Budget Estimates 2015–16

Budget Estimates 2015–16

Report to the Senate


1.1        On 12 May 2015, the Senate referred to the committee for examination and report the following documents in relation to the Treasury, and Industry and Science portfolios:

1.2        The committee is required to report to the Senate on its consideration of 2015–16 Budget Estimates on Tuesday 23 June 2015.[2]

Portfolio structures and outcomes

1.3        Following the Administrative Arrangements Orders issued on 23 December 2014, the Department of Industry and Science's outcome and programs structure comprises one outcome, three programs and nine sub-programs.

1.4        The Outcome is as follows:

Enabling growth and productivity for globally competitive industries through supporting science and commercialisation, growing business investment and improving business capability and streamlining regulation.[3]

1.5        The three Programmes and Sub-programmes are:

1.6        The complete structure and outcomes for each portfolio are summarised in the appendices as indicated below:

General comments

1.7        The committee conducted hearings over four days:

1.8        In total, the committee met for 32 hours and 38 minutes, excluding breaks.

1.9        The committee received evidence from the following ministers and parliamentary secretaries:

1.10      The committee thanks the ministers and officers who attended the hearings for their assistance. Evidence was also provided by:

Questions on notice

1.11      The committee draws the attention of all departments and agencies to the agreed deadline of Friday 17 July 2015 for the receipt of answers to questions taken on notice from this round, in accordance with Standing Order 26.

1.12      As the committee is required to report before responses to questions are due, this report has been prepared without reference to any of these responses. Following finalisation of indices of questions taken on notice during and after the hearings, indices will be available at:

1.13      http://www.aph.gov.au/Parliamentary_Business/Senate_Estimates/economicsctte/estimates/bud1516/index.

1.14      Answers to questions taken on notice are tabled in the Senate. They may be accessed from the committee's website.

1.15      For the 2014–15 Additional Budget Estimates round, answers to questions on notice were due to be provided to the committee by Friday, 17 April 2015. The committee notes that:

Public interest immunity claims

1.16      On 13 May 2009, the Senate passed an order relating to public interest immunity claims.[4] The order, moved by Senator Cormann, set out the processes to be followed if a witness declines to answer a question. The full text of this order was provided to departments and agencies prior to the hearings and was also incorporated in the Chair's opening statements on all four days of the Budget Estimates hearings.

Record of proceedings

1.17      This report does not attempt to analyse the evidence presented over the four days of hearings. However, it does include a brief list of the issues that were traversed by the committee for the respective portfolios.

1.18      Copies of the Hansard transcripts, documents tabled at the hearings, and additional information received after the hearings (see Appendices 1 and 2 for the list of the documents) are tabled in the Senate and available on the committee's website.

1.19      Page numbers in footnotes following the topics listed below refer to proof Hansard transcripts. Page numbers in the official Hansard transcripts, once they are produced, may differ from the page numbers in the proofs.

Matters raised—Treasury portfolio

1.20      On 1, 2 and 3 June 2015, the committee examined (in order of appearance for portfolio agencies) the estimates for:

Treasury [Macroeconomic Group and Corporate Strategy and Services Group]

1.21      The Secretary of the Department of the Treasury (the Treasury), Mr John Fraser, opened proceedings with a summary of economic developments.

1.22      At the international level, the Secretary observed encouraging signs in large parts of the global economy being tempered by risks in particular areas. He noted that while the risk of Greece defaulting on its debt obligations highlighted the euro area's 'inherent fragility', elsewhere such as the US and Chinese economies provide impetus to global growth.[5]

1.23      On the domestic economy, Mr Fraser noted that the country's 'healthy corporate balance sheets which should encourage increased investment going forward', was offset by the uncertain pace and timing of a recovery in mining business investment. He cautioned the Australian economy was currently facing the twin challenges of rebalancing an economy that relies heavily on mining investment for its growth and declining terms of trade.[6]

1.24      According to Mr Fraser, while mining investment is expected to fall by 25 per cent in 2015–16 and 30 per cent in 2016–17, the supportive fundamentals remained sound—lower exchange rate, lower oil prices and low interest rates, which underpin the economy's transition to broader-based growth. He reported the economy was forecasted to grow at 2.75 per cent in 2015–16 and reach its trend rate of 3.25 per cent in 2016–17.[7] Mr Fraser observed:

There is evidence of these fundamentals at work in household consumption, which grew at three-year highs in the December quarter of last year. Indicators since budget, such as retail trade, automotive sales, and consumer sentiment are consistent with a further improvement in the outlook for consumption. Dwelling investment is responding to low interest rates as well as strong house prices and solid population growth. The significant pipeline of approvals suggests that the upswing still has some way to run.  

