Joe Ludwig (Queensland, Australian Labor Party, Minister for Agriculture, Fisheries and Forestry) Share this | Hansard source

I present government responses to committee reports as listed at item 15(b) on today's Order of Business. In accordance with the usual practice, I seek leave to have the documents incorporated in Hansard.

Leave granted.

The documents read as follows—

Government Response to the Senate Standing Committee on Finance and Public Administration

Annual reports (No. I of 2008)

Recommendation 1

The committee recommends that the government implement the committee's updated 2005 recommendations regarding the publication of an annual report on government advertising expenditure.

Responses to updated recommendations 10 to 12 of the Finance and Public Administration References Committee, Government Advertising and Accountability Report, December 2005

Updated Recommendation 10

The Committee recommends that the Department of Finance and Deregulation publish an annual report on government advertising, commencing in 2007-08. The annual report should be modelled on the Annual Report on the Government of Canada's Advertising Activities 2003-04. It should include:

Response

Agreed in principle. Following the introduction of new advertising guidelines in July 2008, and updated guidelines in March 2010, Finance has published five reports related to campaign advertising expenditure.

Three of these reports were Half Year Reports on Campaign Advertising by Australian Government Departments and Agencies, covering media expenditure costs for campaigns that ran during the first six months of a financial year (from 1 July to 31 December). The first report was tabled in March 2009.

The remaining two reports were Full Year Reports on Campaign Advertising by Australian Government Departments and Agencies, covering both direct campaign advertising expenditure and associated indirect expenditure such as campaign research, consultancy services and other costs. The Full Year reports provide a summary of individual campaigns in terms of target audiences and campaign objectives. Full Year Reports cover the period 1 July to 30 June in each financial year and the most recent was tabled in October 2010.

Updated Recommendation 11

The Committee recommends that from 2007-08, the annual reports of each government agency must include:

Response

Agreed in principle, but at a whole of government level. This recommendation will be delivered as Finance publishes whole of government biannual reports on Campaign Advertising by Australian Government Departments and Agencies.

Updated Recommendation 12

The Committee recommends that from 2007-08 the annual reports of each government agency must include:

Response

Agreed in part. The full year report on campaign advertising includes information on the campaign research costs, the research firms involved as well as other campaign related costs.

Recommendation 2

The committee recommends that the government comply with the Senate Order relating to agency advertising and public information projects of 29 October 2003.

Response

See response to Recommendation 1, in particular, the response to updated Recommendation 10 of the Committee's 2005 Report.

Recommendation 3

The committee recommends that Centrelink review its current outcome and output structure with a view to their modification to better reflect the comprehensive nature of Centrelink's operations and functions.

Response

The recommendation is superseded by the review of financial structures in the lead up to integration of the Department of Human Services.

Recommendation 4

The committee recommends that the Australian River Company Limited provide the committee (on a confidential basis if necessary) with a written explanation as to;

Response

The Australian River Co. Limited (ARCo) was created to hold the residual assets and liabilities of the Australian National Line group (ANL), formerly the Australian Shipping Commission, which were not able to be included in the Government's sale in 1998-99 of most of the ANL operations.

Since May 2002 ARCo has operated under a 'charter' from the Government (represented by the Minister responsible for the 'Finance' portfolio) to manage the remaining operations of the company with a view to winding it down at the earliest opportunity on a commercially supportable basis, including the pursuit of any sale opportunities.

In 2004-05 the then Board was able to complete the sale to Patrick Shipping Pty Ltd of two 'roll on / roll off' vessels operating across the Bass Strait. The net profit on the sale of approximately $2.3m was paid to the Commonwealth as a dividend. SeaRoad Holdings Pty Ltd continues to operate these vessels between Melbourne and Devonport.

A wind down of ARCo's remaining operations must deal with two separate and largely unrelated aspects of the residual assets and liabilities. In both cases characteristics which would have influenced the original exclusion from a commercial sale remain relevant.

The first aspect is the appropriate future management of insurance settlements for ARCo's ongoing legal liability to former employees of ANL for the period 1946 to 1997. The ARCo annual report for the year to 30 November 2010 shows a gross provision for these claims of $18.9m based on an annually updated actuarial review of the company's claims exposure going forward. When ARCo's insurance arrangements are taken into account, the net provision reported in November 2010 is an estimated $3.6m. The actuarial review notes that some claims may take up to 40 years to settle. The potential for asbestos related disease is a factor in this analysis.

