GENERAL PURPOSE STANDING COMMITTEES
General Purpose Standing Committee No. 1
Thursday, 29 May 1997
The Committee met at 5.00 p.m.
Reverend the Hon. F. J. Nile (Chair)
The Hon. Franca Arena
The Hon. D. J. Gay
The Hon. Dr B. P. V. Pezzutti
The Hon. P. T. Primrose
The Hon. M. F. Willis, President of the Legislative Council
Mr J. D. Evans, Clerk of the Parliaments
Mr S. Bennett, Manager, Parliamentary Building Services
Mr A. R. Beverstock, Manager, Parliamentary Security Services
Mr R. F. Brian, Parliamentary Librarian
Mr D. Draper, Manager, Parliamentary Food and Beverage Services
Mr P. Guilfoyle, Manager, Parliamentary Printing Services
Mr R. W. Lawrie, Manager, Parliamentary Archives
Mr G. McGill, Financial Controller
Mr S. Schuck, Manager, Parliamentary Information Technology Services
Miss N. J. Ward, Editor of Debates, Parliamentary Reporting Staff
Ms H. K. Williams, Manager, Parliamentary Education and Community Relations
CHAIR: I note that the guidelines for this Committee vary from those for estimates committees in previous years, in accordance with the resolution of the House. I report that at an earlier meeting of the Committee held today I was elected as Chairman. I report also the notification to me of the following changes to Committee membership nominations: the Hon. D. J. Gay, to replace the Hon. Virginia Chadwick; and the Hon. Dr B. P. V. Pezzutti to replace the Hon. Helen Sham-Ho. At this meeting the Committee will examine the proposed expenditure from the Consolidated Fund for the portfolio area of The Legislature. Before commencing the meeting I remind members, staff and any other persons who are not Legislative Council members, Committee members or parliamentary officers that they should not approach the Committee table. Messages for members should be given through the attendant on duty or to the Committee clerks.
In order to accurately complete the questions and answers papers the Committee Clerk requires that members complete and sign the appropriate form when a question is taken or given on notice. Because only one hour has been allocated to the Committee, the question time allocations will be amended. Government members will have 15 minutes, crossbench and Independent members will have 15 minutes and then there will be three allocations of five minutes each for the Government, the Opposition, and members of the crossbench. Each question will be limited to one minute and the reply to four minutes.
The Hon. D. J. GAY: If the crossbench time is not used will it be reallocated between the Opposition and the Government?
CHAIR: Any time that is still outstanding can be equally divided between the Government and the Opposition.
The Hon. Dr B. P. V. PEZZUTTI: Does it need to be divided? I think that under the rules unused crossbench time is allocated to the Opposition.
The Hon. FRANCA ARENA: That would be a most unfair decision. It should be equally divided between the Opposition and the Government.
CHAIR: I am advised by the clerk of the Committee that there is nothing in the rules to state that unused time should be allocated to the Opposition. That may have been the intention, but it is not indicated in the rules. To clarify that, I am advised the Opposition would get an additional 30 minutes in a 3½-hour meeting, but the rules are silent as to the division of spare time.
The Hon. D. J. GAY: I ask a further procedural question. At the beginning of the session, Mr Chairman, you stated that this estimates committee would examine The Legislature.
CHAIR: I said this was General Purpose Standing Committee No. 1.
The Hon. D. J. GAY: For the Legislature. My understanding is that the Legislature is presided over by the two presiding officers. I ask: why is the Speaker not in attendance?
CHAIR: At the earlier meeting today of the Committee it was decided to issue a summons or request to the Financial Controller. One was not sent to the Speaker, nor was one sent to the President, but the President is present and so is the Clerk of the Parliaments. Does the President wish to make a comment in answer to that question?
The PRESIDENT: I am afraid I cannot enlighten the Committee at all in relation to why Mr Speaker is not present.
The Hon. FRANCA ARENA: Has the Speaker been informed to be present?
CHAIR: No summons was issued.
The Hon. FRANCA ARENA: Exactly, so it is not much use going over it.
The Hon. Dr B. P. V. PEZZUTTI: Is the Hon. Franca Arena suggesting the Speaker does not know the Committee hearing is scheduled for this evening?
The Hon. FRANCA ARENA: Exactly. That is what I am suggesting. Mr Chairman, I ask that you commence proceedings as 10 minutes has already elapsed and we will be here all evening discussing these things. I think we should proceed.
The Hon. D. J. GAY: I am informed that Mr Speaker instructed the Financial Controller not to attend here, so he is obviously aware of the Committee hearing. What powers does this Committee have to demand that the attendance of Mr Speaker. It is flagrant behaviour by a joint Presiding Officer not to attend an estimates committee hearing for The Legislature. It is akin to the Minister for Agriculture not attending the estimates committee hearing on agriculture.
The Hon. Dr B. P. V. PEZZUTTI: I move:
That a message be sent to the Speaker.
CHAIR: I appreciate the concern of the honourable member but Mr Speaker has not been present at previous upper House estimates committee hearings. My decision is that it would not be prudent for a Legislative Council estimates committee to examine estimates for the Legislative Assembly.
The Hon. Dr B. P. V. PEZZUTTI: I move:
That the Committee send a letter to Mr Speaker expressing regret that he is not here and requesting that he appear at some later time.
The Hon. D. J. GAY: I second the motion.
CHAIR: I acknowledge that some areas of concern cover both Houses. However, this is a Legislative Council general purpose standing committee and the precedent has been that the Speaker has not attended these committee hearings. Although I could not support the motion, I will put it to the Committee.
The Hon. Dr B. P. V. PEZZUTTI: These are new committees operating under new arrangements, as you said in your preamble.
CHAIR: Yes, that is so.
The Hon. FRANCA ARENA: Will the Committee's hearing time be extended or are we going to discuss this matter all evening?
CHAIR: There may be a problem as the Committee has two areas of budget expenditure to cover tonight.
The Hon. D. J. GAY: I will be very brief. The Legislature is run by the joint Presiding Officers. It is absolutely imperative that the Speaker attend, but he has turned his nose up at the Committee. The Speaker is akin to a Minister and his non-attendance should not be seen as a precedent. I support the motion moved by the Hon. Dr B. P. V. Pezzutti, that the Committee send a letter to Mr Speaker expressing disappointment at his non-attendance and inviting him to attend future meetings.
CHAIR: I believe that as Mr McGill, the Financial Controller, is present, that is adequate for the purposes of this Committee's deliberations. I do not support the motion and the motion is defeated. It can be noted in the minutes that the motion was defeated so that there is a record of the concern expressed by some members.
I now declare the proposed expenditure open for examination. I will call over the program areas, as required. However, as honourable members know, this is a general purpose standing committee and, as such, has wider latitude so far as the asking of questions is concerned than previous estimates committees had, but I trust that all members will respect the usual conventions and traditions as the Committee works through the questions. Time for Opposition questions has commenced.
The Hon. D. J. GAY: I refer to Budget Paper No. 3, Volume 1, program 1.1, pages 16 to 19. My question is addressed to the President and to the Financial Controller. What action has been taken to secure funding for salary increases for the staff of Legislative Council members following the recent award increase for the staff of Legislative Assembly members?
The PRESIDENT: In October 1996, following representations from members, I wrote to the Treasurer requesting funding and approval for the following: first, the regrading of staff from the present clerk grade 3-4 to clerk grade 4-5, to give them parity with the electorate office staff of a lower House member; second, an all-incidents allowance of $4,000 per annum in lieu of payment of overtime and meal allowances, to match a similar claim made by their counterparts in the Legislative Assembly; and, third, relief staff for members.
The all-incidents allowance of $4,000 was approved and funding was provided by Treasury and was backdated to July 1996. This is in line with a similar approval for Assembly staff. The funding for relief staff was refused. Approval to regrade the staff was given but funding was not provided. I received this advice from the Treasurer only this month following further correspondence on the matter. I advise the Committee that there are no funds in the Legislative Council budgeted vote to meet the cost of regrading and the back payment to July 1996, estimated at $120,000 in this current year and $170,000 for next year and ongoing. While there may be surplus funds available in the Parliament as a whole this year to meet such costs, no such surplus funds are expected in future years, given the magnitude of budget cuts which are being imposed on the Parliament.
I have met with the Public Service Association in relation to this matter and a meeting is also scheduled between the Treasurer, me, Mr Speaker and Treasury officials tomorrow at 11.45 a.m. There are, however, surplus funds within the total budget for The Legislature which could be applied to the back pay to July 1996 but it requires the
concurrence of Mr Speaker, which, to date, he has refused to give. In relation to the ongoing commitment of $170,000 a year, it will be impossible to find this from within the Legislative Council's vote as the estimates are currently established and will require supplementation or transfer from other parts of the Legislative Council budget.
The Hon. D. J. GAY: Mr McGill, do you wish to add anything further to that?
Mr McGILL: There is nothing further I can add.
The Hon. D. J. GAY: Are you two gentlemen aware that if this matter is not settled before 30 June these staff will forfeit their back pay?
The PRESIDENT: I am aware of that. I have brought this fact to the notice of Mr Speaker as the basis of requiring concurrence. I have also brought it to the attention of the Treasurer and it will be a significant element so far as I am concerned in the discussion scheduled for tomorrow.
The Hon. Dr B. P. V. PEZZUTTI: What funding is available in the 1997-98 financial year to resolve the accommodation problems of members of staff on level 12?
The PRESIDENT: The simple answer to that is none. However, the member would be aware that this matter has been before the Industrial Commission since 1995 and in that period Mr Speaker and I have pursued a number of options, without success until recently. We have now obtained the Premier's approval for the Assembly committees currently on levels 8 and 9 to move to the vacant court building in Hospital Road. This will in turn allow Parliamentary Building Services to move from level 11 to levels 9 and 8. Level 11 can then be refurbished for use by Council members. Following that a swap can occur between level 11 and level 12 for members.
I am advised that the timetable for this work is approximately six months. We hope - and I emphasise the word "hope" - that everything will be in place during the next December-January recess. We are constrained by the timing of the move of the committees, a matter over which we do not have control. The Premier has established an interdepartmental working party to progress the development of the Hospital Road site as a matter of urgency. Our building manager, Mr Bennett, is the Parliament's nominee on that working party, which will meet for the first time next Tuesday.
Mr Bennett has been requested to promote the Parliament's early access to the court building as a matter of urgency so that level 12 accommodation can be resolved as soon as possible. Eventually, once building work is complete in the Sydney Hospital buildings, we anticipate that committees of both Houses will move next door to the Nightingale Wing of the hospital, with a covered walkway joining the two buildings. We outlined the above proposal to the Public Service Association a couple of weeks ago and as a result it has withdrawn its dispute before the Industrial Commission. On the question of funding for this program, the Treasurer indicated orally in earlier discussions that down the track supplementation would be made in order to fund this project.
