Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

by leave—I move coalition amendments (1), (2) and (3) on sheet 7162 together:

(1)   Schedule 1, item 19, page 6 (line 32) to page 7 (line 3), omit subsection 18B(1), substitute:

(1)   The Auditor-General may conduct a performance audit of a Commonwealth partner if the partner is, is part of, or is controlled by, the Government of a State or Territory.

(2)   Schedule 1, item 19, page 7 (after line 4), before paragraph 18B(2)(a), insert:

(aa)   the person or body is, is part of, or is controlled by, the Government of a State or Territory; and

(3)   Schedule 1, item 19, page 8 (lines 1 to 3), omit subsection 18B(9).

I take the points raised by speakers in this debate and move these amendments on behalf of the coalition. The effect of these amendments is to limit the scope of the Auditor-General's powers effectively at the door of government. We have taken account of Senator Bishop's concerns earlier when he said that we need to give the Commonwealth Auditor-General the power to look into other branches of the federation where they are in receipt of Commonwealth money. The coalition strongly agrees with this and has proposed it. We have argued in this place before that, in respect of money appropriated and spent by this place for a purpose—whether it be directly or through another level of government—the members of this place have an interest, on behalf of all Australians, in checking up on the spending of that money to determine whether or not the money was spent effectively, whether or not the program was designed efficiently and whether or not the program was administered well.

We have heard a number of examples of where that has failed over the last few years. We have seen it happen with school halls, where we know there were billions of dollars wasted. As I said earlier, the idea that we would have asked Australians a few years ago for the undreamed of amount of money of $14 billion—a once-in-a-generation amount—to be invested in education, and that we would have spent it that way, is, I think, something that not even members of the government would own up to. That is because they cannot look in the mirror and say, 'We spent that $14 billion as well as it could have been spent.' Imagine the benefits that could have gone to teacher training, to teacher remuneration and reward and to other facilities in schools—not just school halls. I think that in the years to come we will hear complaints about lack of schoolyards in some of these schools. I live in the inner city of Melbourne and a number of these schoolyards—

Senator Farrell interjecting—

Senator Polley interjecting—

They do not have a yard any more, Senator Polley and Senator Farrell. They do not even have a schoolyard. There is nowhere for them to run around. They are rostering lunchtime and playtime at schools that have a real-estate challenge. But we whacked on a hall because many of the schools were old. If we had asked ourselves if this was the best way to spend this once in a generation amount of money we would have said this is not the way to do it. No one can contend that this was the single best thing to do with $14 billion.

Senator Farrell interjecting—

I hear the very soft interjections about school halls. I have teachers in my family, Senator Farrell, and no one thinks the school hall or the improved schoolyard is the best way to have spent that money. That the children in those schools will spend many years of their working lives paying back the debt you ran up to pay for the school halls, long after they have finished building them and probably long after those school halls have become redundant and been torn down, is tragically ironic.

The challenge around this bill in particular is: where do we draw the line and what is the legitimate burden to place upon those people who are in receipt of Commonwealth funding? I have no problem whatsoever in applying the same burdens to Commonwealth agencies, state governments and state agencies. However, the coalition has a substantial concern that a subcontractor working on a school hall, with 10 degrees of separation from the appropriation of money in this place, is somehow going to be the person facing the audit from the might of the Commonwealth Auditor-General's office. We know from the JCPAA report that they do not expect there to be a significant increase in workload nor a significant increase in the requirement for resourcing of the ANAO as a result of the recommendations that have been incorporated in this legislation.

The problem, however, is that we do not need to see a substantial increase. What worries me is that we are actually going to see one or two small or medium sized businesses subjected to a substantial audit, which they often do not have the capacity to deal with. Lend Lease, if we were going after them, would have the capacity to deal with the Commonwealth Auditor-General. But how on earth does a two- or three-person firm working in plumbing, electricals or even service provision, like IT, have the capacity to face up to the Commonwealth Auditor-General?

The truth is that it does not. The truth is that we are not even looking at the right spot.

The effect of these amendments is also to bring the burden back upon us. As politicians, as members of the executive opposite, at the state and territory level as well, the burden is upon the public sector not only to appropriate the money and throw it around but to actually design the programs well and to administer them well. The opposition's view is that we can actually meet the objectives outlined in the JCPAA report and that we can meet the objectives of ensuring value for money, ensuring that programs are administered and funded efficiently and ensuring that we get the outcomes we desire. We believe we can do that by holding government departments and agencies accountable. Whether it is a state department of education or the Commonwealth department of sustainability, the burden should be upon the public sector to make sure the program is designed well, to make sure it is administered reasonably and to make sure it achieves the objectives that the money was appropriated for. I do not think the need has been established that we should be going after the person who is necessarily in receipt of that.