This insurance liability for former employees is largely covered by long standing insurance agreements which could not be expected to be replaced on favourable terms. Continuation of this insurance policy cover is dependent on the workers' compensation liability remaining with ARCo. This effectively precludes alternative arrangements involving a liquidation of the company, such as a transfer of the liability to the Commonwealth insurer Comcare, from being commercially supportable at this time. The uncertainty and sensitivity surrounding the liability, with its exposure to asbestos disease, means that a disposal of ARCo shares by the Commonwealth that includes the necessary safeguards for former ANL employees would necessarily be on terms unattractive to the Commonwealth.

The second aspect is the future of the two remaining vessels owned by ARCo and operated between Weipa and Gladstone by Queensland Alumina Limited (QAL) on a yearly renewable charter basis. These bulk ore carriers, the River Boyne and the River Embley, were specifically designed for this task, including a shallow draught for operation within the Great Barrier Reef, and the use of coal fired turbine propulsion, now virtually unique in commercial maritime operations. Two similar ships, which together with the ARCo owned ships were dedicated to the Weipa I Gladstone operation, were recently retired and sold for scrap.

The ARCo Board was restructured in 2007, with two of the three positions being filled with senior executives of the Department of Finance and Deregulation, The Board continued to explore the divestment option for both the company's legal liabilities and the two remaining ships. As a result of this process, the Board has concluded that the retention of the net insurance liabilities within the legal entity of ARCo, and the retention and continued operation of the ships until the end of their economic lives with QAL (expected to be in 2012-13), is the appropriate commercial course for the company. The Board considers this optimises the Commonwealth's financial position and other risks in relation to its ARCo shareholding.

The Government has agreed to an ARCo wind down strategy that involves the sale of the two ore carriers in 2012-13, with the expectation that this will reflect scrap value. This has been the long-standing basis for valuation of the vessels, reflecting the realities of the ships' role and configuration. The administration of the workers' compensation liability will continue for the foreseeable future under the existing insurance arrangements and through the entity of ARCo under Commonwealth ownership.

Following the sale of the ships and the crystallisation of ARCo's financial position, the Government will determine in consultation with the Board, the dividends payable to the Commonwealth and the financial and governance arrangements appropriate for the administration of the insurance settlements process going forward. It is expected that the long standing practice of contracting this role to the private sector under broad ARCo Board supervision will continue. It is also anticipated that the use of the ARCo entity under Commonwealth ownership to manage the insurance settlements would be subject to periodic review having regard to changes in the claims portfolio, the insurance arrangements or the regulatory framework.

Recommendation 5

The committee recommends that the Australian River Company Limited provide a comprehensive description of its principal activities in all future annual reports.

Response

ARCo has taken the committee's recommendations into consideration in preparing its subsequent annual reports, including reporting on the progress made regarding divestment of assets and future management of residual liabilities. The 2010-11 report will include the strategy referred to in the response to Recommendation 4.

Recommendation 6

The committee recommends that the Australian River Company Limited provide the committee with an explanation as to:

what measures were taken to ensure that there was no real or perceived conflict of interest in the appointment of the Secretary; and on the basis upon which the Australian River Company Limited made the decision to pay for the services of a company in which an Australian River Company Limited Director is a shareholder and director.

Response

The ARCo Company Secretary was an employee of ANL Container Lines Pty Ltd (ANLCL). ANLCL was contracted by ARCo to provide management, secretariat and financial reporting services, including administration of the insurance settlements process. At the time the contract was signed, ARCo analysed the different industry sectors in which the two companies operated (bulk carrier transport for ARCo and container transport for ANLCL) and formed the view that the interests of ANLCL and ARCo were not in conflict. As a result, ARCo does not consider that there is any actual or perceived conflict of interest in this arrangement. If such a conflict had emerged the arrangement would have been reviewed.

For commercial reasons only, there has been a change in the contract allocation, with ASP Ship Management Pty Ltd currently providing these services. ARCo is satisfied there is no actual or perceived conflict of interest in this arrangement.

In relation to services purchased by ARCo from a company in which an ARCo Director is a shareholder and director, at the time the decision was made to purchase these services, they were expected to be minor in extent and cost and uncertain in relation to scope and nature. In these circumstances ARCo considered that the interests of the company would best be served by purchasing the services as and when required directly from Acton Corporate Partners Limited (Acton Partners). ARCo considered that this would most likely deliver best value for money for the company. The ARCo director that had an ownership interest in Acton Partners was excluded from all deliberations relating to the engagement.