The Hon. Dr B. P. V. PEZZUTTI: Have any studies been conducted on the use of the Nightingale Wing and what the approximate cost of that will be?
The PRESIDENT: The costing has not yet been done accurately, either in relation to the court building or in relation to the Nightingale Wing. However I expect that process to occur soon, after the interdepartmental committee has met and put the detail in place. The next stage would be to obtain accurate costings, then make submissions to Treasury and at the same time prepare an implementation program.
The Hon. Dr B. P. V. PEZZUTTI: What would be the minimum lead time for the movement of the committees from the Parliament to the court building or to the Nightingale Wing?
The PRESIDENT: I am informed that in relation to the proposal to occupy the court building - and that would be by Legislative Assembly committees or by committees administered by the Legislative Assembly - six months. In relation to other committees, including Legislative Council committees moving into the Nightingale Wing, there will need to be a lead time of two years.
The Hon. D. J. GAY: What surplus funds the Legislative Council hold from its 1996-97 budget?
The PRESIDENT: On current estimates, at the most $20,000 and probably closer to nil.
The Hon. D. J. GAY: Mr McGill, what surplus fund does the Legislative Assembly hold from its 1996-97 budget?
Mr McGILL: Mr Chairman, I have been directed by Mr Speaker not to answer any questions in relation to the Legislative Assembly estimates and I have also been directed to respond through the President of the Legislative Council, rather than answer questions directly.
The Hon. D. J. GAY: In the first instance, Mr President, are you aware what surplus funds the Legislative Assembly holds from its 1996-97 budget?
The PRESIDENT: I am not in a position, of course, to speak authoritatively, but from information which is available to me and which I believe to be reasonably accurate it would seem that the Legislative Assembly is currently looking at a surplus of approximately $480,000. Perhaps I should explain the situation, Mr Chairman, in relation to surpluses. Within the budget of The Legislature the President has control exclusively of the Council's budget, the Speaker has control exclusively of the Assembly's budget, and we have joint control of what we might call the joint services budget. In order to move money around it is quite clearly necessary for the Presiding Officers to concur. On information available to me it would appear that if there were no further expenditures, other than normal running, The Legislature in total would conclude this year with a surplus of $1.023 million.
However, there are planned expenditures from that between now and the end of the financial year of a total of $638,000. That would include, subject to Mr Speaker's concurrence, the back pay for Legislative Council staff. Assuming that concurrence is forthcoming, that would leave a surplus of approximately $400,000, if there were no other expenditures. However, it is normal at this time of the year, when we are facing a surplus, to ask departmental heads to prioritise things they would like to put in place and we to seek to expend those surplus funds. This is not only a common practice here but it is a common practice in all departments of government where there is a surplus. Towards the end of the year surplus funds are used for things that are needed but for which previously there has not been allocation of funds.
The Hon. Dr B. P. V. PEZZUTTI: In regard to Parliamentary Information Technology Services, why is there such a disparity between the quality and the quantity of computers available to members of the Legislative Council as compared with members of the Legislative Assembly, not to mention access to training for our staff compared with Legislative Assembly staff?
The PRESIDENT: Is there a disparity? It is a very general question that is difficult to answer unless you can perhaps favour us with some examples.
The Hon. Dr B. P. V. PEZZUTTI: I can certainly favour you with the information. I have a computer which is now six years old. It has run out of memory. I am constantly ringing up people in Parliamentary Information Technology Services to download information from that computer. They say it is not able to be salvaged, yet there is no money to provide me with a computer of a standard that is now commonly provided in Legislative Assembly offices.
The PRESIDENT: The answer to your question is that there are currently plans for capital expenditure before the end of this current financial year for the updating of computers in the offices of members of the Legislative Assembly and members of the Legislative Council. The total cost will be $777,000. That is already provided for in the capital works budget and is not part of the figures I was speaking to you of earlier. I would hope from that that you will find a great improvement.
The Hon. D. J. GAY: I have a follow-up question on that subject. I note in the 1997-98 budget that $1.3 million has been allocated for capital works and services, compared with $2.3 million in 1996-97. What is the effect of this on capital works in general and also on the five-year information technology plan?
The PRESIDENT: The bid that The Legislature put in for information technology was $2.4 million, comprising $393,000 for core business systems, $1.496 million for replacement of members' equipment, and a Parliament House network of $498,000, giving that total of $2.4 million. That was cut back by Treasury to $860,000. We are now in a position of having to prioritise that dramatically reduced allocation. Quite clearly this has a significant effect on the ongoing development of information technology services for members.
The Hon. Dr B. P. V. PEZZUTTI: Parliamentary Information Technology Services recently sought counselling services for its staff. By whom were those services provided and for what reason was it considered necessary to have that service provided?
The PRESIDENT: I am sorry but I do not understand the question.
The Hon. Dr B. P. V. PEZZUTTI: Perhaps the question could be placed on notice.
The Hon. FRANCA ARENA: Has the Legislative Council an average administrative and support staff of 31 for 1997-98, whereas the Legislative Assembly program shows just 36 administrative and support staff for the same period? Taking into account the number of members in both Houses, their staff and the staff of committees, are you as President aware that this shows a ratio of one support staff member for every three members of the Legislative Council, compared with one support staff member for every 9.5 members of the Legislative Assembly? How do you justify these inflated staff numbers?
The PRESIDENT: First of all I think the basis of the analysis is completely fallacious. The operational staff of the departments of the Assembly and the Council do work which is not primarily related to servicing members. A bill put through the Assembly requires exactly the same number of staff to deal administratively with it in the Council. So, first of all, I question whether the staff to member ratio is a valid analysis, but based on 1996-97 budget figures the Assembly had 37 staff compared with the Council's 29.
The Hon. FRANCA ARENA: I must be looking at different figures. I saw 31 for the Council and 36 for the Assembly.
The PRESIDENT: Irrespective of the exact numbers, I accept that the Assembly services more members, but that is why it employs 222 electorate staff compared with the Council's 46 electorate staff. The point I am making, as you would appreciate, is that many of the services offered by the Houses by way of procedural advice or management of committees, are identical and of equal complexity. I would argue that procedurally the Council staff have a much harder time than their counterparts in the lower House, given that the Council has seven crossbench members, and that the Government does not have a majority. In fact, about 25 per cent of all bills are amended in the Legislative Council, and this requires a considerable staff input.
In the past 12 months Council procedure staff have developed approximately 20 procedure briefing notes covering a range of issues raised by members. These notes are resources available to any member. They have also published all Presidents' rulings from 1978 to 1994. They have brought all the journals and records of the House up to date. They have made information available about members and committees via Lotus Notes and the Internet. They have developed and delivered a series of seminars for staff on procedural matters. They have responded on an ongoing basis to requests by individual members for procedural advice and have staffed from existing resources the Standing Committee on Parliamentary Privilege and Ethics, which had four references, held 12 public hearings and completed four reports within the past 12 months.
I would suggest that this type of valuable work to support the functioning of the House is not necessarily susceptible to economies of scale. The work is still there to be done whether you have 42 members or 99 members. As members would know, the Council continues to dedicate a single point of contact for members' services. From the letters and comments we receive from members concerning the fine service that the officers provide, I know that this is a valuable initiative on our part.
It is also interesting to take this analysis a step further beyond precise staff figures. For example, in 1996-97 the Assembly's staff of 37 cost an average of $74,000 each, whereas the Council's 29 staff in the same period averaged $67,000 each. So the Assembly has 30 per cent more staff than the Council and it is paying each one of them on average an additional 10 per cent more than Council staff are paid. I am not aware of why Assembly staff should attract such a premium but the budget figures show that they do.
The Hon. FRANCA ARENA: The 1995-96 annual report of the Legislative Council discloses that each of the senior managers of the Legislative Council - the Clerk, the Deputy Clerk and two Clerk Assistants - has a private secretary. How is this justified where there is only one secretary for all the senior Legislative Assembly managers?
The PRESIDENT: I will ask the Clerk, who is effectively the chief executive officer, to answer that question.
Mr EVANS: It is true that the Deputy Clerk has a project officer. With respect to the Clerks Assistant, they do not have individual secretaries. The people who work in those areas also work for all procedure staff. They are not dedicated secretaries for the Clerks Assistant.
The Hon. FRANCA ARENA: Could the President tell the Committee how many trips he undertook in the last 12 months that were funded by The Legislature and the purpose of the trip or trips? For the same period how many trips have the Clerk and the Deputy Clerk undertaken.
The PRESIDENT: I have had two. One was to the conference of State legislators in the United States, where, accompanied by the Speaker and the two Clerks, and at the request of that conference and of the Commonwealth Parliamentary Association headquarters in London, I joined with other senior Commonwealth parliamentarians, including a number of Presiding Officers, for a demonstration of a Westminster Parliament before the legislators of America who had requested that demonstration. Each year 5000 delegates attend that conference. My second overseas visit was in response to invitations that I had received from the government authorities of Shanghai in China, the city of Nanjing in China and the capital of Yunnan Province, Kunming.
The Hon. FRANCA ARENA: What has been the cost of those trips?
The PRESIDENT: In round figures the total was $23,000, $24,000.
The Hon. FRANCA ARENA: What about the Clerk and the Deputy Clerk?
The PRESIDENT: I will ask the Clerk to answer that.
Mr EVANS: I attended the 18th annual conference of the Australian Study of Parliament Group in Wellington, New Zealand, as President of the State chapter of that society, where I delivered a paper. That was at a cost of $1,892. I also attended a meeting of all Australian Clerks in January this year at Norfolk Island at a cost of $1,485. There has been no overseas travel by the Deputy Clerk this year.
The Hon. FRANCA ARENA: What has been the turnover rate in the administrative and support staff of the Council in 1996-97 and how does it compare with that in previous years?
The PRESIDENT: I do not think it is a terribly big number, but I will take the question on notice.
The Hon. P. T. PRIMROSE: I refer to the allocation for the Parliamentary Library, set out in Budget Paper No. 3, Volume 1, page 25. Obviously everyone acknowledges that the Library does a great job. I notice that the average effective full-time staffing is suggested to be decreased from 38 to 36 and that the other operating expenses would be reduced from $470,000 down to $398,000. I am wondering what the effects of that reduction might be in terms of the general activity and operations of the Library?
