Assistance to the pharmaceutical industry is currently given under the Factor (f) Scheme, which concludes in 1999. The Factor (f) Scheme compensates companies for the low prices they receive under the Pharmaceutical Benefits Scheme (PBS) provided they add value through production in Australia or carry out Research and Development (R&D) in Australia. Following an Industry Commission review into the appropriateness of assistance to the industry,(1) the Government announced a new scheme to apply from July 1999. Under the new scheme the Government is committed to spend $300 million over the period 1999-2004, with assistance beyond that date subject to review in 2003.
The 1996 Industry Commission report on pharmaceuticals found that the PBS was the most important impediment to growth of the pharmaceutical industry in Australia. It found company investment decisions are influenced by low prices and other features of the PBS. The Industry Commission essentially confirmed the original justification for the Factor (f) Scheme, compensation for low PBS prices. Of course, for the consumers of prescription drugs the PBS offers the great advantage of lower prices to the consumer. In addition, by channelling drug sales through the PBS, the Australian Government is able to exert downward pressure on prices paid to drug suppliers. Overall the Industry Commission estimates that Australia saves $860 million per annum through the PBS price suppression mechanism.
While the new scheme has the effect of increasing the forward estimates for outlays, it will nevertheless represent a large cut in outlays compared with the Factor (f) Scheme due to expire in 1999. Assistance for 1997-98 is estimated to be $175.1 million for the manufacturing sub-heading 'Pharmaceutical and Food'.(2) That is almost entirely accounted for by Factor (f) payments. By 2000-01, the first full year of the new scheme, outlays under this sub-heading are estimated to fall to $48.6 million. On the detail given so far, the criteria for payments under the new scheme are much the same as Factor (f), although payments fall from 25% to 20% of eligible value added or R&D. The reason for the dramatic decline in funding is that the new scheme will be capped and applicants will have to compete with each other for funding. Exactly how the different applicants will judged has not been decided. However, any relative assessment of competing applicants is open to the criticism that the Government is engaging in a 'beauty contest'.
As part of its overall pharmaceutical package, the Government has also announced that it will extend patent protection for pharmaceuticals on a discretionary basis for up to 5 years.(3) This compensates drug companies for the lengthy trial and evaluation periods during which they cannot exploit the advantage provided by the patent.
In response to the pharmaceutical package, CSL Ltd has announced a new R&D facility in Victoria. CSL's Managing Director, Brian McNamee, is reported to have said 'the Government's decision to extend the Factor (f) pharmaceutical compensation scheme and provide patent life extensions has provided a positive signal. We are prepared to invest money now...'(4) This announcement by the largest spender on pharmaceutical R&D may well be an early indicator of the importance of having a successor to Factor (f).
In 1996, the Office of National Tourism (ONT) was established within the Industry, Science and Tourism portfolio. The Office succeeds the former Department of Tourism, which was abolished following the change of Government in March 1996. The role of the Office is to provide a focus for tourism policy advice to the Commonwealth and to provide the machinery for the implementation of the Government's tourism and exposition programs.
A number of initiatives are being implemented through the ONT. A new National Tourism Development Program has been initiated with a view to spreading the benefits of tourism to regional and rural Australia, while a new National Visitors' Survey will be introduced from October 1997 with a view to improving the industry's information base. To encourage increased marketing of Australia as an international tourist destination, tourism operators have been granted full access to the Export Market Development Grants Scheme.
The savings envisaged through this Budget measure are attributable to reductions in ONT's running costs; these will be achieved by rationalising the administrative functions of the Office. Presumably this will be possible because of the administrative economies being achieved through the incorporation of the ONT within the Industry, Science and Tourism Department, so doing away with a number of the support overheads which would have been required when the function was performed by the freestanding Department of Tourism.
The main objectives of the Australian Tourist Commission (ATC) are to increase the number of visitors to Australia from overseas, maximise the benefits to Australia from overseas visitors, and ensure that Australia is protected from adverse environmental and social impacts of international tourism.
The Commission has developed a four year Olympic Games Tourism Opportunities strategy to leverage maximum economic benefit from the expected level of international interest in Australia in the years leading to Australia's hosting of the 2000 Games. This Budget measure assists in facilitating that strategy. The funds will be used in four key promotional areas:
The strategy is aimed at broadening awareness of Australia as an attractive tourist destination and increasing tourist visitations over the longer term. It will seek to entice high yield visitors and to ensure a wide dispersal of visitors across the country. A key element of the Commission's Olympic strategy is to ensure that Australia receives long-term benefits from being the host nation.
In identifying national yield objectives from international tourism, the ATC has set the specific targets of increasing employment in the tourism sector from the estimated 1995 level of 536 000 to over 680 000 by the year 2003.
Although ATC's funding supplement for the Olympics strategy is $3 million, the overall ATC funding increase for the year amounts to $1.5 million or a 2% increase. This result has been positively received by the industry body, Tourism Council Australia, which has observed that on last year's forward estimates this increase is about 4%, ensuring that this aspect of tourism promotion had 'survived unscathed' from the Budget.(1)
While the ATC represents the major element of the Commonwealth's direct involvement in tourism, the Office of National Tourism within the Department of Industry, Science and Tourism is also a significant dimension of the Commonwealth's involvement in tourism; 1997-98 Budget outlays for this agency have been reduced below the level applying in 1996-97 (see discussion under Sub-program 1.3-Tourism).