All the flaws that have led to this particular bill have actually been flaws on behalf of government. I do not want to assign a motive to those opposite, but it does concern me that there is a bit of misdirection going on here. It is as if the private sector businesses in receipt of these malformed and maladministered programs are somehow the ones completely at fault. I do not know whether they are or not, but the truth is that we know there were substantial flaws in the government administration of this. We know that there was not the capacity of the Auditor-General to look into this. We know that we could not test whether there was value for taxpayers' money. So why don't we, at least in the first instance when we are dealing with this problem, say: 'Let's fix up our side of the equation. Let's fix up our side of the negotiating table and make sure government programs get it right'? I do not think—and it is an extreme example—that making the subcontractor company of two or three subject to the Auditor-General is going to solve the problem. It will only be one instance anyway.

We know, with the BER and with home insulation, that there were systemic problems. There were problems at a policy level and at a government administration level. The problems were not just with a few dodgy people. The problems were because of what this government did. As I have said before, this government was warned about this. It was warned about this during the inquiry into the stimulus, it was warned about it on the way through, it was warned about it while it was happening and it was warned about it after it started happening, yet at no point was the Labor government, under the then Prime Minister and now foreign minister, interested in heeding those warnings until it was too late, in both economic and, tragically, personal terms.

A concern we have about the bill as it stands is that, if the Auditor-General were to start auditing a couple of small firms, I can imagine some firms I know that would be in receipt indirectly of Commonwealth funding that simply would have to stop work. They do not have the redundant capacity to have their books audited. They might be family businesses. They might be small businesses with just a few people and an accountant employed as a bookkeeper. How on earth do we expect those people to deal with the Auditor-General? A lot of these small businesses are already struggling under the burden of red tape. We read only a couple of weeks ago that, under the national OH&S laws proposed by this government, every small business and home business in my home state of Victoria has to develop an evacuation plan. That is tens of thousands of businesses that have to figure out a way to get out of their house or garage, just to comply with national regulation.

This is a mind-set that worries us on this side of the chamber. I do not think there is necessarily anything malevolent about this, nor malicious, but what does concern us is that there is a complete lack of understanding of the impact that rules like this can have on small business. I know that this is going to scare off a lot of small businesses. For a family business that might be in receipt of Commonwealth money, the mere risk of being subjected to an audit of this scale—adding the tax office, WorkSafe, Fair Work Australia and whatever other agency you have to deal with to the Commonwealth Auditor-General—is actually just too great.

I just want to reinforce these points. We do believe in chasing the money trail, but I think the responsibility of the money trail is actually one of the public sector. It is our responsibility to design, administer and implement programs efficiently. That is our burden. It is not an unreasonable one and I do not think we should try to shift blame, if we get it wrong, because someone else has not run the program properly. There are always people who misbehave with public funds. Our responsibility is to make sure the incentive and the opening is not there for them to do it. That is where this government failed. That is where the Building the Education Revolution failed and that is where the Home Insulation Program failed. Undoubtedly there were some people undertaking acts that could be described as wrongdoing. But I do not see why we should subject all the businesses of Australia—most of which are overwhelmingly doing their best to comply with the plethora of regulations at local, state and federal level—to this threat because we cannot get our programs right.

This bill has not come up over years of contracting. I know there are concerns on the crossbenches. They are entirely legitimate concerns about how we keep an eye on contractors and the increasing use, particularly at a state level—as I am sure senators Xenophon and Rhiannon would have been aware of—of commercial-in-confidence as a cover-all claim to prevent public scrutiny of the expenditure of public funds. I have been there and I actually agree with those concerns. But the burden then is upon us to design and run the programs properly, to make sure there is no incentive for malfeasance, to make sure there is no ability to rort a program, to make sure that you do not have a situation where someone can get a phone book and start cold-calling pensioners and saying: 'I can put insulation in your roof. I have got no qualification. It will be free.' That is not necessarily the problem of all the businesses that were working in that space legitimately—most of whom, by the way, have now gone out of business. The fact that there might have been one or two builders or others that might have taken advantage of the Building the Education Revolution funds that were splashed around Australia, particularly in New South Wales, does not mean that all the builders in every state of Australia should have the threat of an ANAO audit hanging over their head. The fact that we are not dramatically increasing the size of the resourcing makes me wonder if, when the political pressure is on, one business or two businesses, who may have done nothing wrong, are going to get audited. There is a lack of understanding, in this city in particular, that even if you have done nothing wrong—even if you have no risk of being inconsistent with the guidelines and have done everything by the book—the audit is still going to cost you money and time. In the case of a family business it is also going to cost you in stress, because in many cases the spouse of the businessperson is the bookkeeper.

An example of this at the moment is dentistry. Many dentists throughout Australia have committed the technical error of not putting paperwork in on time because they were not familiar with the Medicare bulk-billing system. Historically dentists have not had a great deal to do with this process; they have done it for only a number of years. Yet we have dentists with bills of $70,000, $100,000 and in one case several hundred thousand dollars. The government is coming in and auditing them. These are family businesses in many cases, and this is putting their families through a great deal of stress. I was at a dentist with the shadow minister only last week in northern Melbourne. Three nurses had been placed full time at that dentist's practice to deal with the Medicare audit and chase up the paper trail. Medicare is not alleging that any money has been misclaimed. It is not alleging that any money has in some way not been appropriately spent. They are simply saying, 'You didn't do the paperwork; you didn't tick all the boxes.'