The PRESIDENT: Ultimately, if you keep screwing down any organisation's available funding resources, it will have a deleterious effect on its ability to deliver services. I do not believe that the cutbacks that have occurred in the last couple of years have had any deleterious effect on the Library's ability to deliver services and I relate that largely to the customer response. The only real protest that I have had over the last two years from those to whom the Library provides services related to the curtailing of the Australian Associated Press news service. That does not mean to say that both Mr Speaker and I are not concerned about the resources that the Library will have in future years in view of the projections that we have been told about for cutbacks to funding for The Legislature.
Again I go back to the general description I gave of the Presiding Officers managing the finances of the Parliament: in the latter part of the year we are very often able to do things from surplus funds. For example, we hope to fund a number of things, because there is a very, very large surplus emerging from the activities of Legislative Assembly committees. I will give the Committee an example. I think it was towards the end of the year that we were able to pour $100,000 into upgrading of equipment in the Library. That has meant that strictures on staff were able to be overcome by technology. It is something we just have to watch very carefully, but I appreciate the concern expressed.
CHAIR: Time is now allocated for questions from crossbench members and the rules allow the Chair to ask questions so I will proceed. I do not know whether the Parliamentary Librarian wishes to add anything to the President's previous answer. I am happy to have that in my allocation of time, unless it is considered that the question has been answered sufficiently.
Mr BRIAN: In the last two years Library funding has been cut back by $188,000. I now face another cutback of $113,000. With the skilful management and cooperation of my staff the Library should come out pretty well on budget this year but I cannot see how we can maintain the same level of service next year. While it is true that on the equipment side we are relatively well off because of the expenditure at the end of each financial year - and I thank the President for his support of that - the real problem is in staffing because the Library is very much staff intensive. Of course, without staff we cannot deliver the very personal service that we provide to members and I am not sure how we will solve the problem.
CHAIR: Following on from that point about cutbacks, I note at page 33 of Budget Paper No. 3, Volume 1, reference to the printing of parliamentary reports, publications and Hansard. I note that there have been some attempts to reduce costs by putting material on computer for members to print in their respective offices various papers and Hansard. What effect is this having on efficiency and on the provision of information?
The PRESIDENT: The Parliament is facing budget cuts and has been warned that it will face future cuts. The introduction of electronic publishing is one measure that is being implemented in order to reduce costs. As with any change of this nature, some disruption and teething problems have occurred. There is also the natural human resistance to change. However, I am confident that these initial problems can be overcome: in fact, they have to be overcome. If we are to become more efficient in the way we do things and if we are to cope with imposed budget cuts, other changes will have to be instigated. In November last year members were advised that the hard copy of business papers would be phased out from the beginning of the 1997 sittings. As I understand it, the Assembly phased out the hard copy from September 1996. However, the Council chose to delay its implementation to give its members more time to prepare.
We also offered short individual training lessons on-site for members and staff in Lotus Notes, the software which now carries the business papers. Unfortunately few members or staff availed themselves of that opportunity. I issued a circular on 3 April this year reminding members that a hard copy would not be available. Members were given a great deal of notice about this change and were offered training on more than one occasion. While there have been teething problems which will be addressed, I have to say that electronic delivery of information is the way of the future. It also is one strategy that we have to produce services at a reduced cost, and that is an imperative given the strictures that are continually being put on us.
CHAIR: If members are using their own facilities to print the material is the gross amount of paper in fact being reduced or does it just transfer the cost from the Council to members?
The PRESIDENT: Quite clearly that has to be monitored. If the result of the monitoring shows a need for an increase in allocation, and if it is a matter of saving X here at the expense of supplementing fractionally elsewhere, then it has to be done.
CHAIR: Page 33 of Budget Paper No. 3, Volume 1, refers to education and community relations. Members have noted in recent months the extensive development of large-screen television presentations of the Legislative Assembly proceedings, particularly near the lifts as one enters the members' area. Are there any plans for similar presentations of Council proceedings, or are there any plans for the presentations to alternate between Council and Assembly proceedings?
The PRESIDENT: That was an initiative of Mr Speaker, and I do not intend to repeat it on the Legislative Council side.
CHAIR: Is there any reason for that decision? Does it relate to a financial consideration?
The PRESIDENT: First of all, I think it has a greatly deleterious effect on the decor of what is a showpiece building. Secondly, I suppose people sit in the LA waiting area and watch the large screen, but in my opinion that area was never intended to be a quasi-cinema. The only people who really look at the large screen in the level 7 lift lobby are members using the lifts. I frankly see no need for such a thing on the LC side.
CHAIR: I have a question dealing with security. On Tuesday, 27 May, a situation occurred in the Legislative Council Chamber when a protest took place in the visitors gallery. The Deputy-President asked the protest group to leave because of the large amount of noise they were making, and because members could not conduct the business of the House. I understand that three attendants approached the protesters. The protesters apparently had a document, which they read out, claiming they had a right to be there and could not be removed. The attendants returned to their seats and the protest continued until the Chair was forced to adjourn the House until the ringing of a long bell. Do any special provisions apply to the removal of protesters from the visitors gallery? Do any officers, either the attendants or the police, have the authority to remove them?
The PRESIDENT: Under the current interim security measures everyone who comes into the parliamentary precinct is cleared for metal items. They cannot enter the Legislative Council gallery unless they are processed through the Council desk and are, in effect, authorised to go in. I understand that those people in the gallery were the guests of a member who was unaware that they were going to do what they did, and I accept that. As for the authority of the security staff in attendance to
remove people, I take the view that, on instructions from the Presiding Officer, and that includes the person occupying the chair, Council attendants and security staff have authority to physically remove people. However, it has been usual practice during a disturbance in the gallery for the occupant of the chair to leave the chair in order that the disturbance might be dispersed in an orderly manner, without an unseemly brawl erupting. In extreme cases, if need be, the staff will call the police.
CHAIR: Do attendants have a legal right to physically remove people or are police officers the only ones with that right?
The PRESIDENT: Until the precincts of Parliament legislation is passed we have to rely on the common law, and who knows what the common law is?
CHAIR: Page 23 of Budget Paper No. 3, Volume 1, relates to allocations for parliamentary committees. I note that the total budget is lower than the amount budgeted in 1996-97. It was $3.7 million, but was reduced to $3.6 million. In view of the increased number of committees, including general purpose standing committees, are there sufficient funds allocated for committees?
The PRESIDENT: I would have to say that this is an example of an area where the estimates become somewhat fictional. We are supposed to have in The Legislature what Treasury calls capacity for global budgeting but for some reason or another when we submit the estimates we are required to be very detailed. Quite often it is not possible - and this is an example of this - to sit down at the time the estimates are demanded of us, which is early in the year, and work out a proper allocation as between the committees of the two Houses as well as the joint committees. I have to be honest with you and say we pluck a figure out of the air as a pro rata figure and then early in the financial year we sit down and try and do a more accurate allocation amongst the committees of both Houses and the joint committees. What I am saying to is: do not place great reliance on that division.
CHAIR: At this stage can you cater for those committees?
The PRESIDENT: For the committees that we know of, I would say yes. We have been able to financially service all the committees in previous years and, even though there are cutbacks, I believe we can do the same this year. Of course, the Parliament has the ability to establish further select committees about which we have no knowledge at this stage. That factor can always blow the committee budget, and in extreme cases we have to start pulling in money from elsewhere.
CHAIR: Would you prefer that, rather than establish a select committee, a matter be referred to one of the existing standing committees which does have a budget and staff?
The PRESIDENT: We can reallocate funding; the Council has the ability to do that. I do not think it is necessary to refer something to an existing committee rather than establish a new select committee.
CHAIR: I note that page 35 of Budget Paper No. 3, Volume 1, covers the acquisition of property, plant and equipment. Last year it was budgeted to be over $1 million and this year it is only half that. How is that saving being made?
The PRESIDENT: For the overall capital program we sought $8.178 million and we were given $1.676 million, so we just do the best we can in terms of priority with the money we end up being given.
The Hon. Dr B. P. V. PEZZUTTI: Could you ascertain from Mr McGill what was the cost to The Legislature of travel for Mr Speaker, the Clerk and the Deputy Clerk of the Legislative Assembly and how many trips were undertaken during the last financial year, that is, up until June this year?
The PRESIDENT: For my part I would have absolutely no idea; I am not privy to those figures.
The Hon. Dr B. P. V. PEZZUTTI: Perhaps we could seek the assistance of Mr McGill, if he is prepared to tell the Committee.
Mr McGILL: I do not have the information. Even if I did have the information, I am under instructions from Mr Speaker not to discuss Legislative Assembly estimates or expenditure.
CHAIR: The question may be placed on notice.
The Hon. Dr B. P. V. PEZZUTTI: The Special Report of Estimates Committee No. 1 last year concluded:
The committee concluded that the financial controller is not an officer of the Legislative Assembly solely but an officer of both Houses jointly. According to the committee's view the financial controller, like any other witness, is subject to the powers conferred on the Legislative Council committees to summons and examine the witnesses whether such powers are conferred by resolution of the House or by statute.
I do not ask that that question be submitted for further consideration but that you do what is in your power at this meeting or at a subsequent meeting of this Committee to seek that information, which I think quite properly this estimates committee should be able to examine.
CHAIR: The question can be put on notice, attached to the Committee's report and forwarded to the Speaker.
The Hon. Dr B. P. V. PEZZUTTI: I foreshadow a further statement on this issue before the conclusion of the Committee hearing.
The Hon. D. J. GAY: Mr McGill, you stated that Mr Speaker has instructed you not to answer questions about the Legislative Assembly. I understand that you are employed jointly by the Presiding Officers. If the President, who is one of those Presiding Officers, were to instruct you to answer this question, would you answer it?
Mr McGILL: I was appointed by Mr Speaker of the Legislative Assembly and therefore I see myself as an officer of the Legislative Assembly and not a joint officer of the Parliament.
The Hon. D. J. GAY: Do you have your instructions in writing from Mr Speaker?
Mr McGILL: I do.
The Hon. D. J. GAY: Would you be prepared to table them at a subsequent time?
Mr McGILL: I would like to make a correction. I do not have written instructions not to answer questions: I received them verbally.
CHAIR: I note that the report to which the Hon. Dr B. P. V. Pezzutti referred has been tabled in the Legislative Council only today. Even though the Committee has made that ruling, it has not yet been adopted by either House of the Parliament.
The Hon. Dr B. P. V. PEZZUTTI: I make the point that part of the budget estimates will not be able to be examined by this Committee, namely, those under the control of Mr Speaker. Mr Speaker is almost putting himself outside the law on this issue and we will deal with it later in Committee.
Mr President, you answered a question from the Hon. Franca Arena about the difference between staff numbers in the Legislative Assembly and the Legislative Council. I wonder how many staff in this building service The Legislature and members jointly, that is, under joint services arrangements?