Recommendation 7

The committee recommends that:

Response

Departmental annual reports must be prepared in accordance with guidelines approved on behalf of the Parliament by the Joint Committee of Public Accounts and Audit (JCPAA).

The 2009 Report of the Independent Review of the Environment Protection and Biodiversity Conservation Act 1999 (the Review) recommended that the requirements for section 516A reporting be amended to provide more detail to government agencies regarding the type of information that should be reported and to give the reporting requirements greater force. The government response to the Review agrees to amend the Act to allow the minister to specify the requirements for this reporting in regulations under the amended Act. This will provide further guidance in order to improve the quality of reporting and the community's understanding of Commonwealth actions to contribute to improved sustainability. Consistent with its election commitment, the government will introduce amendments to the Parliament in 2012.

Joint Committee on the National Broadband Network

Review of the Rollout of the National Broadband Network

First Report

Australian Government Response to the Committee's First Report of 31 August 2011

February 2012

INTRODUCTION

In March 2011 the Parliament established the Joint Committee on the National Broadband Network (the Committee) to enable the ongoing parliamentary scrutiny of all aspects relating to the rollout of the NBN. The Committee is required to report to the Parliament on the rollout of the NBN on a six monthly basis until the completion of the project.

The Committee has been asked to provide progress reports on:

The Committee's first report was informed by four public hearings held in a number of locations throughout Australia, and public consultation which attracted twenty one submissions and eleven exhibits. As part of the review the Committee also conducted two infrastructure inspections in Broken Hill and Melbourne on 27 and 28 July 2011. On

31 August 2011, the Committee tabled its first report, entitled Review of the Rollout of the National Broadband Network The report made five recommendations ranging across: future reporting arrangements; government readiness to take advantage of the NBN; the impact of the Definitive Agreement process on timing of the rollout; the expected productivity, jobs and competitive benefits of the NBN; and timeframes for regional and remote rollout and satellite service levels. The Committee has since released its second report on the rollout of the NBN to the Parliament on 24 November 2011, to which the government will provide a separate response.

BACKGROUND

The Australian Government believes that access to affordable, high-speed broadband is increasingly essential to the way Australians communicate and do business. It will help drive productivity, improve education and health service delivery and connect our cities and regional centres.

The Australian Government has established NBN Co to design, build and operate a new high-speed NBN. The NBN will be the single largest infrastructure investment made by an

Australian Government and will be accompanied by historic reforms to the telecommunications sector. The NBN is about more than having a faster internet connection. The productivity gains associated with this investment will mean that the full benefits will continue to flow for decades beyond the completion of the project.

NBN Co's central objectives, as set out by the government are to:

In implementing the government's policy initiative, NBN Co's specific objectives include:

The NBN will be Australia's first national, wholesale-only, open access broadband network offering equivalent terms and conditions to all access seekers. This means NBN Co will roll out the network and sell wholesale services to retail service providers, who will then provide services to end users. This represents a significant structural change in the

telecommunications industry and will support vibrant retail competition. The NBN will be built and operated on a commercial basis, at arm's-length from government, by NBN Co.

AUSTRALIAN GOVERNMENT RESPONSE

The Australian government has considered the Committee's first report and provides the following response to the recommendations.

Recommendation 1

The committee recommends that the NBN Co together with the Department of Broadband, Communications and the Digital Economy, commencing for the first quarter 2011-2012, provide a six-monthly report on the progress of the rollout of the National Broadband Network, using established Key Performance Indicators and performance measures, no later than three months before the committee is due to report to the Parliament.

The government supports this recommendation and submitted its first report to the Committee on 23 September 2011.

The government will submit six-monthly reports to the Committee and adopt this reporting pattern on an ongoing basis. The reports will provide quantitative and qualitative advice outlining NBN Co's key performance information across the following areas:

The information provided to the Committee will become more meaningful as the rollout progresses and more premises are connected and as NBN Co's operating and business systems come online during 2012.

Recommendation 2

The committee recommends that Government agencies take measures to ensure they are ready for the rollout of the National Broadband Network (NBN), prior to receiving and working with the NBN for service delivery.

The government supports this recommendation.

The government outlined its vision for the NBN-enabled digital economy in its release of the National Digital Economy Strategy, including the goal that by 2020, four out of five Australians will choose to engage with the government through the internet or other type of online service.

Significant progress is already being made in Australia to expand delivery of government services and programs online. Recently, the government released a draft Strategic Vision for Information and Communications Technology (ICT) that outlines a long term plan for the government's use of ICT to support increased public sector productivity.