This is an example of what an audit can mean to a small business. The threat of an audit is a real and present problem that will scare small businesses away from bidding for government contracts and government work. And the last thing this country needs is more Lend Leases getting more government work. I have nothing against them, but the last thing this nation needs is fewer small businesses getting less government work because of the compliance burden. Since the previous government lost office in 2007 there have been 200,000 job losses in the small business sector and around 20,000 fewer small businesses operating in Australia. We do not need to make their life any more difficult, but the threat of an ANAO audit will do that.

I urge senators on the government benches and the cross benches to consider these amendments, because I think we can deal with all the legitimate concerns about chasing the money trail by actually taking that responsibility upon ourselves and making sure the government of the day—in whatever jurisdiction it may be—actually designs, administers and implements its programs appropriately. That is why we stand for office. It is our responsibility, and we should not try to avoid blame.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

Let us call this what it is. The Auditor-General Amendment Bill 2011 is about making small business pay for the incompetence and the mismanagement of this Labor government over the past four years. We have this bill because the Labor government made a complete mess of the pink batts arrangement. This government decided to send billions of dollars out into the Australian economy to get people to put pink batts into their roofs. It is a matter of historical record that we had fires, deaths and all sorts of issues. In this $2½ billion program, after the government had spent half they then had to spend the other half to fix up the mess.

Because this government stuffs up, because this government does not know how to administer a program and because this government does not know how to do its job, who has to carry the can? Who has to pay the price for it? Small business does. The truth of the matter is that there were inherent flaws in what the government did at the time. No amount of auditing, no amount of additional red tape and no amount of increased compliance burdens would have addressed those inherent flaws.

Senator Bishop is now the chair of the Economics Committee, so let us have a conversation about economics. When you have a government that suddenly puts billions of dollars into the economy, saying, 'We want people to spend this money on putting pink batts into their roofs,' and all of a sudden you get all these people across Australia saying, 'I've got this free money and I know I have to spend it putting pink batts into my roof,' guess what happens? The level of supply available in the Australian economy cannot match the artificially increased demand for that particular product or service.

We have a government that incompetently decides to put billions of dollars into the economy to create an artificial demand that the market cannot supply. And what happens? Hundreds of thousands of cowboys come in and said: 'There's all this money going around. The government is throwing taxpayers' money around like confetti. I want a piece of that. I can do that. I might not have the expertise, I might not have the track record, I might not have the experience and I might not know what I'm doing. What I'm doing might be completely unprofessional and it might put lives at risk. It might put the lives of my workers at risk. But there's all this government money going around, and I want a piece of that cake. I'm going to put some of these pink batts into people's roofs, even though I haven't got what it takes to make it happen.'

Here we have a government that has just thrown billions of dollars into the economy, creating artificial demand that cannot be met from the supply available in the market. All these cowboys come in and provide very bad service, with all the consequences that have been well documented. Then, of course, the inevitable happens: the government, under appropriate political pressure, has to pull the pin on the program, because there is an understandable outcry across the Australian economy about its incompetence, which has put lives at risk and caused fires in houses around Australia. The government then has to do the inevitable: it has to pull the money out of the program.

What happens then? You have the established suppliers—the people who know what they are doing, the people who have a good, solid small business, the people who actually provide a service that is valued by people across Australia—all of a sudden being confronted with competition from all these cowboys who were attracted by the government's taxpayer funded honey pot. Then all of a sudden the government pulls out the money. So all of a sudden what happens in the markets? I hope that the chair of the economics committee—the government senator representing the Labor Party on the economics committee—reflects on what I am talking about here, because he knows that this is true. As soon as the government then says, 'Okay, we've got to take all of this money away now,' we now have all these suppliers and services out there—the cowboys as well as the established businesses—but now we have taken all of the demand out of the market. What happens? All of a sudden all of the Australian small businesses—the good businesses who were able to provide a service that was valued and who knew what they were doing, along with all of the cowboys—have not got any business anymore, because the whole market collapses. All of a sudden their businesses are under pressure. All of a sudden their businesses collapse alongside the cowboys.

No amount of additional red tape would have prevented that from happening. We wrote the script before the government went ahead with this—this Labor government, which does not understand the economy, does not know how to manage money, does not understand the consequences of its decisions, does not think things through and does not understand the impact that its decisions are having on real people. We have Senator Ludwig here, the minister who made an ill-thought-out decision out of nowhere to ban all exports of all live cattle—boom!—at the stroke of a pen, hurting thousands of Australian families. Of course, we get this again and again and again. This is a government which does not think things through. This is a government which does not understand the real-life consequences of its decisions. Then, once the shit hits the fan, rather than deal with the actual—

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Order! Senator Cormann, I think you need to withdraw that remark.