The depreciation of the Australian dollar over the past year will play an important role in the transition to broader based growth by making businesses in export orientated and import-competing sectors more competitive. Exports are expected to continue to make a significant contribution to GDP growth, with resource and services export volumes growing particular[ly] strong.

Although investment by the services sector has grown strongly over the past year, the latest capex survey [or capital expenditure survey], which was conducted in advance of the budget, continues to suggest that businesses in the non-mining economy overall remain reluctant to commit to significant investment plans in 2015–16.[8]

1.25      In the area of employment, Mr Fraser elaborated on the labour market's resilience:

Employment growth has picked up, labour force participation has risen and the unemployment rate has remained steady. That said, with GDP forecast to grow below trend, the unemployment rate is still expected to edge a little higher, to 6½ per cent, in 2015-16 before falling to 6¼ per cent in 2016–17.

Wage growth continues to be constrained by spare capacity in the labour market. Although modest growth in wages is weighing on household income growth, it has been crucial to supporting employment during a period where the economy has been growing a little below trend. Incomes are being affected by weaker commodity prices. Although they have recovered a little recently, further growth in low cost supply is expected to continue to weigh on prices for many of our key, non-rural commodity exports. As a result, nominal GDP growth is forecast to grow by 3¼ per cent in 2015–-16 before picking up to 5½ per cent in 2016–17. This has driven a substantial downgrade to tax receipts of $52 billion since the 2014–15 budget—$20 billion of this due to iron ore prices alone.[9]

1.26      In a follow-up to the committee's examination of Treasury's real GDP growth forecasts, the Acting Deputy Secretary of Macroeconomic Group (Domestic), Ms Wilkinson, provided the following basis for Treasury's growth forecasts:

We have made those forecasts on the basis of assumptions about the impact that fundamentals will have to drive broader based growth in the economy. This includes factors like the impact that the lower exchange rate will have on the incentive for investment and export growth in the trade exposed sectors. It takes into account the transition that is taking place within the mining sector from its investment phase to its export phase, so there is significant growth in exports over the forecast period. It takes into account the impact that low-interest rates will be expected to have on dwelling investment and the impact that low-interest rates, the lower oil prices and the general increases in household wealth would likely have on consumer demand over the forecast period.


[Treasury's] forecasts are broadly in line with forecasts that have been generated at places like the bank through consensus forecasts and they are broadly in line with IMF forecasts for Australia.[10]

1.27      The topics covered during the committee's examination of the Treasury [Macroeconomic Group] included:

1.28      Other related matters traversed included:

Treasury [Fiscal Group] and the Clean Energy Finance Corporation

Clean Energy Finance Corporation (CEFC)

1.29      The Chief Executive Officer of the Clean Energy Finance Corporation (CEFC), Mr Oliver Yates, in response to the committee's question about the difference between the CEFC's new investment mandate the government provided to it this year and its previous mandate, outlined the following changes:

The original investment mandate required the CEFC to seek a benchmark, which was equal to the average of the five-year government bond rate for the investments that we made on a period after meeting our own operating expenses. That was the previous benchmark. If we look at the borrowings that we had under the previous benchmark, the cost of funds or our benchmark was to meet, after expenses, a return of about 3.1 per cent. The new benchmark is different. The new benchmark seeks for us to achieve a gross return based upon a similar scenario—being an average of the five-year government bond rate at the time we are making investments. But, in addition, it seeks a return of an additional four to five per cent above that rate as a target benchmark. In effect, the main scenario is a lifting of the rate by four to five per cent. However, the current rate is a gross amount. So it is before operating costs; whereas, the previous rate was after operating costs.[20]

1.30      Other main topics dealt with during the examination of the CEFC included:

1.31      In relation to the types of projects the CEFC has in its portfolio, Mr Yates advised:

In terms of our portfolio, we have nine per cent of it currently in bioenergy, 20 per cent of it is in things like energy efficiency such as refrigeration, lighting, air conditioning. Generation and distribution assets are around 10 per cent. Solar PV is running at about 27 per cent. Ocean energy is three per cent and wind is 31 per cent. We are seeing increasing activity in the other sectors of the economy in relation to our portfolio, and that is really because there has been a significant reduction in the renewable energy sector. As I mentioned last time when I was here, Bloomberg indicated a decline in investment activity of around 80 per cent within the renewable energy sector. That has not changed yet. We expect that to change now with some clarity in relation to the RET.[26]