CHAIR: Perhaps that question should be placed on notice as it is a matter of listing the departments and the staff numbers.
The Hon. Dr B. P. V. PEZZUTTI: I thought the Financial Controller, who controls joint services, would be able to answer a question of that nature.
The PRESIDENT: I am informed by the Clerk that the figures are contained in the budget papers, department by department. I will take the question on notice. The guesstimate is that it is probably 100, 150, something like that.
The Hon. FRANCA ARENA: In answer to an earlier question Mr President said that the amount of money expended in overseas trips by himself was $23,000. Is the amount of $29,000 on page 33 of Budget Paper No. 3 inclusive of the two trips, including the Presiding Officers conference?
The PRESIDENT: No, it does not include that. That is a separate allocation that is made every year for the annual Presiding Officers and Clerks conference, which is for all the Presiding Officers and Clerks of all the Parliaments of Australia
The Hon. FRANCA ARENA: So you took more trips than those two trips you told us? There are extra trips?
The PRESIDENT: No, that is an additional conference expenditure. If you are talking about this past year, the conference was held in Tasmania; it was not held overseas.
The Hon. FRANCA ARENA: What about the overseas delegation cost which jumped from $10,000 to $260,000 and is expected to be $210,000 next year? I suppose we are receiving more and more overseas visitors but at a time of cost-cutting it seems an enormous amount of money to spend on overseas visitors.
The PRESIDENT: We have in New South Wales now a number of formalised sister-State province relationships: the Guangdong Province in China, Korea, California, Thailand and the Tokyo
Metropolis. They are regarded both by government and the Parliament as very important parts of the projection of New South Wales to these important places with which we have trade, cultural and a whole lot of other relations. We have received no indication from government that they want us to cut back in this area and, therefore, they are included in that way in the budget estimates. There has, no doubt, been an escalation in them over the last 10 years but I would submit that they are part of a purposeful government policy in which the Parliament participates.
The Hon. FRANCA ARENA: I address a question to the head of catering. I note that his staff numbers have decreased from 41 to 32. If the Library has difficulties with its staff reductions, and given the increased demand on the catering services, which are always excellent, it must be difficult for Mr Draper as well. Could we have some comments on that?
The PRESIDENT: I will ask Mr Draper to comment. The Presiding Officers largely leave the question of catering staff in the hands of the Manager of Parliamentary Food and Beverage Services, who copes with a mind to economies without diminution of services. Would you like to add to that, Mr Draper?
Mr DRAPER: The permanent staff numbers have been reduced but we are covering the areas with permanent casual staff.
The Hon. FRANCA ARENA: They are permanent casuals and get all the entitlements of part-time staff?
Mr DRAPER: Yes.
The Hon. P. T. PRIMROSE: Can I ask what you, Mr President, expect may be the implications of the slight reduction in the total number of cleaning staff that are available according to the estimates?
The PRESIDENT: I will take that question on notice but it is very much related to an independent review which Mr Speaker and I have authorised from outside consultants for the efficiency and cost of delivery of all services within the Parliament.
CHAIR: As we know, this Committee's investigation time was reduced from 3½ hours to one hour. I call on a Committee member to move a motion relating to the supplementary meeting.
Committee adjourned on motion by the Hon. D. J. Gay.
GENERAL PURPOSE STANDING COMMITTEES
General Purpose Standing Committee No. 1
Thursday, 29 May 1997
TREASURY, ENERGY AND STATE AND REGIONAL DEVELOPMENT
The Committee met at 6.00 p.m.
Reverend the Hon. F. J. Nile (Chair)
The Hon. Franca Arena
The Hon. Virginia Chadwick
The Hon. Jennifer Gardiner
The Hon. J. H. Jobling
The Hon. P. T. Primrose
The Hon. M. R. Egan, Treasurer, Minister for Energy, Minister for State and Regional Development, Minister Assisting the Premier, and Vice-President of the Executive Council
Mr J. Pearce, Secretary
Mr B. Buchanan, Director, Office of State Revenue
Department of State and Regional Development
Mr W. Watkins, Acting Director-General
Dr P. Paterson, Director
Department of Energy
Mr R. Neil, Director-General
Ms C. Zoi, Executive Director, Sustainable Energy Development Authority
The Hon. M. R. EGAN: I introduce to the Committee Mr John Pearce, the new Secretary of Treasury, and Mr Bruce Buchanan, head of the Office of State Revenue.
CHAIR: At a meeting earlier today I was elected Chair of the Committee. At this meeting the Committee will examine the proposed expenditure from the Consolidated Fund for the portfolio areas of Treasury, Energy, and State and Regional Development. Before questions commence, some procedural matters need to be dealt with. First, the Hon. Jennifer Gardiner will replace the Hon. Helen Sham-Ho. I remind members' staff and any other persons who are not Legislative Council members, Committee members or parliamentary officers that they should not approach the Committee table. Messages for members should be given through the attendant on duty or to the Committee clerks. In order to accurately complete the questions and answers paper, the Committee clerk requires that members complete and sign the appropriate form when a question is taken or given on notice. For the benefit of members and Hansard, I ask departmental officials to identify themselves by name, position and department or agency before answering each question.
This being a general purpose standing committee, it has more latitude than the original estimates committees. Before I declare this Committee open and before the questioning of witnesses commences, I remind Committee members that at the hearing on Friday, 29 May, the Committee authorised the broadcasting of its public proceedings. Should it be considered necessary to discontinue the broadcasting of these proceedings, a member will be required to move a motion accordingly. At present the proceedings are open to the news media and the public. The allocations of time for the various departments under the Minister's authority are: two hours for Treasury, 45 minutes for State and Regional Development, 45 minutes for Energy. We will commence with 30 minutes for questions from the Opposition, 30 minutes for Government questions, 30 minutes for questions from the crossbench and then 30 minutes more for Opposition questions. After two hours the Committee will break for 10 minutes.
CHAIR: I declare the proposed expenditure open for examination. The Committee will deal first with questions on Treasury.
The Hon. VIRGINIA CHADWICK: I refer the Treasurer to Budget Paper No. 3, Volume 2, page 647, line item Employee related expenses. I am interested in the whole-of-government cost to the New South Wales taxpayers of hosting the Olympic Games. Does Treasury have officials who are dedicated to the compilation and monitoring of the whole-of-government cost, and, if so, what is the number of staff allocated to this important task?
The Hon. M. R. EGAN: My officers are all dedicated. Certainly part of their responsibilities is to oversee the expenditure of virtually all government operations, government agencies and government departments. They are also required to monitor the activities of the various business enterprises owned and run by the Government. There are officers in Treasury who oversee the Olympic Games expenditures and activities. I am not sure that there are any whose duties are solely related to the Olympics, but Mr Pearce might correct me if that is wrong.
Mr PEARCE: The majority of one person's duties is the monitoring of the Olympics. A couple of other officers would include such monitoring as part of their normal duties.
The Hon. VIRGINIA CHADWICK: I am sure that the Treasurer is aware of the Auditor-General's criticisms in relation to the whole-of-government expenses of the Olympics. Does he believe that it is sufficient to have one person monitoring this important area of government expenditure, along with that being a passing duty of a couple of other officers?
The Hon. M. R. EGAN: Obviously there are a number of people associated with the Olympics portfolio - those associated with the Olympic Co-ordination Authority and the Sydney Organising Committee for the Olympic Games - who are more directly involved in that. But Treasury has the job of monitoring all of the Government's activities, some $23 billion of revenue and expenditure each year in the budget sector, and non-budget sector activities involving many billions of dollars. For the purposes of Treasury I certainly consider that staffing to be adequate; it is at a high level.
The Hon. VIRGINIA CHADWICK: It is the whole-of-government aspect that is the focus of my question and was clearly of concern to the Auditor-General. Many other government departments - the Department of School Education, for example - face the cost of an inbuilt Olympic component because of the nature of their portfolio and activities associated with the Olympics. Does the Treasurer have available whole-of-government costings of the Olympics?
The Hon. M. R. EGAN: I am not aware that we are going to conduct any schools or TAFE colleges at the Olympics, so I would think that if the Department of School Education, for example, were involved in any way that would be peripheral.
The Hon. VIRGINIA CHADWICK: Having had some experience in that department a couple of years ago, I would regard its costing, the time involved and the staff involved as significant, not peripheral.
The Hon. M. R. EGAN: In regard to the Olympics?
The Hon. VIRGINIA CHADWICK: Yes. I again ask whether the Treasurer has been concerned about the Auditor-General's criticism of a whole-of-government approach to costing of the Olympics. Does the Treasurer take those criticisms on board and does he intend to increase the number of staff - at present one staff member - allocated to this task?
The Hon. M. R. EGAN: That is not true. Mr Pearce has pointed out that more than one Treasury officer is involved in the monitoring of mainly the SOCOG and the OCA expenditures. Of course, quite a number of Treasury officers monitor the activities of all the other departments.
The Hon. VIRGINIA CHADWICK: I shall move on to a different question. In passing I point out that I for one consider that taxpayers have a right to understand the costs involved in expenditures such as those made for police activities, security, health and education -
The Hon. M. R. EGAN: Of course.
The Hon. VIRGINIA CHADWICK: - and it would appear that the Treasurer is not monitoring that expenditure. I refer now to Budget Paper No. 2, page 1-13, table 1.6, Total, Current Outlays and Total, Capital Outlays. In 1997-98 for both the budget sector and the general government sector what percentage in dollar value of current and capital outlays represents Olympic and/or Olympic-related expenses? How does this figure compare with outlays in previous years? What estimates are provided for 1998-99 and 1999-2000?
The Hon. M. R. EGAN: I am not trying to be a smart alec, but I would have thought that that was the sort of information one could obtain for oneself from the detailed information on the various capital programs contained in the budget papers. The capital expenditure for the construction of Homebush Bay Olympic venues and infrastructure this year is, as I think everybody knows, $628 million. That is out of a total capital program of approximately $3.9 billion in the budget sector.
The Hon. VIRGINIA CHADWICK: I refer to Budget Paper No. 3, volume 2, page 649, subprogram 68.1.1. In Treasury advice on budgeting targets and strategies, was the Treasurer provided with information on the economic impact on jobs, investment and tourism business of the proposed 10 per cent bed tax prior to its introduction and inclusion in the State budget? If he was provided with such advice, why did he proceed with this proposal?