Mathias Cormann (WA, Liberal Party, Shadow Assistant Treasurer) Share this | Link to this | Hansard source

I withdraw that remark, but the Senate well understands what I am trying to say. Once the problems happen and once the government is confronted with the consequences of its actions, rather than address the root causes it wants to put another red-tape bandaid on it. Rather than deal with the root causes, which are bad decision making in the first place, it wants to put a red-tape bandaid on it, which yet again will hurt small business.

The Senate should not go along with that. The Senate should force this government to face up to the consequences of its bad decisions. The decision to put billions of dollars into the Australian marketplace to solicit an artificial demand for additional pink batts was a bad decision, and it was always going to end up in tears. It was ending up in tears not because of what established, respected small businesses across Australia were doing but because what the government did was fundamentally flawed. It was inherently flawed. It was always going to be a problem.

So that is why the coalition will not be party to attempts to force businesses across Australia to pay the price for this government's incompetence and mismanagement. What we need is better government, not more red tape. We need a government that actually thinks things through before it presses ahead and sends billions of dollars into the economy, creating all sorts of consequences which were entirely foreseeable and which this government should have foreseen. That is really at the crux of this issue. Instead of doing the right thing and focusing on how it can deliver better government, it says: 'Oh, well, it's not really our fault. It's not our fault that all these cowboys were attracted into the pink batts market because we decided to put billions of dollars into the economy, creating a demand which existing small businesses would not be able to handle. It's not our fault that all these cowboys that came into the market then did not do the right thing. We now want to punish every single small business across Australia as a consequence of our incompetence and mismanagement.' That is not the way to go about this, I would suggest to the Senate.

Of course, this is not an isolated example. The pink batts example is one of the high-profile ones. Of course, we had the Julia Gillard memorial halls, and that was another high-profile fiasco. But the principle here is that when governments, and in particular Labor governments, wilfully spread taxpayers' money around like confetti instead of doing what they should be doing—that is, to prudently and cautiously assess in terms of allocating limited taxpayer resources to the priority needs and services that should be provided to the Australian community—this is what you are going to get. It is completely inefficient that this government says, 'Rather than be more cautious in the way we spend taxpayers' dollars and focus on how we can deliver more with less and on how we can fund the necessary services of government instead of going into areas where we should not go, let's just increase the size of government and the level of red tape and make it harder for small and mid-sized businesses to contract with the government.' That is not the way to do it.

The live cattle export fiasco, which was the responsibility of Senator Ludwig, who is sitting here in this chamber, is another one of these examples where you have a government that is completely oblivious and, quite frankly, does not care about the impact that its bad and incompetent decisions are having on real families and real people. So I guess the next thing is that we are going to have some sort of red-tape solution to prevent governments from making these sorts of decisions in the future, instead of just doing what we should do, which is to change the government so that we have a government that actually knows what it is doing. Our position is very clear: although we do not wholeheartedly support the bill, the amendments circulated by Senator Ryan at least allow us to be in a position to not oppose it. Unless the Senate supports the amendments put forward by Senator Ryan, the legislation will be an irresponsible attack on small- and mid-sized businesses across Australia. It will inappropriately increase the level of red tape imposed on small- and mid-sized businesses just to cover up the demonstrated incompetence of this Labor administration over the last four years. We remember when they came out with another proposal to spend a lot of money, they thought, 'We can't trust finance minister Penny Wong with that; we'd better appoint former coalition finance minister John Fahey to oversee how the money is spent.'

This government know they are not good at dealing with money, so they are always looking for a workaround. The problem is that this workaround is going to increase the cost of doing business with government in Australia. That might be good for big business, and we know that Senator Bishop and the Labor Party more generally are very comfortable in the company of big business and that they do not really like small business. Big businesses are a bit like governments sometimes—they have their bureaucracies and they can talk the same language to each other. Big businesses have big departments, whose job is to deal with government bureaucracy. Big government likes big business because they talk the same language. Small business is not able to handle a lot of the red tape coming out of this government. This legislation is another example of unnecessary red tape. What we need in Australia is a serious commitment to rolling back the red tape, reducing the red tape, and not keeping on adding to it. If Senator Bishop and other Labor senators spent a bit of time in their home states talking to small business, they would know what I am talking about. Get out of the boardrooms of the big business corporations, who are quite happy to deal with that sort of stuff, and start talking to real people.