Fiscal Group

1.32      The main topics covered during the examination of the Fiscal Group included:

Treasury [Revenue Group] with the Australian Charities and Not-for-profit Commission and the Australian Taxation Office

Australian Charities and Not-for-profit Commission

1.33      In the course of the Australian Charities and Not-for-profit Commission's (ACNC) examination, the committee questioned the ACNC on the following topics:

1.34      In relation to the ACNC's complaints mechanism, Mr Murray Baird, the Assistant Commissioner, reported about half of the 1300 complaints received by the ACNC were dealt with through its advice services and compliance team, and following further investigations, resulted in 10 revocations. He explained:

We start with 1300 concerns that would typically come into our advice line, and of those 596 were referred to the compliance team as being within our jurisdiction that could not be dealt with on the initial contact.


[Of the remaining 586] typically, we give them compliance advice. Our starting point is to try to ensure compliance and assist with compliance. They would have been the result of an assessment to see whether they were serious and within jurisdiction. If the investigation proceeds, that can result in asking for an undertaking for behaviour in the future or giving advice about behaviour in the future. In the most serious cases we would move to a show cause notice for revocation.[39]

1.35      Other issues considered by the committee during the ACNC's appearance included:

Australian Taxation Office (ATO)

1.36      The Tax Commissioner, Mr Chris Jordan, opened the Australian Taxation Office's (ATO) appearance before the committee with an update of its reform program 'Reinventing the ATO' over the last two years. Some achievements highlighted by the Tax Commissioner to come out of the reform program included:

[the] positive responses to [the ATO's] new products and services and the way our people are dealing with clients and each other. Just a few examples: MyTax had a great take-up last year of around one million people and it is being expanded this year to include around five million eligible individual taxpayers. Importantly, next year—so for June 2016—it will be available to all individual taxpayers to use.[46]


[In the area of] small businesses, we have done a lot in that space and offered services through a variety of new channels. There is a newsroom where they can go to specifically with information just about them. There is an after-hours call-back service, six to nine so, when their business is closed, they can book a call. Small business assist is an interactive tool that they can type their questions into to get an answer and, to help facilitate that, a click-to-chat facility. And we are continuing with our field visits where we guarantee not to use any information for audit purposes but to help them.

We have made significant improvements in our dispute management area with a lot of early and personal engagement; use of in-house facilitators; alternative dispute resolution techniques; and, from 1 July this year, the movement of objections from the compliance group to provide a separate, independent area within the ATO to review these matters.[47]

1.37      Another successful area of reform the committee was apprised of related to the ATO's tailored support in the debt area, which was trialled in February:

[The ATO] spent less than $10,000 on a number of SMS reminder messages to a group of habitual late payers, and we found that these messages returned around $543 million of payment on time instead of being very late and having to chase people up.[48]

1.38      Other matters canvassed during the committee's examination of the ATO, included:

1.39      Of the milestones raised, the Tax Commissioner identified the new guidelines related to profit allocation from multinational companies operating within an antiquated international framework, as particularly relevant:

The main milestone in our area is specifically the new guidelines on how to allocate profits from the multinational companies that, by doing things in a very aggressive structuring sense, assert now that we do not have a taxing right. As I have mentioned before, the basic international tax architecture was developed in the early 1920s for the League of Nations. It depended on physical presence in the country to drive the taxing rights. Clearly, as we know, with the digital delivery of a lot of services, which are a growing part of our consumption, that old framework has been relied upon to assert that there is no taxing right here in Australia. That will be measures delivered to the finance ministers meeting and leaders meeting in Turkey later this year. That is something in particular that we will be very keen to monitor.[55]

1.40      Turning to the committee's consideration of 'effective tax rates', different accounting techniques which can yield very different outcomes and the difficulties of applying consistent treatment, the Deputy Commissioner of Public Groups, Mr Hirschhorn, explained how the ATO's methodology was formulated:

The approach that [the ATO] have set out in response to the question on notice [about methodology] was a way of gaining visibility on the ultimate tax bill in Australia and elsewhere in relation to profits earned from the Australian channel. If you look simply at the accounting records—one way of looking at the effective tax rate is to look at accounting records—that often begs the question as to how much of the profit is reported in entities outside Australia. It can also obscure the position, because accounting for tax will often differ in its timing from when tax is actually paid. Indeed, you can have an accounting tax expense even where no tax is paid. This approach is designed to build up from somebody's Australian accounting records to give a picture of both Australian and global tax on their Australian channelled profits on a consistent basis. What that then does is make transparent how much of that profit chain is taxable in Australia, how much of it is taxable somewhere else and how much of it is taxable nowhere. It also gives a sense, when the tax bill is less than 30 per cent of profit, how much of that tax might be attributable to policy decisions—for example, accelerated depreciation, loss recoupment, research and development incentives, and how much of it potentially is explained by moving profit to low-tax jurisdictions.[56]

Treasury [Revenue Group]

1.41      During the examination of the Treasury [Revenue Group], the committee examined the following matters:

1.42      In relation to the earlier comments made by the Tax Commissioner on the new guidelines on how to allocate profits from multinational companies, Mr Heferen, Deputy Secretary of the Revenue Group, elaborated that these new guidelines are complemented by a range of other action items, including a 15-point action plan that the OECD provided to the G20. Mr Heferen advised:

[The] G20 last year ticked off six of those action items, I think. The remainder should be finished this year. Action item 15 is, if you like, the multilateral instrument. A lot of this stuff is implemented through tax treaties—there are tens of thousands of tax treaties, with all the different countries having treaties with one another. Rather than having the new arrangements go treaty by treaty, which would obviously take way too long for that to be implemented in a sensible time frame, action item 15 goes to proposing a multilateral instrument that countries sign up to, and that acts as an overlay to bring into the treaty framework and treaty network the new standards or the new rules that are agreed to.[64]

1.43      According to Mr Heferen:

[T]his year, action items 8, 9, and 10 will deal with better transfer-pricing arrangements. That will be a key thing for Australia. Transfer-pricing rules: at the Senate committee inquiring into tax avoidance, I tried to go through what we see as the three main arms of multinational tax avoidance, increased debt deductions, having an absence of a permeant establishment in Australia, and finally transfer pricing, where that is done quite aggressively. As far as we can see, on the first two, a lot of action has been taken domestically. Transfer-pricing rules were updated a few years ago, but I think where the OECD will head in its proposal, there will be a much more rigorous way to ensure profits are taxed in the country where the profits are earned.[65]

Treasury [Markets Group]

1.44      The committee examined the Treasury [Markets Group] on the following main topics:

Reserve Bank of Australia

1.45      The committee examined the Reserve Bank of Australia (RBA) on the following main topics:

1.46      In response to the committee's questions about the two different boards within the RBA—the Reserve Bank Board and the Payments System Board, the Assistant Governor of Financial System, Dr Edey, explained:

[The establishment of a Payments System Board within the RBA] was a decision taken [in response to the Financial System Inquiry―the Wallis Report] in 1997-98. You are right that those two things are not very closely related to each other. That is why we have two boards at the Reserve Bank—to handle those two areas. We have the Reserve Bank board and the Payments System Board to handle the two areas. The Reserve Bank Act specifically states that the Reserve Bank board has a certain charter, which is related to macroeconomic stability and anything that is relevant—except for payments system matters. Then we have the Payments System Board that handles the payments system matters, with a focus on efficiency and stability of the payment system.[80]

Australian Bureau of Statistics

1.47      The committee examined the Australian Bureau of Statistics (ABS) on the following main topics:

Commonwealth Grants Commission

1.48      During the Commonwealth Grants Commission's (CGC) appearance, the committee questioned the CGC on its GST Review process and any changes in methodologies used in its final report. The Secretary, Mr John Spasojevic outlined the following steps taken by the CGC:

The commission goes through a pretty standard process. It received its terms of reference from the Treasurer. It put out papers for consultation with the states. It met with the states twice, once at the level of treasurer and once with under-treasurers. In the end I think it undertook three rounds of consultations with the states. It developed a draft report, which it put out as per the terms of reference 12 months after the receipt of those terms of reference, and it put out its final report to the Treasurer in February.[87]

1.49      Mr Spasojevic drew attention to the following key changes in methodology adopted for the report:

1.50      Other matters examined included:

1.51      In his explanation of the necessity for change from a capital city metric to a closest major city metric to calculate the cost of goods, Mr Spasojevic referred to the cost comparison of goods sourced in one location compared to another:

I do not think we [the CGC] consider[s] [Melbourne] as the capital city [covering Tasmania]; we consider it as the major city, the biggest city, that is close by [to Tasmania]. That gives us a different metric for measuring what costs might be throughout Tasmania in relation to costs in similarly remote areas from, say, Melbourne. That gives us a better reflex of costs in Tasmania as a total, given the higher transport costs across the Tasman.[94]

Inspector-General of Taxation

1.52      In the course of the Inspector-General of Taxation's (IGT) examination by the committee, the following range of issues were canvassed:

1.53      The IGT noted the current review mechanism following a decision made by the ATO was dependent on the class of taxpayers. The Inspector-General of Taxation, Mr Ali Noroozi, observed:

At the moment, if you are one of the larger taxpayers, there is something that the new commission instituted called the independent review. The taxpayer could request a review of the original ATO position. After that, if the taxpayer is still not happy with that, they could object to that, which is a formal process under the law. All of that, for the big end of town, is done not in the compliance area but in the technical legal area of the ATO. So it is all done within the ATO. What I was saying was that you need greater separation, because the legal area are also responsible for setting the precedents that the tax office follows, and often these same people may be involved to some extent in the audit activity. Particularly for the big end of town, some of these technical people may be dedicated to deal with particular compliance teams. So what I was saying was that that is why you need a greater degree of separation.[101]

1.54      According to Mr Noroozi, by establishing a separate appeals area:

[this will] fulfil two functions. One is ensuring that the taxpayer gets as independent a review as possible so they get fair and equal treatment, and the other...is providing a further degree of assurance that settlements are as they should be.[102]

Australian Competition and Consumer Commission

1.55      During the Australian Competition and Consumer Commission's (ACCC) appearance, the committee examined the following matters:

1.56      On the matter of high credit card interest rates, Mr Rod Sims, the ACCC Chairman, clarified that unless there was a breach of the law or anti-competitive behaviour, it was outside the ACCC's remit:

[I]s there a breach of the law? We have no evidence of that, keeping in mind that pricing well above cost is not against the law. Essentially, consumer law says do not mislead consumers or do not sell them unsafe goods, but there is no law against pricing way above cost unless the good is somehow prescribed as a monopoly asset.[109]

Australian Securities and Investments Commission

1.57      The Australian Securities and Investments Commission (ASIC), in its opening statement, emphasised ASIC's work in the area of culture as it is a major risk to investor trust and confidence and big driver in the financial industry.

1.58      ASIC's Chairman, Mr Medcraft, outlined some activities ASIC will focus its resources on in relation to improving the culture within the financial industry:

ASIC [is] planning to incorporate culture very strongly into our role as a conduct regulator and enforcement agency. The areas we are planning to target are those where poor practices may increase potential for poor conduct; therefore increase the risk to trust, and investor and consumer trust and confidence. We intend, first, to incorporate culture into our risk based surveillance reviews; second, to use surveillance findings to better understand how culture is driving conduct among those that regulate; and, third, to communicate to industry and firms where we have problems with their culture and conduct. Let me add fourthly, we will intend to enforce where we see the wrong culture that is driving bad outcomes.

[ASIC recently] announced what we call the three-Cs framework on conduct risk for firms to help guide them to think about conduct and culture. The three Cs are, firstly, communication: making sure most importantly that communication comes from the top, that the people at the top know what the expectations are about the right way to do things, and that that communication is consistent and reviewed constantly. Secondly, challenge: to make sure that you are constantly challenging what you are doing to make sure that you are doing the right thing in your business. Thirdly, as we all know, do not ever be complacent—do not ever be complacent; always be making sure that it is dynamic. We can talk more about those if the members are interested.[110]

1.59      Mr Medcraft also drew the committee's attention to the paper he delivered at the Davos forum in Queensland where he commented on the opportunities for capital markets or market based financing to fund the real economy, and the challenges for infrastructure, especially the small and medium sized enterprise (SME) sector, and their problems with accessing finance through the banking system and the capital markets.[111]

1.60      Other related matters covered during the committee's examination included:

Australian Prudential Regulation Authority

1.61      During Australian Prudential Regulation Authority's (APRA) examination, the following range of issues were covered:

Productivity Commission

1.62      During the Productivity Commission (PC) examination, the matters raised included:

Matters raised – Industry and Science portfolio

1.63      On 3 and 4 June 2015, the committee examined the estimates for the:

1.64      Matters examined included the following:

Australian Nuclear Science and Technology Organisation

1.65      During the Australian Nuclear Science and Technology Organisation's (ANSTO) appearance before the committee, ANSTO provided an overview of the impact that the construction of the new nuclear medicine facility and associated synroc waste plant would have on the supply of nuclear medicines. The Chief Executive Officer, Dr Adi Paterson, provided the following comment:

The big change that will take place for us is that at the moment we are a supplier into the Australia New Zealand domain and to some countries in the region and we are a small supplier into the US market at present, and when the new nuclear medicine facility is completed we will be able to move to supplying of the order of 11½ million doses a year of diagnostic nuclear medicines into the US, Asian region markets, Australia and New Zealand. This will be a very significant change. It will move us into being one of the major global suppliers and will have great advantages both for Australian manufacturing capabilities, because we are effectively in that sense a manufacturer, and because the 11½ million doses will generate around $100 million a year in revenue which will return to Australia.[134]

1.66      Dr Paterson also described how the economics of synroc waste technology compared to the current waste treatment paradigm of encapsulating liquid wastes within a cemented product, advising the committee that:

Not only would Synroc considerably reduce the volume, it also more safely and more sustainably contains the nuclear waste.

The reduced volume and the better safety case together add up to a considerable advantage. It is oversimplifying but nevertheless true that the economics of nuclear waste is highly correlated with the volume that is produced and, if you can reduce the volume, that is a positive outcome.[135]

1.67      Other matters of interest discussed included:

Commonwealth Scientific and Industrial Research Organisation

1.68      During its examination of the Commonwealth Scientific and Industrial Research Organisation (CSIRO), the committee canvassed the following matters:

1.69      In relation questioning about progress made in finding an alternate source of funding in order to increase the number of operating days of the RV Investigator per year, Dr Marshall advised:

A number of us have engaged a number of corporates, private companies, that are interested in availing themselves of the use of the vessel. One of the great opportunities with the new ship is that we are able to carry 40 scientists instead of 13—I believe they are the correct numbers—which means we would in principle be able to accommodate a commercial voyage and then ask the commercial partner to let us put some more scientists in those extra berths, essentially to go along for the ride. We could then do science and let the commercial partner do their work as well. We have had some fairly positive reception to that notion. We have not granted anything yet but there are some things that are quite close.[151]

1.70      Dr Marshall also provided the committee with an update with regard to the restructuring of CSIRO and how staff morale is faring in relation to this, commenting that:

I would say that when I started that process there was a lot of uncertainty, a lot of concern about the future. The organisation had gone through a massive change in the restructure. From that experience, I would say the morale is definitely looking forward now, not backwards. Culturally I think as scientists we want to look forward. We want to look to the future. We believe we can make the future better. So that is a really profound and important shift in the morale.[152]

Australian Institute of Marine Science

1.71      During the Australian Institute of Marine Science's (AIMS) appearance, the committee asked about the work undertaken by the Institute on offshore oil and gas projects and the effect of the oil price crash.[153]

1.72      AIMS' Chief Executive Officer, Mr Gunn, provided the following comment:

I think that right across that sector there is pressure on expenditure. As usual, we are working pretty hard to make sure our work is relevant. At the moment we are still in negotiation on a number of projects. I am hoping it will note have too much impact on the research we do.[154]

1.73      In response to questions regarding how AIMS will factor projected budget cuts, Mr Gunn noted:

The practice of all science agencies—all agencies—when they are faced with a cut is to look for savings within efficiencies. Efficiencies are driven hard by those types of cuts. We go through our usual process of looking at ways we could make sure that our science is maintained while becoming more efficient in the back-end of the business.[155]

National Offshore Petroleum Safety and Environment Management Authority

1.74      During the National Offshore Petroleum Safety and Environment Management Authority's (NOPSEMA) examination, NOPSEMA provided the committee with an update on the progress of conferring state powers in the areas of health and safety and environmental management to NOPSEMA.[156]

1.75      With regard to the process of conferring state powers, NOPSEMA's Chief Executive Officer, Mr Stuart Smith, explained:

Typically, if a state or territory chooses to confer its powers that would be a matter that would need to be considered by the cabinet and signed off by the cabinet. There are a number of ways in which conferral can occur: for instance, the relevant jurisdiction could adopt the Commonwealth legislation; they could adopt mirroring legislation; or they could look at NOPSEMA being their agent and us administering their laws on the basis that their laws have substantive equivalence with the Commonwealth regime. In terms of conferral, when it takes place NOPSEMA becomes the agent for that particular state.[157]