The Strategic Vision for ICT and its implementation will include measures to ensure that government agencies are ready for the rollout of the NBN.

In addition to this the government has announced several new initiatives to advance the digital economy goals outlined in the National Digital Economy Strategy. A number of these initiatives relate to government services delivery including:

Recommendation 3

The committee recommends that NBN Co Limited publish a detailed account of impacts on timing and cost of the National Broadband Network as a result of the time taken and resources used to complete the Binding Definitive Agreements between NBN Co and Telstra and NBN Co and Optus, and the decision to increase the number of Points of Interconnect from 14 to 121.

The government notes this recommendation.

The Definitive Agreements between NBN Co and Telstra and NBN Co and Optus are currently being scrutinised by the ACCC and are therefore not yet finalised.

At the time that NBN Co's 2011-2013 Corporate Plan was finalised, there were a number of issues which — due to their complexity — had implications that could not fully be anticipated. These issues included the time needed to finalise the Definitive Agreements, the impact of the government's acceptance of the agreement between NBN Co and the ACCC to have 121 points of interconnect and the suspension of the construction tender process.

While the agreement with Telstra was extremely complex and took longer than first anticipated, the government is confident that these agreements will protect the interests of Australian taxpayers and support the NBN rollout by providing access to existing infrastructure, minimising overhead cabling and reducing the overall costs of the NBN. Further, NBN Co will proactively manage the construction timetable over the life of the project to minimise and overcome any delays.

In line with Commonwealth Government Business Enterprise Governance and Oversight Guidelines (October 20111, NBN Co is required to submit a corporate plan to Shareholder Ministers each year. NBN Co is currently developing its second Corporate Plan 2012-15 which will take into account any impact there may be on the timing and cost of the NBN as a result of agreements with Optus and Telstra and other factors.

Following the finalisation of the agreements the government will consider the

recommendation, but notes that any decision to publish details of the impacts would need to be taken following finalisation of the ACCC consideration and take into account the extent to which the legitimate commercial interests of parties, including Telstra and Optus would be compromised by publication.

Recommendation 4

The committee recommends that the Minister for Broadband, Communications and the

Digital Economy publish a detailed statement outlining the productivity, jobs and competitive benefits of:

The government supports this recommendation in principle and this Statement outlines those productivity, jobs and competitive benefits of the NBN. It also provides comments on how competitive markets will operate at the wholesale and retail levels, and summarises the impact on competition of the increase of Points of Interconnect from 14 to 121.

The NBN will give 100 per cent of Australian addressable premises access to high-speed* broadband and will provide the enabling infrastructure to support Australia becoming one of the world's leading digital economies by 2020. High-speed* broadband will be available to 93 per cent of Australian homes, school and business premises via fibre to the premises technology; the remaining 7 per cent of premises will be connected via a combination of leading edge fixed-wireless and satellite technologies. This represents a significant step change over broadband speeds currently experienced by users of this technology today.

The establishment of NBN Co to build and operate a National Broadband Network followed a decision by government to terminate the NBN Request for Proposals (RFP) process. The government conducted a robust open competitive process in accordance with the requirements of the RFP [and the Commonwealth Procurement Guidelines], which included rigorous analysis and evaluation of proposals, with the aim of selecting a preferred proponent to build and operate the NBN. The decision to terminate followed advice from the panel of experts that none of the national proposals submitted offered value for money for the Commonwealth against the criteria set out in the RFP. The government decided that as the private sector was unable to provide an acceptable solution for Australia's broadband needs, the government would establish NBN Co to build and operate the NBN and provide the infrastructure the economy was demanding.

With the release by NBN Co of its first 12-month construction timetable on 18 October 2011 the NBN is rapidly moving to realise tangible benefits for productivity, jobs and competition:

To remain competitive in our region as the world moves to a 21st century digital economy, Australia needs to maintain the momentum and make this investment.

The most recent OECD statistics (for June 2011) indicate that Australia is ranked 21st out of 34 countries in terms of its number of fixed broadband subscribers per 100 inhabitants.1

Other OECD statistics indicate that Australians pay more for broadband than most other OECD countries. Regarding average subscription prices (as at September 2010), Australia is:

These OECD statistics are further evidence that Australia cannot afford not to reform industry structure and infrastructure.