Senator Mark Bishop interjecting—

Start talking to some real people across Western Australia, Senator Bishop, because that is what senators on this side of the chamber do. If you were talking to some real people, you would not be supporting this legislation This legislation is all about making business pay the price for Labor's incompetence and mismanagement over the last four years.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

I want to briefly respond to the remarks made by Senator Ryan and Senator Cormann. The entirety of the debate in the committee has been rather polemic in nature: emotion and not much substance or principle. The opposition are erecting the straw man of hurtful Commonwealth invasion and unwarranted attack on the proper, lawful operations of small businesses. We reject that polemical assertion outright. The purpose of the audits, if they are ever conducted on small business or medium business, is limited to an assessment of how the operations of the small business entity contributed to achieving the purpose for which it received Australian government funds. If the Commonwealth allocates $300 million to road and bridge construction, tender is made and it is allocated to a prime contractor. The prime contractor in turn retains a whole range of subcontractors—operators, tilers, electricians, welders and the lot—to carry out the job and down the chain dozens and dozens of small business operations carry out the actual work of the contract. We say it is entirely appropriate that if it is warranted, if there is a need, the Commonwealth is able to audit a particular exercise to ensure that the purpose of the money allocated is spent only and solely on the purpose for which it was allocated. If moneys are allocated for the construction of a road, the moneys must be properly spent on labour costs, on steel girders, on bitumen and on cement and the like, but not otherwise. We say that that is a most reasonable argument and a most reasonable objective.

We have noted the concerns behind the polemic argument run by Senator Ryan and Senator Cormann, so we took the trouble to inquire of the Auditor-General as to the purpose of the bill before the chair. What will it do? Once the bill is passed and the powers granted, the Auditor- General is responsible for the exercise of the powers. The Auditor-General—and I put this on the record again in this debate—advised:

The Auditor-General expects to use the power to audit private-sector entities only when the performance of a contractor would be significant in the context of the delivery of a government program. It is very unlikely that this could ever be the case in relation to a small business.

So the polemic debate that we have had for the last 40 minutes, defending the interests of the small business and which I say is a straw man, the Auditor-General in a curt, written response advised, 'It would be unlikely this would be the case in relation to a small business'.

In response to the other comments raised as to the allocation of Commonwealth funds to line departments of the Commonwealth or state entities and departments, we agree and are rigorous in ensuring that funds are properly appropriated, programs are properly designed, internal accounting and reporting responsibilities are created at the outset, and line responsibility is supervised. All of those things occur as a matter of course in the administration of Commonwealth programs. If shortcomings or deficiencies or errors are identified, we are more than happy to ensure that a proper audit and a proper regulatory process make certain that it does not occur again. We simply say that, if we have proper funding allocation, proper program design, internal accountability requirements and appropriate supervision of line staff, it is also appropriate in state government entities that receive Commonwealth funds.

Commonwealth funds, of course, is a synonym for taxpayers' funds, so we want them spent properly both at a Commonwealth level and a state level. There is an increasing use of outsourcing and an increasing shift of work to the private sector, all across the Commonwealth. You only have to go through northern New South Wales, Queensland and Western Australia to see the hundreds and hundreds—thousands—of contractors carrying out government work at ports, on roads and bridges, at schools and at community centres to understand the need to ensure that the billions of dollars that the Commonwealth appropriates from Commonwealth funds is spent on the purpose for which it is intended and no other.

We are not embarrassed by that. We say it should be the case. The reason there have not been amendments of this nature to date to the Auditor-General Act, and why it has become an issue of late, is simply that the nature and allocation of Commonwealth funding is changing. Increasingly, the Commonwealth sets a goal, a purpose, and the delivery of the purpose is allocated to a private sector entity. It could be a large construction company, a large shipbuilding company or a large defence contractor. Now that funding arrangements have changed, all we are seeking to do is to ensure the standards that were present in the act when only Commonwealth entities were responsible for the spending of Commonwealth funds are still appropriate in taxpayers' interests and that funds are properly audited and accounted for.

We note, absent the polemic from the other side of the chamber, the comments again of the Auditor-General that it would be very unlikely that this would ever be the case in relation to a small business. With those remarks, the government indicates that it will oppose the amendments moved by Senator Ryan.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

I do not plan to take a great deal of the chamber's time but I have to respond to some of the comments from Senator Bishop. Senator Bishop, I put to you that I was not being in my polemical form when I spoke earlier. I can do that but that was not characteristic of the way I was speaking. You read out a statement by the Auditor-General, saying it was essentially 'very unlikely' . That provides no comfort. The Auditor-General has incredible autonomy. The office has independence for good reason. That statement that it was 'very unlikely' that they would look into a small business simply does not provide the security for the many businesses that I had, I thought, outlined earlier in quite a quite a reasonable fashion in this chamber, rather than a polemic fashion.

The point is the threat of the audit can be in itself a disincentive for small businesses to participate in these arrangements. I suggest that there is a lack of understanding of the appropriate role of a government agency in the government's point of view on this. If I am a contractor to a state government agency that may be indirectly in receipt of Commonwealth money, I probably already have compliance burdens. You want to impose on top of that a potential compliance burden with the Auditor-General. I put to you that the responsibility is with the contracting agency. That is why we are in public life—one of the reasons for managing public funds responsibly. This, I fear, is a diversion from the real challenge, which is making sure we design, run and implement our programs appropriately.