The Hon. M. R. EGAN: That is a silly question. The accommodation duty that the Government is proposing applies to room rates in central Sydney. It is expected that the total cost of accommodation in the central Sydney area will increase by 6 per cent to 7 per cent if the tax is fully passed on to visitors. For overseas visitors this will add at most a couple of per cent to the total cost of a trip. This increase could easily be offset or swamped by exchange rate fluctuations. Weak growth in tourism demand from Japan in recent times is largely due to the depreciation of the yen by about 60 per cent since mid-1995. When a bed tax was introduced in Hawaii - often characterised as a competitor holiday destination to Australia - it was fully passed on to tourists without reducing visitor demand growth. The Northern Territory bed tax has had no discernible impact on visitor demand growth.
The accommodation duty is likely to have a negligible impact on the number of business visitors to Sydney, which category accounts for about 13 per cent of visitor nights in central Sydney. Sydney provides all of the top 10 visitor attractions in Australia. The opening of a permanent casino will add to Sydney's attractions. Some visitors may switch to cheaper hotels or to accommodation outside the area affected by the tax. However, that will not reduce aggregate visitor numbers and some hotels will gain as a consequence. A major operation at Darling Harbour has commented that the tax will have no impact on its operations. An accommodation duty has been recognised as a good tax because it recovers some of the cost of providing and maintaining tourism attractions from those benefiting from those attractions. That really is the gist of the advice I was given by Treasury officials in my discussions with them before I proposed this matter to the Government.
The Hon. VIRGINIA CHADWICK: I refer to Budget Paper No. 6, page 12, table 2.7, Advances paid. Will the Treasurer explain why the figure of $247 million, which represents asset sales, was not deducted from the overall budget surplus of $27 million? Is it a fact that when this figure is deducted, the true result in the budget sector and the general government sector is an underlying deficit of $220 million and $279 million respectively? Is it not a fact that the Australian Bureau of Statistics and all other Australian States calculate the true budgetary position by deducting net advances paid? Does the
Treasurer believe that he has in any way misled people by failing to include in this figure all asset sales?
The Hon. M. R. EGAN: No, that is absolute nonsense. I point out that the level of asset sales in this year's budget is considerably lower than the level of asset sales in the budgets of the coalition Government, of which the Hon. Virginia Chadwick was a member, and they were treated in exactly the same accounting fashion. What also needs to be kept in mind is that although this budget, as with every other budget in my recollection - and I have been around as long as you; I was elected in 1978 - includes asset sales, if we were to take out the asset sales from the underlying result we would also have to take out the asset purchases from the underlying result. This year the capital program, in other words asset purchases, is $3.9 billion. On the logic that the Hon. Virginia Chadwick has just presented to the Committee, this budget would have an underlying surplus of almost $4 billion.
The Hon. VIRGINIA CHADWICK: I would beg to differ. I refer to Budget Paper No. 2, page 1-13, table 1.6, Asset Sales. Last year's estimate for asset sales in 1997-98 was $171 million. According to this year's papers the Government is anticipating the sale of $322 million in assets. How does the Treasurer explain this doubling of estimated asset sales? Will he provide the breakdown of this figure amongst all the portfolios and identify the assets to be sold? Will he also give an assurance that all proceeds of the asset sales will go towards retiring State debt and that none will be used as recurrent revenue in any portfolio?
The Hon. M. R. EGAN: No -
The Hon. FRANCA ARENA: Mr Chairman, this question seems to be taking well over the one minute allowed. Maybe the Treasurer does not mind, but if we are to keep to the timetable questions should be limited to one minute.
The Hon. M. R. EGAN: I am quite happy with that. The reason the asset sales figure is higher in the budget than in the forward estimates is that as the actual financial year to which the budget applies draws closer, we are in a better position to identify properties that we regard as surplus. Just as the figure in this year's budget for asset sales is higher than last year's forward estimates for this budget year, it is likely that the asset sales figure in the 1998-99 budget will most likely be higher than the 1998-99 forward estimates contained in the 1997-98 budget; and likewise the asset sales for 1999-2000 will be higher than is anticipated in either the 1998-99 or the 1997-98 forward estimates; and we could go on and on. That simply means that as the budget year approaches we can identify more assets that are worth selling. I might add that the anticipated asset sales figure this year is somewhat lower than for past years.
The Hon. VIRGINIA CHADWICK: I thank the Treasurer for that answer. The Treasurer has said that he has been able to identify a number of assets that will be sold or that he will attempt to sell in the next 12 months. What might some of those $322 million worth of assets be?
The Hon. M. R. EGAN: Approximately $142 million is from agencies disposing of surplus assets and the balance consists of what is known as Crown assets. The most significant individual Crown asset sale is that of the St James Centre, which is expected to be sold early in the new financial year. I think I even read something interesting about that in the Australian Financial Review this week. The Government is doing very well on property sales.
The Hon. VIRGINIA CHADWICK: I thank the Treasurer for that information. He has identified one property, but $322 million is obviously a very high figure.
The Hon. M. R. EGAN: Yes, $142 million is a result of assets sales from individual agencies.
The Hon. VIRGINIA CHADWICK: Will the Treasurer give an indication of some of the other assets he intends to sell?
The Hon. M. R. EGAN: Yes, I would be happy to do that and I take the question on notice. The major asset in the bundle of Crown assets this year is the St James Centre.
The Hon. VIRGINIA CHADWICK: As the second part of this question, I was seeking an assurance that the Government, in gaining this sort of one-off windfall, would use none of the proceeds of asset sales for recurrent purposes.
The Hon. M. R. EGAN: The proceeds are all used for recurrent or capital purposes. They all are within the overall budget surplus of $27 million. Yes, of course they are used for that. There is a capital budget of $3.9 billion, and that revenue is very important in enabling the Government to make new investments.
The Hon. VIRGINIA CHADWICK: Was I correct in hearing the Treasurer say that the proceeds would be used for recurrent as well as capital expenses?
The Hon. M. R. EGAN: Yes, the money all goes in the same bundle. It pays for recurrent and capital expenses.
The Hon. VIRGINIA CHADWICK: But, as this concerns an asset sale and hence a one-off windfall, how could it be used for recurrent purposes?
The Hon. M. R. EGAN: If the bundle were unbundled I suppose the answer to the question would be no, but it all goes into the one bundle. The fact of the matter is that asset purchases, in other words the capital program, amounts to $3.9 billion. Asset sales amount to $322 million. I could arrange it to be shown as capital revenue rather than recurrent revenue, but that would really be a pointless exercise because capital purchases are more than 10 times higher than capital sales.
The Hon. VIRGINIA CHADWICK: I refer to the $322 million anticipated revenue from asset sales. Do any of the major asset items that make up the asset sales come from the transport portfolio?
The Hon. M. R. EGAN: I could check on that. There was some talk about the sale of one of the transport buildings, but I am not sure whether that comes under Crown assets or the transport portfolio.
Mr PEARCE: I am not sure either, I must admit. Certainly within the transport area some asset sales are involved. I do not have the precise figures with me. Probably we should take that question on notice.
The Hon. VIRGINIA CHADWICK: Regardless of which area of asset sales the items come under, what might they be?
The Hon. M. R. EGAN: That question would appear to contain a non-sequitur.
The Hon. VIRGINIA CHADWICK: Then I will try again. Regardless of whether they be regarded as transport assets or as Crown assets, what transport assets are to be sold?
The Hon. M. R. EGAN: I have just said that I did not know, and Mr Pearce said he would find out.
The Hon. VIRGINIA CHADWICK: I will put that question on notice. I refer the Treasurer to Budget Paper No. 2, page (v), Budget Sector Financial Management, Savings initiatives. Can the Treasurer reconcile the savings estimate of $680 million in the 1995-96 budget papers with the significantly reduced savings estimate of $146 million in this year's budget papers? Which portfolios failed to reach the Government's original savings target?
The Hon. M. R. EGAN: That is an incredible question. It indicates that whoever drafted it does not understand his or her way through the budget papers or the processes of the budget. The items listed in Budget Paper No. 2, page 1-42, Summary of Major Savings Measures are those measures that are being adopted in respect of the 1997-98 budget and subsequent budgets. In other words, they are new measures. The first column shows an estimate of the savings in the 1997-98 year and the second column shows the maximum savings that will be achieved in a full year, whether that maximum saving will be achieved in 1998-99 or 1999-2000. It has no relevance at all to the summary of major savings measures in respect of the 1995-96 budget. These are additional measures.
The Hon. VIRGINIA CHADWICK: Is the Treasurer able to confirm that all departments achieved the original savings targets set by him last year?
The Hon. M. R. EGAN: The previous question related to 1995-96. One of the criticisms of last year's budget was that the Government did not provide a list of savings measures.
The Hon. VIRGINIA CHADWICK: Is the Treasurer confident that the savings he has requested of or imposed upon departments will in fact be met and that strategies have been put in to place to achieve them?
The Hon. M. R. EGAN: Yes.
The Hon. VIRGINIA CHADWICK: I refer to Budget Paper No. 2, page 1-13, table 1.6 Departmental Payments. What dollar value of the figure shown is attributed to public servants who are still employed by the public service but do not attend work or are unattached according to the public service employment guidelines?
The Hon. M. R. EGAN: I am not sure of the precise figure. That information could be obtained.
The Hon. VIRGINIA CHADWICK: I am happy to put that question on notice. Most of us who have read the Auditor-General's report know that he estimates that in three agencies alone the cost to the taxpayer of workers who are employed by way of salary but are not performing work is $10 million.
The Hon. M. R. EGAN: That is a complete misrepresentation of anything the Auditor-General has said. Those referred to in his report are not people who are not employed; they are people who
work for an agency but are surplus to what the agency believes to be its optimum staffing level. I make no apology for that, and I have pointed that out on many occasions. That is a cost to the taxpayer. This Government, I think unlike any other government in Australia, will not achieve optimum staffing levels by retrenching or sacking people, because it is not a heartless Liberal government, it is a compassionate Labor Government. When the Government sets out to achieve optimum staffing levels it will do so by natural attrition and voluntary redundancy only. That does impose a tax on the taxpayer. It is a cost that I believe we as a community should bear. Whilst it does cost money, it is an entirely appropriate policy. It is not as though those people are not employed; they are employed, they do go to work.
The Hon. VIRGINIA CHADWICK: I take on board the Treasurer's earnest and heartfelt belief that those people should not be retrenched and I understand his passionate conviction that the taxpayers should bear the social cost. I find it astonishing, however, that the Treasurer cannot tell the Committee what that cost actually is.
The Hon. M. R. EGAN: In fact the Auditor-General made an assessment of three agencies. I have not made an assessment of every agency; that is not an exercise that is necessarily begun.