The demand for higher bandwidth will continue to grow. Cisco estimates that Australia's internet traffic will grow six-fold by 2015.5 This is a compound annual growth rate of 41 per cent. Cisco says that:

When coupled with the Government's National Digital Economy Strategy, the results reveal that Australia is on the verge of a substantial evolution in how new jobs, businesses and even new public services will be enabled by a broadband-enabled economy' (News Release - Cisco Visual Networking Index Forecast (2010-2015), 9 August 2011).

The latest Australian Bureau of Statistics figures indicate that fixed line networks carried 93 per cent of the data downloaded over the internet in Australia in June 2011 and fixed line downloads grew by 79.7 per cent over the 12 months between June 2010 and June 2011.6 Our telecommunications systems are increasingly relying on fixed networks to do the heavy lifting in a high growth operating environment.

The UN Broadband Commission Report released on 6 June 2011 states:

'Developing isolated projects or piecemeal, duplicated networks is not only inefficient, it delays provision of infrastructure that is becoming as crucial in the modern world as roads or electricity supplies'7

The Chief Executive of Singapore Telecommunications was reported in The Australian (10 June 2011) as supporting the competitive opportunities arising with the NBN:

'If you look at NBN in Australia, that presents an excellent opportunity for a fixed communications network ...with NBN, which will be an open access network, I think you will be able to see the entire fixed telecommunications industry reshaped and I think you'll see more competition and a lot more innovation, and with that, improved productivity for businesses and added convenience for consumers'.8

Productivity benefits

The NBN is a key nation-building project; it will help drive Australia's productivity in business, education, health, and government service delivery; and improve social inclusion through fast and reliable broadband services to our cities, regional centres and rural communities.

The NBN will play a significant role in enabling new ways of doing business, participating in work, gaining an education and access to services across regional Australia and in our economy as a whole.

In a recent paper 'Business Innovation and the Use of Information and Communications Technology', the Australian Bureau of Statistics has analysed the effects of sophisticated information and communications technology use — which is reliant on reliable high-speed broadband — on business growth and productivity. It has concluded:

'Business innovation is regarded as a key determinant of both individual business success and national economic growth. At the micro level, business innovation has the potential to increase consumer demand through improved product or service quality and simultaneously decrease production costs. At the macro level, strong business innovation can increase multifactor productivity, thus lifting international competitiveness, economic growth and real per capita incomes. It is thus of great interest to businesses and policy makers to identify those factors which stimulate innovation and to understand how these factors interact.

We expect that ICT plays an important role as a source of business innovation because it enables closer communication and collaboration between the business and other organisations, allowing businesses to more quickly exploit opportunities for innovation. It also provides a platform from which businesses can build innovations, and provides significant efficiency gains. We find strong evidence that businesses which use ICT more intensely are more likely to innovate and furthermore, develop more types of innovation and also more novel innovations'.9

The NBN will enable households to access a range of online services and participate in a range of activities simultaneously. Evidence shows that households are continuing to increase the amount of data that they consume, with the recent Australian Bureau of Statistics Internet Activity Survey as at 30 June 201110 showing there is strong and growing demand from Australians for broadband services. Evidence for this includes:

The NBN will also provide opportunities and incentives for businesses to innovate in the way they provide goods and services to consumers, advertise, collaborate with business partners, and interact with customers more broadly.

As noted in the NBN Implementation Study, for Australia's small businesses (SMEs) in particular, 'fibre connectivity is a productivity enabler'.19 On 8 November 2011 NBN Co announced that 'as Australia's two million small businesses look at alternative ways to reach new markets, boost their efficiency, and cut costs ... NBN Co intends to offer telcos and internet service providers new high-speed* wholesale broadband services which telcos and internet service providers can tailor to the specific needs of the Small Office/Home Office (SOHO) and small business market' (News Release — NBN Co to offer new services to ISPs tailored to small business, 8 November 2011).

SMEs will be particular beneficiaries of the NBN as they are currently unable to access the high-speed fibre connections available to large businesses located in Central Business Districts. SMEs will benefit from both themselves being connected to high-speed broadband as well as their Australian customers being connected to high-speed broadband.

A McKinsey Global Institute survey of SMEs in 12 countries20 found that:

The NBN will make it easier for some businesses to compete nationally, particularly in relation to projects that they would not normally compete for because it was previously geographically impractical. Increased competition is likely to deliver lower prices and other benefits to consumers.

High-speed broadband has the potential to remove barriers to online transactions and encourage more businesses and consumers to participate in online retail. A 2010 Access Economics report found that about 23 per cent of dissatisfied, and 1