So, Senator Bishop, rather than being polemic, as you suggested, they are genuine concerns on this side. I do not think that the government understands the burden of every additional regulatory piece of red tape it throws on a small or medium business. The lack of understanding is exemplified by the comments you made, Senator Bishop. This is going to be an additional regulatory burden—yet another one. It is going to scare small businesses and I fear that we may find an innocent business that is audited one day. Quite frankly, there is a lack of understanding by the Auditor-General and the government about the impact an audit that clears someone completely still has on a person's business and, potentially, their life. That statement from the Auditor-General read out by Senator Bishop is comforting but I put it to you that it is only temporary because the very autonomy in this act means it is just that—it is as worthless as the Malaysia deal; it is not legally binding.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

The concern expressed by the opposition is that this amendment means there will be the threat of an audit of businesses and as a result of this small businesses may be put off tendering for government contracts.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

One of them.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Yes, that is one of the concerns raised. I want to fairly summarise Senator Ryan's position in relation to that. My question to Senator Bishop is: what safeguards are in place for there not to be an unnecessary onus on businesses? I can understand the argument about there being a threat of an audit, but if an audit actually takes place I would imagine that there would be protocols and procedures in place for the Auditor-General's office to deal fairly with those small businesses to ensure that the process is a fair one and not unduly onerous. Has any analysis been done on the compliance costs, particularly for those small businesses? I think there are many larger businesses that are big and ugly enough to look after themselves, particularly public companies, that will not be daunted by the prospect of an audit. Even if a small business is subjected to an audit, and again we are looking at an efficient and effective use of taxpayers' funds for these government contracts and making sure that the money has been appropriately spent, I would have thought that the audit process would not necessarily have to be a traumatic one. It could be a pretty straightforward one that is reasonable. To what extent will the Auditor-General's office adapt its processes in order to deal with small businesses?

I do not think they have this wrong now, but this would be quite a different role for the agency in terms of their interaction with small business contractors. Essentially that is my concern. I can see the motivation for Senator Ryan's amendment but I wonder, in a practical sense, what the impact will be. Can we get Senator Bishop's perspective on this?

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

In response to Senator Xenophon's direct question: if there is ever any audit of a small business it will be, by its nature, the exception not the rule. That logically derives from the comment provided in writing by the Auditor-General. I will read it again:

… very unlikely that this would ever be the case in relation to a small business.

So the Auditor-General does not, on the basis of the statement he has provided, anticipate a heavy workload in this area. That is why I characterise it as exception rather than rule and that is why, Senator Xenophon, I characterise Senator Ryan's argument as a straw man argument. If the responsible entity does not intend to have a heavy, a medium, a small, a sequential or an ongoing workload in relation to audit of small business, then it is a straw man argument to build this up into a massive issue. These arguments were run in the House under the sponsorship of Mrs Bishop—she moved amendments which were in substance the same but different in form—and were specifically covered in the explanatory memorandum.

On the issue raised by Senator Xenophon concerning the cost to small business, no analysis has been done. It is too early to do the analysis. We disagree with the inference that audits will be traumatic for small business. We disagree strongly that any audits, should they occur—no matter how minor in number—will be traumatic for small business. The Auditor-General's office is not operating some sort of gestapo unit which runs near and far with truncheons, invading offices and saying, 'Give us your papers; give us your notes; give us your files.' They are a set of government officials who always conduct themselves properly and only according to law.

The reason I can assert that, Senator Xenophon, is that—and Senator Xenophon knows this—for the best part of 10 years I have been heavily engaged with officials of the Auditor-General's office and departments at all levels, particularly in the areas of defence—the Defence Materiel Organisation and contracting responsibilities of line officers. If no-one else in this parliament has been assiduously following the accounting lines of responsibility, I have. But in all of those inquiries we did in opposition and which have been followed through in government, we have never, ever had a complaint raised—formally or informally, in writing or verbally—about, even at worst, inappropriate behaviour by officials of the Auditor-General's office. So I think, on the basis of the behaviour experienced over the last 10 years, it is not unfair to say that we could expect that behaviour to continue in the future.