The Hon. VIRGINIA CHADWICK: If I put this question on notice, would the Treasurer be able to give an across-government estimate to add to the $10 million that the Auditor-General has identified in three agencies -
The Hon. M. R. EGAN: I would be happy to try to obtain that information. I must say that I take with a grain of salt the assertion of the Hon. Virginia Chadwick that it is a cost that she thinks the Government should bear. It is obvious from the nature of her first question that she is highly critical of the way in which this Government -
The Hon. VIRGINIA CHADWICK: Don't put words in my mouth, Mr Treasurer.
The Hon. M. R. EGAN: - deals compassionately with its work force. The honourable member changed her tune between her first and second questions.
The Hon. VIRGINIA CHADWICK: I shall certainly put the question on notice. In relation to the same matter, the Auditor-General suggested that rather than the cost appearing as a cost on the agencies involved, it should be identified as a separate social cost or social program within the budget so that the laudatory aspects of the policy the Treasurer has just enunciated are clear for all to see. Has the Treasurer considered identifying that as a separate line item to a social program in the budget?
The Hon. M. R. EGAN: No, I have not.
The Hon. VIRGINIA CHADWICK: If any of the agencies are facing privatisation, has the Treasurer taken into account the fact that there is a cost there for people who have been declared redundant?
The Hon. M. R. EGAN: Yes, but I do not see that it has anything to do with any proposed privatisation.
The Hon. FRANCA ARENA: I refer to Budget Paper No. 3, Volume 2, page 655, Economic Advice, Taxation Policy and Advice on Intergovernmental Financial Relations. What has been the expenditure on electricity reform and what benefit has been realised?
The Hon. M. R. EGAN: Questions asked by the Hon. Franca Arena are much more difficult to deal with than previous questions. In 1996-97 an estimated $4.053 million will be spent on electricity industry reforms. That includes approximately $2.7 million for consultancy fees. I am advised that since the establishment of a competitive energy market in New South Wales consumers have received more than $200 million in savings, in other words, lower electricity prices to the total tune of $200 million. The competitive energy market has resulted in real reductions for household and business customers.
At this early stage business customers in particular are benefiting. Some businesses are experiencing savings of 20 per cent, 30 per cent and even 40 per cent, which increases their ability to beat both interstate and overseas competitors. New South Wales households and businesses now enjoy the cheapest power in Australia. I was very pleased to read the report of the Chairman of the Independent Pricing and Regulatory Tribunal, Professor Tom Parry, which I think was released in January, in which he confirmed what the Government had been claiming. New South Wales households, for example, and particularly those in country areas, generally pay much less for their power than other Australians.
In fact, regional New South Wales has Australia's cheapest off-peak domestic power. As I mentioned, in the past year the Government has delivered businesses savings of around $200 million on power bills. A small business in New South Wales now pays 30-40 per cent less for power than its competitors in Victoria. That gives an average saving of $3,700 - a big whack for a small
businessperson. Likewise, the average New South Wales household pays $165 less for power than a similar household in Victoria.
The IPART report credited the Government's reforms with providing, "significant price reductions to both small and large commercial customers". The Government has introduced competition to the generation and retail sale of power in New South Wales. As Committee members will be aware, 26 power distributors were amalgamated into six competing energy corporations and three competing generators were established from the old Pacific Power. By mid-2000 all of the State's 2,600,000 household and business power customers will be able to shop around for their power.
The Hon. VIRGINIA CHADWICK: On a point of order. I am finding the Treasurer's answer absolutely riveting but it appears to be related to energy.
The Hon. M. R. EGAN: No, the question relates to Budget Paper No. 3, Treasury agency, Economic Advice, Taxation Policy and Advice on Intergovernmental Financial Relations. It clearly relates to economic advice, and I have been asked about the expenditure on electricity reforms and the benefits realised. Now, if the Hon. J. H. Jobling were here, he would be aware that the electricity task force is part of Treasury, not the Department of Energy. I emphasise that by mid-2000 all of the State's 2½ million customers will be able to shop around for power. We will be able to buy our power from whomever we choose.
The Hon. FRANCA ARENA: The Treasurer mentioned the amount of money spent on consultancy fees. Is that money spent on what is absolutely necessary? Is there a better way of spending money?
The Hon. M. R. EGAN: No, that is, in fact, quite a moderate expenditure given the huge reforms that had to be undertaken. The Government has essentially created nine of the biggest businesses in Australia, three generators and six distributors. On the basis of the amount of money spent per firm, the amount that spent by the Government on expert financial, legal and accounting consultants is fairly modest.
The Hon. P. T. PRIMROSE: The Treasurer may not have all the details relating to this question, because it is reasonably complex, so he should feel free to take it on notice. I refer to Budget Paper No. 3, Volume 2, page 683, subprogram 69.1.3, Crown Transactions, Other Service-wide Activities. The capital program shows a revised figure for 1996-97 of $26 million. Will the Treasurer provide details of this amount?
The Hon. M. R. EGAN: This amount relates to a capital advance of $26 million, $25 million of which was advanced to Axiom Funds Management Corporation. As the Committee will be aware, the Government considers asset sales on a case-by-case basis, and the excellent result achieved in the sale of Axiom, the New South Wales public sector funds management organisation, to Deutsche Australia Ltd demonstrates the advantages of this approach. In 1996 public sector superannuation arrangements were restructured by separating funds management from scheme administration activities, and a decision was taken to sell the funds management business. The fund's assets were not sold and continue to be held by the trustee for the benefit of members.
The sale of the funds management business allows fund members to benefit from the introduction of competition for the management of their retirement savings, with the net sale proceeds being reinvested in the pooled superannuation fund. The contract between the trustee and Axiom allows the phasing in of contestability, giving the trustee increased discretion over a steadily increasing proportion of the funds under management. The Government found the Deutsche proposal to provide the greatest long-term benefits to taxpayers and fund members. Deutsche's experience in managing international assets should enhance investment returns and so reduce the cost to taxpayers of the accumulated unfunded superannuation liabilities.
The size, experience and global reach of the asset management businesses of Deutsche Morgan Wendfeld are considerable and provide capability to add significant asset management skills to Axiom if needed. Deutsche will transfer marketing resources from Singapore to Sydney to service clients in Australia and New Zealand. The gross proceeds of the sale are about $240 million, which will include repayment of the initial $25 million advanced by Treasury and net assets. The sale price compares very favourably with the $26 million reported last December as the price paid by the Commonwealth Bank for the Commonwealth funds management business.
The Hon. FRANCA ARENA: I refer to Budget Paper No. 3, Volume 2, page 649, Budget Strategy Allocation, Monitoring, Reporting and Systems. Part of the program objective is to ensure financial responsibility by advising on a State budget strategy that will achieve a responsible financial position. How does the budget demonstrate the Government's commitment to prudent financial management?
The Hon. M. R. EGAN: That question does not relate to any particular line item. I simply point out that this is only the third genuine surplus budget in the State's 209-year history and of the three surplus budgets I have been able to deliver two of them - two consecutive surplus budgets. This is a budget that pays all our way for recurrent and capital expenditure. We have a huge recurrent surplus of more than $2 billion, which enables us to completely fund, with our other capital revenues, our capital program and have an overall surplus after paying for recurrent expenses and capital expenditures of $27 million. It is important to keep in mind that the budget within that surplus also pays for all of this year's Olympics expenditure - and this will be the year that really breaks the back of Olympics expenditure - some $628 million.
Within that $27 million overall surplus is a provision for in excess of $1.4 billion for superannuation, which is many hundreds of millions of dollars in excess of this State's emerging annual benefit payments. The Government is funding the accruing liabilities of the superannuation schemes in a way that no other government in Australia is doing. I warn all of those other governments, including the Commonwealth Government and in particular the governments of Victoria, South Australia, Western Australia and Tasmania, that they should not continue to bodgy up their budget results by not paying for their accruing superannuation because down the track citizens in those States will have to bear the brunt of a catastrophic financial shock. That will not happen in New South Wales because this Government is providing for that money up-front as the liability is accrued. The overall budget result in New South Wales, a surplus of $27 million, is in fact a much better result than the results of other States, which do not have the Olympic Games to fund, are not providing for their accruing superannuation liabilities and have a different mix of recurrent and capital expenditure.
New South Wales has a huge surplus on recurrent expenditure, which enables this State to have a very, very large capital works program. For example, the New South Wales capital works program per capita is about 30 per cent higher than that of Victoria. That means Victoria either is not investing sufficiently in new infrastructure or, as I suspect, does not have the need for new infrastructure because its rate of population growth is much lower than that of New South Wales. Last year Victoria's population increased by 40,000 to 75,000. A higher rate of population growth means investment in new social and economic infrastructure. New South Wales is paying for a higher per capita capital program, paying for the Olympics and providing funding for accruing superannuation liabilities. The New South Wales budget is the most fiscally and socially responsible budget in all of Australia.
The Hon. VIRGINIA CHADWICK: Why stop at Australia?
The Hon. M. R. EGAN: I will add to that. Ours is probably the most fiscally and socially responsible budget in the world. I was recently in Boston in the United States and spoke to the Vice-Lieutenant Governor of the marvellous State of Massachusetts. I proudly told him that I was about to bring down the second consecutive surplus budget in the history of New South Wales. He said that was very good and that his State had a surplus budget too, but as I questioned him further I found that the Americans have a very different idea of what a surplus budget is. It does not include capital expenditure; it covers only what they call operating expenditure. In other words, it does not cover their interest bill.
New South Wales has an interest bill of $1.5 billion, which is paid for out of our budget. That is paid for before we reach the bottom-line result of $27 million surplus, so to compare this budget to surplus budgets of other provinces, States and countries is like comparing apples with oranges. This Government has a fair dinkum surplus budget. Articles in The Economist would demonstrate that not a province, State or country in the world has a fair dinkum surplus budget like that of New South Wales - not a country in the world.
The Hon. P. T. PRIMROSE: I refer to Budget Paper No. 3, Volume 2, page 652, Accounting and Finance Administration, Policy and Standards, Funding, Liability and Asset Management, Banking and Financial Reporting. The program description includes provision of select financial services. What is the status of the Government banking tender?
The Hon. M. R. EGAN: At present three banks - Westpac, the Colonial State Bank and the ANZ Bank - together provide transactional banking and corporate card services for central government. The current contracts were due to expire on 30 September 1997 but I am advised that all of the contractors have agreed to extend the existing arrangements until March 1998 to allow for the preparation and completion of a tender. The broad objectives of the project are to select banking service providers following the expiry of the current contracts and to review the suitability of new services and technologies to match the current and
future needs of agencies. The project will be controlled by a steering committee headed by Mr Ian Neil, an executive director in Treasury.