1.76      Mr Smith went on to comment on the advantages of the conferral of states regulatory powers in these areas:

I believe conferral is in the best interests of the country, because I believe the regulatory regime we have is the one most likely to lead to safe and environmentally responsible outcomes. I believe that is the key benefit from conferral. You will have one regulator—so you are removing a level of duplication—and you are getting some savings but you are also getting certainty from that. Also, you are getting a regulatory regime that is the best in the country. Some of the states and territories are already applying a very similar regime and we are working with them. Having just one regulator administering everything means that you are more likely to get a safe outcome and an environmentally responsible one.[158]

1.77      Other areas of examination by the committee included:

Geoscience Australia

1.78      The committee covered the following topics during its examination of Geoscience Australia (Geoscience):

Office of the Chief Scientist

1.79      The Chief Scientist, Professor Ian Chubb, provided the committee with an overview of the important work currently underway out of the office:

Right now we are about to start a consultation process on the development of a whole-of-government science policy, science strategy. That will take a few weeks and months until the end of the year when I leave. Hopefully it will be completed by then. That is focusing on four main pillars: innovation, education, research and international engagement. We are approaching that with a consultation paper that will go out later this month. Then we will have a series of roundtables dotted around the country to get some input into that. Basically, the position is: is the government response to my recommendations from last September appropriate? In other words: are the adequate, are we missing things, are there things we should be doing or are they all okay? That will, I hope, lead to a significant shift in the way we approach support for science in the country and will give us some long-term capacity that will enable us to build appropriate capability. Embedded within that but already released are our science and research priorities. They went out a couple of weeks ago, launched by the Prime Minister and Ministers Pyne and MacFarlane and me. We are now doing the back-office work on that to map what we presently do in those areas and which proportion of our present $9.2-odd billion—if you count it all, or $7.2 billion if you take out the tax R&D rebate—do we spend on those priority areas? I was really pleased to see that the ministers—state, territory and federal—agreed to a national STEM policy for schools, announced last Friday. That is consistent with what I have been arguing in the STEM strategy paper.[168]

1.80      In response to a question from the committee regarding the most comprehensive way of preparing students for a career in science, technology, engineering and mathematics (STEM), Professor Chubb commented that:

I think that the foundation for it all is that all STEM subjects—and not much engineering is taught in schools, of course, so we are talking primarily about science, technology and mathematics with respect to schools—be taught as they are practised. When it is practised, it is awesome, fantastic. You discover things. You learn things. You learn things about nature. You learn things about the constructed world, not just the natural world. Taught the right way, showing young people how awesome it is, either they will either learn it and go on to be members of the community with the capacity to make informed judgements when they have to make a judgement or they will become scientists. Both are important.[169]

1.81      Other matters of note examined included:

Department of Industry and Science [Cross-portfolio /Programme 3: Programme Support]

1.82      During the Department of Industry's [Cross-portfolio/ Programme 3] appearance before the committee, the department was questioned about the use of non-conforming and non-complying building products and, in particular, the incorrect use of aluminium cladding products. The department assured the committee that:

...we are aware of the sensitivities of the matter and the need for the Commonwealth to work with the states and territories in relation to potential strategies to address some of the outstanding issues. At the forthcoming building ministers forum issues relating to non-conforming and non-complying building products will be a key issue.[175]

1.83      The department further commented that:

[T]here is a range of players who are involved in actually resolving these issues—not just the states and territories, but the builders themselves, industry groups and so forth. One of the actions that have occurred is that the Australian Industry Group has developed a construction product alliance that involves a lot of key stakeholders, which is attempting, from an industry lens, to look at action that could be taken. Certainly, the department has entered into and continues discussions with the ACCC and with other parties in relation to what action could be taken.


Through our previous parliamentary secretary, late last year there was an opportunity for stakeholders to meet with the Commonwealth to talk about issues from their perspective, through a non-conf[o]rming building products round table. Obviously, representations to government continue from industry stakeholders. Also, at the forthcoming BMF [Building Ministers' Forum] there will be a further discussion about these important matters and what further action may need to be taken, either at the jurisdictional level or at the national level.[176]

1.84      Other matters examined included:

Department of Industry and Science [Programme 1: Supporting Science and Commercialisation]

1.85      During the Department of Industry's [Programme 1] appearance, the Minister representing the Minister for Industry informed the committee about what has occurred as a result of the recent review of co-operative research centres (CRCs).