So if Senator Xenophon, in addressing the concerns of Senator Ryan, asks what assurances we can give, the response of the government is this. First, we expect any audit of small business to be absolutely minimal. Second, no analysis has been done of the costs to small business—we believe it to be too early. Third, and finally, if the point were to be pressed, we say that the past conduct and performance of the ANAO has never, in all the years I have been here both in opposition and in government, been challenged by any senator or member of the House. On that basis we would say that the integrity and past practice of officials should be regarded as sufficient guarantee. Even if one were to go to the worst case, as outlined by Senator Ryan and raised by Senator Xenophon—that is, if there were outrageous abuse, if there were exceptionally poor behaviour by officials or if tactics of the type described but not specified by Senator Ryan were employed—there is, of course, a set of regulations which provide recourse. So, Senator Xenophon, that is the response of the Commonwealth to your legitimate question.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

I would like to respond to a couple of the—I am not sure if they were intentional or otherwise—inferences I took from Senator Bishop's comments in response to Senator Xenophon. In no way was I reflecting upon the integrity of the officials of the Auditor-General's office. That would be the last thing I intended. What I am suggesting is that this would be a very new space for them in which to operate. It is not something with which they have a great deal of experience. I am aware of the limitations of my own experiences, Senator Bishop, and I always try to take those into account. I am very reticent to go boots and all into an area where I do not have experience, particularly shared experiences with those in that area. This is an area where the ANAO do not have experience. You say that these audits will only happen as the exception, so the ANAO will not get any experience.

I mentioned earlier that I do not think a promise is good enough when we have parliamentary officials with this much power. I have always been a strong believer in checks and balances upon an executive power and this is akin to an executive power. The Auditor-General is accountable to this place, but lack of experience could make the audits traumatic. Senator Bishop asserted that there is no reason for these audits to be traumatic. If you are in a two-person business where your spouse does the books while you work and all of a sudden an auditor comes in to look at the books to the standard that we would demand in this place for anyone receiving public funds, if anything it is going to be a bit challenging for a lot of small businesses running a simple MYOB cash accounting system to be able to meet those requirements. On top of that, the official may not have any experience in dealing with small businesses. While there is no malfeasance or intention for this to be difficult, there is not going to be a first-instance meeting of minds on this case.

We are setting up a situation here where a legitimate audit done under this law for all the right reasons may be undertaken and may find that a small or medium sized business has done nothing wrong—great; I am sure everyone will be pleased by that—but I think you are undervaluing the trauma, the opportunity cost and the stress to the business or people's personal lives of the bit in between: the audit. For a lot of these people in receipt of government funds, if you are unwilling to draw a line under where the Auditor-General stops and where our responsibility begins, then I think you undervalue the impact that this could have on a small business operation. A promise is not enough. A statement is not enough. That is no reflection on someone's integrity—it is simply the fact that there may be a different person in office in the future. You have outlined that they do not have experience and you have outlined that they are not going to get experience because they intend to do it rarely, and therefore they are not going to have that knowledge which might make it a little bit easier, and I do not see why there is not some discussion if not on the opposition's amendment of drawing a line at the government's front door then at least of considering a threshold requirement. The Auditor-General cannot look into a $15,000 IT contract. That is a job for someone else, and I would suggest it is appropriate for the agency that let the contract to do it.

I say to the chamber that this government's form on contractors is not one to be trusted. We have budget items at the moment for going after contractors. The term 'sham contracting' has been thrown around both houses in this place and I know a lot of small business people and independent contractors who are very worried by that. There is, in my view, a lack of understanding, and I think Senator Bishop's speech just illustrated that, while there is no intention from the Auditor-General—and maybe not even from the government—to make life more difficult, it will do so, even if inadvertently.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

There is one point I did not make in response to the question asked by Senator Xenophon, and it might go some way to allaying concerns raised by Senator Ryan in his response. I am advised by officials that the Auditor-General can currently require small business to produce documents that are relevant to an audit of a Commonwealth program. There is already preliminary lawful activity in that sense.

Senator Xenophon, you made a reference earlier to the fact that you were a former member of the upper house in South Australia, and my vague memory in the brief that I received was that the powers being sought in this bill are entirely consistent with extant powers that the auditors-general of South Australia, Western Australia and, I think, Tasmania already have. Again, in response to your question, we do have examples of how the staff of auditors in those two or three states function. I am sure that, from your own, lengthy experience in the South Australian parliament, if there had been not even abuse but misuse of authority it would have been brought to your attention through normal processes in that institution. Question put:

That the amendments (Senator Ryan's) be agreed to.

The committee divided.   [12:23]

(The Chairman—Senator Parry)

Senator Feeney did not vote, to compensate for the vacancy caused by the resignation of Senator Coonan.

Question negatived.

Scott Ryan (Victoria, Liberal Party, Shadow Parliamentary Secretary for Small Business and Fair Competition) Share this | Link to this | Hansard source

by leave—I move opposition amendments (1) to (10) on sheet 7163:

(1)   Schedule 1, page 4 (after line 11), after item 7, insert:

7A Subsection 16(1)

Omit "(other than a GBE)".

(2)   Schedule 1, items 8, 9 and 10, page 4 (lines 12 to 18), omit the items, substitute:

8 Subsection 16(3)

Repeal the subsection.

(3)   Schedule 1, items 12, 13 and 14, page 4 (line 24) to page 5 (line 1), omit the items, substitute:

12 Subsection 17(1)

Omit "(other than a GBE)".

13 Subsection 17(3)

Repeal the subsection.