The committee will include major users from the Office of State Revenue, which is the organisation headed by Bruce Buchanan; the Police Service; the Department of School Education and the Roads and Traffic Authority. Agencies will also contribute to the project via membership of a working group that will evaluate and summarise data for the steering committee. Price Waterhouse has been contracted to assist Treasury in the preparation and the assessment of a tender for banking services. I am advised that the whole process will take about eight months to complete. The tender request for transactional and corporate card services is scheduled for issue during August 1997, with evaluation being completed by early November 1997.
The Hon. FRANCA ARENA: Has Treasury investigated the impact of the bed tax on tourism and the New South Wales economy? Will the Treasurer comment on talk about New South Wales losing tourism?
The Hon. M. R. EGAN: This question is very similar to one asked by the Hon. Virginia Chadwick. There is a growing tourism industry in Australia and in Sydney in particular. Sydney is and always will be the major tourist destination in Australia. We currently have about 2,200,000 visitors per annum, and that figure has been growing at a rate of about 7 per cent a year. With the massive international exposure that the Olympic Games will provide, one would expect the rate of growth to be not only maintained but probably increased. Sydney is the world's most attractive destination. Indeed, it has been recognised as such by the Condé Nast travel magazine - I believe the exact words used were "the most attractive tourist destination in the world". Being or becoming the most attractive destination does not happen automatically.
Obviously, our great city has tremendous natural assets such as its climate and natural beauty, but as well as that the Government spends a huge amount of taxpayers' money making sure that this is a city that has good infrastructure, roads and public transport systems; that this is a safe city with an appropriately staffed police force; that this city has the hospitals international visitors would want if they fell ill. In other words, taxpayers' money contributes towards making Sydney the attraction it is. I certainly believe that international and interstate visitors should assist in contributing to that enormous expense. We are providing a link between Mascot airport and the Sydney central business district, which, although touted as a private sector infrastructure project, has the State's taxpayers contributing about 80 per cent of the total equity, in other words, more than $600 million.
It is expenditure on projects such as that which helps make Sydney a very attractive visitor destination, and it is entirely appropriate that visitors to Sydney should contribute. Many people have said that the bed tax will have a dampening effect on demand. I find that very hard to believe, given that there has been a huge increase in visitor numbers and a huge increase in the average cost per occupied hotel room in Sydney over the past two years. Some figures supplied to me last week from the Commonwealth Parliamentary Library indicate that revenue per occupied room in Sydney in the past two years has increased from $155 to $212 per night. That indicates not only the growing demand for Sydney hotel accommodation but also the capacity of the industry to cope with the tax where proposed.
The Hon. P. T. PRIMROSE: I ask about New South Wales credit rating. I refer to Budget Paper No. 3, Volume 2, page 655, Economic Advice, Taxation Policy and Advice on Intergovernmental Financial Relations. Has there been a recent assessment by any external body of the State's economic health?
The Hon. M. R. EGAN: There have been two, in fact. In March Moody's reaffirmed the New South Wales AAA long-term domestic currency rating and P1 short-term domestic currency rating, both the highest ratings offered by the agency. Standard and Poor's a few weeks later also reaffirmed this State's AAA long-term currency rating and its A1-plus short-term local currency rating, again both the highest standard of ratings offered by the agency. Both agencies reported that the level of New South Wales indebtedness was relatively low when compared to other national and sub-national governments. Indeed, Standard and Poor's reported that it was at its lowest level since October 1991, when the agency began rating New South Wales. Only Queensland and Western Australia share those high ratings with this State.
The rating agencies have, of course, recognised the diverse economic base of New South Wales and its strength in credit fundamentals, which results from both economic cyclical factors and corrective policies. The ratings reflect the modest level of the State's overall net indebtedness, its satisfactory ongoing financial position, its diversified economic base and the Government's commitment to a
disciplined medium-term fiscal framework. If the Egan plan is approved by the Government, New South Wales will in a few years not really have to worry about credit ratings because it will not be a net borrower and it will not be beholden to any credit rating agency or international financiers. I was greatly concerned about the way in which the former New South Wales Government had to kowtow to international bond holders when the HomeFund crisis emerged.
The sensible way out of that problem would have been to renegotiate the loans which had been guaranteed by the Government. That could have been done. In the end, New South Wales was not able to do that. I recall the finance Minister of the time, Mr Souris, saying that the State should and legally could have done that but it did not. The previous Government did not do that because it would have put the Government in a terrible position with organisations around the world who lend the Government money. If the Egan plan is approved by the Government, in a few years New South Wales will not have any net debt.
The Hon. FRANCA ARENA: Why were payments to the Audit Office for comprehensive performance audits doubled to $1 million in 1996 and 1997, and why has this level of funding not been maintained in 1997-98?
The Hon. M. R. EGAN: I am advised that for the 1996-97 year the Auditor-General was given an increase in funding for comprehensive performance audits from $500,000 to $1 million. That was to cover half of the total cost of the $2 million expected to be incurred by the Audit Office for that year. Prior to 1996-97 the annual funding had, since the introduction of the comprehensive audit powers in 1991-92, been fixed at $500,000. The amount of $1 million was approved for the 1996-97 year only, subject to a future review of the overall funding arrangements for the Audit Office. That review is still in progress. There will be some legislative amendments involved.
An amount of $500,000 has been included in this year's budget for comprehensive audits. That is because the Auditor-General's request for funding of $1.1 million for this coming budget year was not received in time for the Premier, who is the Minister responsible for the Audit Office, to make a final decision before the budget was finalised. If the increased amount of $1.1 million is approved by the Premier, the balance of $600,000 will be provided to the Audit Office by way of supplementation - if the Premier asks for that and if I concur with his request.
CHAIR: Under the rules of this general purpose standing committee, the Chair is permitted to ask questions. Budget Paper No. 3, Volume 2, page 682, line item State Bank, shows an increase from $32 million to $110 million in loan loss indemnity claims. What is the basis for that and who was responsible for it?
The Hon. M. R. EGAN: It is actually higher. The major line item heading, Expenses, shows post-sale management costs of $1 million, post-sale costs of $23.35 million and the loan loss indemnity claims of $110 million, payment of all of which is anticipated to come out of the 1997-98 budget. When the State Bank was sold the head line price was about $570 million. But as part of the sale contract, the Government of the day indemnified the new owners of the bank essentially from bad loans which had been entered into under the previous ownership of the bank and had not fallen over in the final sense but were expected to fall over or had a chance of falling over. At the time of the sale, I think, the former Government and the Auditor-General of the day kicked off the calculation or the estimate that the State Bank post-sale costs would be in net terms about $40 million. It is now apparent that they will be something in excess of $200 million.
At that time I was very critical of the sale, not because I was opposed to it in principle but because I thought that the deal struck would have meant that we were actually selling off the bank's operating profits but retaining its losses. That has certainly been shown to be the case to a much larger extent than anyone anticipated. I have to say, however, that, given this huge bad loan portfolio which we are still paying for, I have almost come to the conclusion that it might have been the best thing to sell the bank off when it was sold, because it was in a truly terrible condition that we were not told about.
CHAIR: So the actual net value of the sale would be something like $300 million?
The Hon. M. R. EGAN: The net value of the sale would certainly be less than $370 million, and could be lower.
CHAIR: Budget Paper 2, page 3-5, refers to payroll tax. Obviously, employers are happy that the Government has made a small reduction in this tax. Does the Treasurer have any plans to reduce the tax even more dramatically in the future, even to eliminate it, in view of his success in budgeting, as it is a tax on employment?
The Hon. M. R. EGAN: Certainly I have no immediate plans or plans to reduce it significantly in the foreseeable future. But it is not really a matter that I have considered in the past few months. Any medium-term prospect of a reduction in payroll tax would probably involve more comprehensive reforms of taxation and Commonwealth-State financial relations. There is certainly no immediate or medium-term prospect of a significant reduction.
CHAIR: Budget Paper No. 3, Volume 2, page 649, contains a general reference to budgetary strategy, budget preparation and advice and budgetary policy. In view of the Government's announcement of the proposed privatisation of New South Wales electricity utilities, has the Treasurer included in the budget provision for consultants in preparing background papers on that sale, for example, or is he starting from scratch? Will he outline some of the benefits of that proposed privatisation?
The Hon. M. R. EGAN: There is no provision in this budget for anything specifically to do with the possible privatisation of electricity assets. I should point out that at this stage it is not the Government's policy to privatise the electricity utilities. All that has happened is that last week I released a discussion paper, which will be the subject of debate within the Government and, no doubt, the community over the next few weeks. There will be major costs involved in getting those utilities ready for sale if the Government decides to accept my proposal, but those costs would essentially come out of the sale price. If the sale proceeds, that would, of course, be reflected in consolidated revenue in future years' estimates or the 1997-98 actuals.
The proposal would enable the Government to realise some $22 billion of taxpayers' assets currently tied up in electricity utilities. The argument I have put in my discussion paper is that there are better social and economic benefits to the community in taking that investment and paying off debt, with an ongoing benefit to the budget and also a surplus of an amount of about $3 billion, which could then be invested in new social and economic infrastructure. Over the next four years New South Wales would have not only the $3 billion left over after the entire State debt was paid off but it would achieve ongoing savings of about $500 million each year.
That would mean that over a four-year period some $5 billion could be invested in new social and economic infrastructure - new schools, new hospitals, new roads, new public transport. Essentially, that would be a $5 billion war against unemployment in New South Wales. The sum of $5 billion would create about 75,000 extra jobs - about 25,000 direct jobs and, given flow-on effects from a multiplier effect, the creation of 75,000 jobs would probably be a conservative estimate. It would be the biggest employment creation scheme ever in this State and probably in this country.
CHAIR: Budget Paper No. 2 contains a reference to the gun buy-back scheme. I know the police administer the scheme, but it is indicated that current outlays are $50 million above budget. Is there any explanation for that? Will the Treasurer comment on reports from other States that some gun shop owners have been trading in replica guns and even manufacturing guns to rort the system?
The Hon. M. R. EGAN: I would expect that the reason any expenditure is higher than estimated would relate to the fact that provision would not have been made for the guns buy-back scheme at the time of last year's budget. The Port Arthur massacre occurred in April last year, so last year's budget would not have included provision for the scheme. I believe the agreement between the Commonwealth and the States on the gun buy-back scheme occurred much later than last year's State budget. But that would be offset, too, by revenues, would it not?
CHAIR: I was just going to ask whether the Government had received the anticipated assistance from the Federal Government?
The Hon. M. R. EGAN: The last I knew of it there was some shortfall, but I am not sure how far the negotiations between the States and the Commonwealth have gone? Are you aware of that, Mr Pearce?
