.

Senator CONROY—Does the FRC have a view about the appointment of independentauditors? Have you examined that issue at all?

Mr Ullmer—No, we have not. I am just frowning because that, in a sense, is an issue thatgoes beyond accounting standard setting. You were talking earlier about the various roles ofthe foundation. Clearly, a role of the foundation was the auditing aspect of professionalpractice on behalf of the accounting bodies. So that is an issue that is outside the domain ofthe FRC.

Senator CONROY—That component has not moved within the AASB?

Mr Ullmer—No.

Senator CONROY—Is it an issue you would look at? I appreciate your saying it is outsidespecifically the AASB, but is it an issue that is of some relevance to the FRC, or is it justoutside your terms of reference completely?

Mr Ullmer—I would see it as outside the terms of reference. The issue of auditappointments for listed companies is governed by the Corporations Law, supplemented by theprofessional standards of the accounting bodies. Obviously, ASIC has a very significant andimportant role in terms of ensuring that independent audits are effectively conducted.


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Mr Kooymans—If I could just clarify that, the audit side of AARF remained withAARF—the research foundation.

Senator CONROY—Does it still exist—what is left of it?

Mr Kooymans—Yes.

Senator CONROY—I am just wondering how it is funded—by the goodwill of the majoraccounting firms, essentially?

Mr Kooymans—Jointly by the main accounting bodies, as I understand it.

Senator CONROY—I think I have to finish in about one minute, so I will not take thatany further. I appreciate that you are flying out first thing in the morning, on the early flightno doubt. Thank you very much for making the effort.

Mr Ullmer—Thank you again for accommodating us. We are more than happy goingforward to provide whatever assistance we can either in committee or in individual briefingsas appropriate.

Senator CONROY—Thank you very much.

Committee adjourned at 10.58 p.m.

commonwealth of australia official committee hansard · 2001. 8. 20. · sporting organisations and...

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