As a result of the reviews, the 2015-16 budget is investing about $731 million over five years. I think it is interesting to note that since 1991 the nation has invested more than $4 billion in funding the CRC Program. There was a review by Mr David Miles. I think that in the 25 years since it started there have been about 209 CRCs. There are of course reviews, I think, approximately every four or five years in relation to it. There were 18 recommendations, which were all accepted by the government.[182]

1.86      In relation to questions regarding how the department was getting the most value for money with respect to spending in the science and research area, the department's Deputy Secretary, Mr Martin Hoffman, noted that:

[T]he government has now put in place a set of national science and research priorities. This is a way of getting, as it were, the best value or the best return from the investment that is made by lining them up on some national priorities and challenges and then seeing that flow through from the science sector into the economy itself with the identification of the growth sectors. It is really drawing it all the way through from science into industry and vice versa.[183]

1.87      Other matters covered during the committee's examination included:

1.88      Director of Questacon, Professor Graham Durant, provided the committee with an update on the work taking place through the Inspiring Australia program:

The program is doing very well. It is now in its fourth year, having been re-funded in the last budget for a further four years. It is doing some very good work in the ongoing operations of Prime Minister's prizes for science and National Science Week. The recent Unlocking Australia's Potential grant round awarded 63 grants, a sum of $5 million, and achieved a significant amount of activity right across the country. Many of those projects are still underway, having achieved a measure of sustainability after the life of the grant. In all states but one, we have set up an ongoing funding agreement, jointly funded with the states and territories, to place an officer on the ground and to generate some funds that will allow for activities in each of those states and territories as part of the national framework.[190]

Department of Industry [Programme 2: Growing Business Investment and Improving Business Capability]

Australian Renewable Energy Agency

1.89      At the request of the committee, the Chief Executive Officer of the Australian Renewable Energy Agency (ARENA), Mr Ivor Frischknect, gave a summary of some of the 'cutting-edge' technology the agency was presently looking at:

There are many; it is hard to choose. One thing that is very exciting is that Australia really has a leadership position in working on PV R&D. A majority of the panels that we see on rooftops either have now or will in the very near future be based on UNSW and ANU intellectual property. That is a gigantic gift that we have given to the world and, of course, benefited from ourselves directly in the form of cheaper panels. It has also resulted in lots of foreign students coming here, which of course is an export; substantial intellectual property licence fees; and also contract R&D. A lot of the Chinese solar manufacturers do contract R&D here.

That is the past. The future is equally exciting in that we can see the cost declines in PV continuing quite dramatically, and that is going to lead to large-scale projects being competitive with wind soon, and both of them being very competitive with any fossil fuel new build in the near future, if they are not already.[191]

1.90      Other topics examined by the committee during ARENA's appearance included:

Anti-Dumping Commission

1.91      During its examination of the Anti-Dumping Commission, the committee covered the following topics:

Department of Industry [Programme 2: Growing Business Investment and Improving Business Capability]

1.92      The main topics covered during the committee's examination of the Department of Industry's [Programme 2] included:

1.93      In response to questions in relation to the time taken to implement the election commitment of the Manufacturing Transition Program, General Manager of the Operations Branch, Ms Lisa Peterson explained that:

Round 1 of the program opened in September 2014 and closed on 21 October. There was an industry led advisory committee that met on 16 February this year to assess the applications and to determine funding recommendations to be put forward to the minister. While the total quantum of funds available was sufficient, the recommended projects could not be put forward for approval to the minister until necessary changes have been made to the funding profile to accommodate the proposed milestone payments. Within the requirements of the financial framework, funding decisions must of course consider whether or not there are sufficient uncommitted funds across the year. We put in a movement of funds request that was made and approved by the Minister for Finance on 2 April as part of whole-of-government processes. The grants were approved shortly afterwards.[210]

1.94      In relation to the number of applications received and the assessment process for the Next Generation Manufacturing Investment Program, Ms Chris Butler, Head of the Business Services Division, advised the committee:

Interest has been very strong for this program, with a total of 265 applications received seeking $554 million in grants. Of those, 241 of those applications are considered to be eligible and we are going through an assessment process at the moment. Given the large volume of the applications that we have received, we are looking for a decision before the end of the financial year. It has been a very well-subscribed program, and it has resulted in us having to undertake a considerably large assessment within AusIndustry.[211]

Senator Sean Edwards

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