(4)   Schedule 1, page 5 (after line 16), after item 18, insert:

18A Subsection 18(4)

Omit "(other than a GBE)" (twice occurring).

(5)   Schedule 1, item 19, page 5 (line 24), omit "(other than a GBE)".

(6)   Schedule 1, item 19, page 5 (line 26), omit "(other than a GBE)".

(7)   Schedule 1, item 19, page 6 (lines 9 to 11), omit subsection 18A(3).

(8)   Schedule 1, item 24, page 10 (line 12), omit "(other than a GBE)".

(9)   Schedule 1, item 24, page 10 (line 14), omit "(other than a GBE)".

(10)   Schedule 1, item 24, page 10 (lines 22 to 24), omit subsection 19A(3).

I will be as brief as possible. These amendments change the government's bill to ensure that the Auditor-General can, on his or her own initiative, undertake an audit of a government business enterprise. This was a recommendation of the Joint Committee of Public Accounts and Audit. The problem with the government's bill is that it did not implement that recommendation and still requires that the JCPAA request the Auditor-General to undertake an audit of a government business enterprise. It does allow the Auditor-General to request the JCPAA to make that order, and the problem with that is it still means that an audit of a government business enterprise is actually in the hands of the government itself, whether that be the minister or the government majority on the JCPAA.

The opposition does not see the logic in having the Auditor-General able to undertake audits of a small business or a medium sized business that has indirectly been in receipt of Commonwealth money but not able to undertake an audit of a government business enterprise on its own initiative, despite the fact that that GBE has used taxpayers' funds for capital. That inconsistency will be addressed by these amendments. I urge the committee to adopt these amendments, to at least ensure a level of consistency in the treatment of business enterprises. There is no reason whatever for this to be separate.

I know the Greens have outlined on a number of occasions concerns about the investments of government instrumentalities. I respectfully suggest that, if sunlight is to be brought to those concerns, we need to give the Auditor-General the autonomy to undertake investigations and audits in this area without the government's say-so.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I indicate that I support the coalition's amendments, for a number of reasons. I did not support the previous amendments, because I thought that the concerns were not sufficiently founded in terms of how the Auditor-General's office would deal with small businesses and that the Senate could keep an eye on the Auditor-General's office through Senate estimates. In relation to these amendments, I think it is entirely appropriate that the bill be amended to ensure that the Auditor-General is able to inquire into and audit government business enterprises, when you consider that one of the biggest government business enterprises is NBN Co. There are other layers of scrutiny, but this would be an important additional layer of scrutiny. I do not think it is reasonable that the government should veto or direct the Auditor-General, an independent statutory officer, as to whether an audit ought to take place. In the same way that I thought it was important to give the Auditor-General's office the discretion to decide which small businesses to look into—even small businesses where there might be contractors involving thousands or tens of thousands of dollars—it would seem absurd not to allow the Auditor-General, as an independent statutory officer, to investigate what a government business enterprise is doing, particularly with NBN Co., where we are talking about tens of billions of dollars.

So I would like to hear from the government, from Senator Bishop, why we should not include government business enterprises within the purview of the Auditor-General, allowing the Auditor-General to have that discretion. Let the Auditor-General decide, not the executive arm of government. I strongly support these amendments.

Mark Bishop (WA, Australian Labor Party) Share this | Link to this | Hansard source

As everyone knows, this bill has been through the House. The bill was sponsored in the House by the Chair of the JCPAA, Mr Oakeshott. The bill went through the House with the support of Mr Oakeshott. So the matter under discussion, whilst different in the respect identified by Senator Ryan in that it is not entirely consistent with the original recommendation of the JCPAA, has through the negotiation process been agreed to by Mr Oakeshott. It accurately reflects, in addition, the view of the government.

That being the context in which we discuss the amendments moved by Senator Ryan, the question becomes: why does the government hold to that position? The response is very simple and exact, and it is this. Successive governments, both conservative and Labor, have taken the view that the Auditor-General should not have the ability to audit GBEs of his own motion. We say, and I do not think it is seriously challenged, that GBEs are subject to competitive pressures and disciplines that do not apply to other Commonwealth bodies. Medibank, for example, is qualitatively different to the Department of Health and Ageing. So GBEs are subject to competitive pressures and disciplines that do not apply to other Commonwealth bodies and, to the greatest extent possible, we believe—and successive governments have believed—that they should be subject to the same audit arrangements as their competitors. The government considers that audits of GBEs should be requested by the parliament in response to genuine public interest concerns about aspects of their operations rather than as an incidental part of an annual work program.

The JCPAA comprises members from both houses. It comprises members of all parties represented in both houses and it has an independent chair. We consider that to be the appropriate body to consider whether a particular GBE should be audited. But, in that context, Senator Ryan and Senator Xenophon, let me spell it out even more clearly. GBEs operate—

Stephen Parry (Tasmania, Liberal Party) Share this | Link to this | Hansard source

Order! The time allotted for this debate has expired.

Progress reported.