Mr PEARCE: No, I am not.
The Hon. M. R. EGAN: I could find that out. Also, I shall refer to my colleague the Minister for Police the alarming suggestion that people are in various ways profiteering from the buy-back scheme.
CHAIR: People are trading in guns that do not work, which defeats the purpose of the scheme. Do I take it that at this stage the Treasurer is not sure whether any Commonwealth money has been received?
The Hon. M. R. EGAN: I am sure it has been, I am just not sure whether the assistance has been to the full extent of what was promised
initially. There was a period when all of the States were very unhappy with what the Commonwealth Government was offering. I shall find out the details of that issue.
CHAIR: I refer to Budget Paper No. 3, Volume 2, page 647, Operating Statement, Expenses and line items Other services and Total Expenses. It would appear that for other services there has been a blow-out in actual expenditure against the budgeted allocation of $1.5 million. The revised expenditure for 1996-97 is shown at $2.2 million. For total expenses revised expenditure for 1996-97 is shown at $87 million whereas the amount of $84 million is budgeted for 1997-98. Is there any explanation for the above-budget increase?
The Hon. M. R. EGAN: I am advised that part of the increase relates to $1 million in payments to the Audit Office, which were double the amount of $500,000 included in last year's budget. I shall take that question on notice for a detailed response.
CHAIR: I refer to Budget Paper No. 3, Volume 2, page 656, Central Financial Management Services, Retained Revenue, line item Grants from organisations. This item was not budgeted for in the previous year. According to the budget papers the sum of $670,000 is involved for this year. However, that item is again not budgeted for. What would that amount be for?
The Hon. M. R. EGAN: That amount relates to the electricity task force, a group within Treasury that is overseeing the electricity reforms. Contributions were made towards the expenses of the electricity task force from the Premier's Department, $350,000, and the Department of Energy, $300,000. Also, a refund of $20,000 was received from the National Grid Management Council. In total, that is $670,000.
CHAIR: Budget Paper No. 3, Volume 2, page 658, Operating Statement, Expenses, Other services - Social program implementation project, shows an amount of $223,000 that was not budgeted for and is not budgeted for this current year. What is the social program project?
The Hon. M. R. EGAN: As I recall, that was the work done on the development of the social program policy. The Government is attempting to separate the commercial and social activities undertaken by various government agencies. It is my view that the social programs of authorities should be funded from the budget rather than being mixed up with commercial activities. For example, schoolchildren conveyance is really a social program that is undertaken because the government of the day considers that to be desirable. That program should be funded from the budget sector and those funds then used to fund the actual services required for the conveyance of schoolchildren.
CHAIR: Is that like consultants being paid to develop the policy?
The Hon. M. R. EGAN: There could be some consultants, but it is mainly the staff that were seconded within Treasury. The objectives of the program are threefold. The first objective is to provide a framework for the effective separation of commercial and non-commercial activities of government trading enterprises so that management has a clear and non-conflicting set of objectives and is therefore able to be held accountable for both its commercial performance and its effective delivery of social programs. The second objective is to subject to the budget process social expenditures of government trading enterprises, therefore making them transparent and enhancing parliamentary accountability.
For example, if Energy Australia had a social program to provide electricity to pensioners at some concessional rebate, my view is that that is not an appropriate thing for Energy Australia to do; that is an appropriate thing for the Government to do. That is a decision the Government has to make and the Government should, if embarking upon that sort of policy, provide an amount of money to enable Energy Australia to undertake that program. In that way, a program can be subjected to all the accountability mechanisms appropriate for expenditure. It would go through the budget, it would be appropriated for in Parliament, and members could ask questions about it in the estimates committees or in Parliament.
However, if a government trading enterprise undertook such a program off its own bat the Government would not have full knowledge of what it was doing and would not easily be able to determine whether it was an appropriate expenditure of public money - there could be other priorities or competing expenditures of a higher priority. The Government is trying to separate out the social programs operated by government trading enterprises, bring them back into the budget sector and fund them from the budget sector. It is a matter for the Government and for Parliament, it is not a matter for the government trading enterprises. I am advised that the costs largely relate to the substantial implementation assistance Treasury has provided to various agencies, both in the guidelines on the identification costing policy assessment program
evaluation and in contracting being developed and promulgated.
CHAIR: Would that policy cover, for example, the $75,000 grant from the tourist department to support the bid for the Games?
The Hon. M. R. EGAN: No, that would be a core activity of Tourism New South Wales. That department, under its budget, has a program to attract major events, so that would be one of its core functions.
CHAIR: There is talk about cuts in the staff of the Parliamentary Library, catering and other parliamentary departments, yet I note that there has been an increase of 10 in the Minister's own department, Treasury, and a total increase of 23 staff under his portfolio. How does the Treasurer justify that, when the Government has a policy of reducing staff to be more economical?
The Hon. M. R. EGAN: I am not sure whether those increases relate to the Office of State Revenue or the Office of Financial Management.
CHAIR: I refer the Treasurer to Budget Paper No. 3, Volume 2, page 646. The staff of Treasury is increased from 791 to 801, and a total increase of 23 is noted.
The Hon. M. R. EGAN: That does not tally with the figures I have here. The 1996-97 budget shows total staffing of 859. It is down to 790 at the moment. The number of staff will increase to 801 during 1997-98, but that is a decrease of 58 on the number of staff employed 12 months ago.
CHAIR: From 1995-96 -
The Hon. M. R. EGAN: No, from May last year. In the 1996-97 year the figure will decrease from 859 to 801. At present the figure stands at 790. In other words, I take it that staffing was reduced by more than was intended, and now -
Mr PEARCE: With the normal turnover of staff, the increase in the department is really just filling positions that have been made vacant as people have left. The overall budgeted amount has decreased. When a budget comparison is made there is an apparent increase, purely on the basis that the department intends to fill positions that are currently vacant.
The Hon. M. R. EGAN: There has actually been a decrease of about 60 from budget to budget.
CHAIR: I will take the Treasurer's word on that. The budget figures would appear to indicate -
The Hon. M. R. EGAN: I shall obtain a more detailed explanation for the Chair.
The Hon. VIRGINIA CHADWICK: Could that be made available to the Committee?
The Hon. FRANCA ARENA: It will be in Hansard.
The Hon. M. R. EGAN: I have to say that I would like to be on an estimates committee next year. I would like to be on the estimates committee for the Legislature because, I have to say, I get sick of this Parliament each and every year getting an appropriation bigger than the previous one and each and every year comes bleating to me that it cannot survive on that appropriation. A lot of money is being wasted in this Parliament and I am not going to keep forking out more money because people think they can virtually blackmail me because I am also a member of the Parliament. I would like to bring the cleaners in. I would like to put in the receivers and see where that money is going. It is a disgrace.
The Hon. VIRGINIA CHADWICK: Even though I listened to the Treasurer with great interest and have some sympathy for his views, I ask that the time taken by the Treasurer in his impassioned statement be deducted so that the crossbench time is not lost. I would hate that to happen.
The Hon. FRANCA ARENA: How would you measure impassioned time?
CHAIR: I have asked my last question so the Committee will move on to -
The Hon. VIRGINIA CHADWICK: I hope it was not out of my time.
CHAIR: We now go back to questions from the Opposition.
The Hon. VIRGINIA CHADWICK: I refer the Treasurer to his response to a question I asked about asset sales. I requested an assurance that none of the revenue from asset sales would be used for recurrent purposes. At the time the Treasurer seemed to indicate that it could be used for recurrent purposes, which I questioned further. The reason for my curiosity and surprise is the Premier's interview on Stateline on 11 April in which it was stated, "To sell any business asset to use for recurrent revenue would be an obscenity." Will the Treasurer now give
an assurance that no revenue from an asset sale will be used for recurrent purposes?
The Hon. M. R. EGAN: All of the business assets proposed to be sold will be used for either debt reduction or the capital infrastructure fund I have mentioned, but the Hon. Virginia Chadwick seems to have a conceptual difficulty. There is recurrent expenditure and there is capital expenditure. There is a big pool of money. Taxes, revenue from the Commonwealth and revenue from asset sales all go into that pool. Recurrent expenditure and capital expenditure comes out of that pool. It would be possible to disaggregate the pool and have some capital revenues - as there is to some extent with revenues or grants specifically earmarked by the Commonwealth - and another pool of just recurrent revenues for recurrent purposes, but that would really be quite silly.
I am not going to break that up just so that the Hon. Virginia Chadwick does not have an opportunity to ask silly questions. That would not make sense. The fact of the matter is that the Government has asset sales of $320 million and has asset purchases of almost $4 billion. I would suggest that before next year's estimates committees the honourable member makes sure that her question drafters understand the way things work, or, alternatively, that she acquaints herself with the way things work, because questions that are based on conceptual fuzziness are a waste of time.
The Hon. VIRGINIA CHADWICK: While I thank the Treasurer for his most illuminating visual display -
The Hon. M. R. EGAN: Next time I will come along with pictures.
The Hon. VIRGINIA CHADWICK: Thank you. While I thank the Treasurer for his attempt to explain the State budget, I point out that there is a prohibition on all government departments and agencies transferring capital items for recurrent purposes. All I seek from the Treasurer is a guarantee that if $320 million comes out of asset sales it will be used either for capital purposes or to retire State debt.
The Hon. M. R. EGAN: The fact of the matter is that recurrent revenues amount to more than recurrent expenditures. There is a recurrent surplus that goes to capital expenditure. For the benefit of the Hon. Virginia Chadwick I could demonstrate this by drawing separate little circles. Instead of having this big bundle of consolidated revenue, I could divide it up. This question indicates that either the honourable member or her advisers have a fundamental conceptual misunderstanding.
The Hon. VIRGINIA CHADWICK: I thank the Treasurer for his counselling and advice. I refer to a response given by the Treasurer to an earlier question in relation to savings initiatives. When in opposition the Treasurer, speaking for the present Government, said that he had every intention of saving $816 million a year. It is clear that figure has not been achieved. Has the Treasurer abandoned the initiative he announced when in opposition?
The Hon. M. R. EGAN: The savings measures announced in 1995-96 were contained in that year's budget, and in this year's budget savings measures of $146 million have been announced. The savings measures for both years amount to more than $800 million per year.
The Hon. VIRGINIA CHADWICK: Per year?
The Hon. M. R. EGAN: Per year. The problem experienced in this year's budget is not that the Government has not made significant savings in its first two years in office. The difficulties in this year's budget stem largely from the fact that in March last year the people of Australia believed all of the nonsense put to them by the Hon. Virginia Chadwick and her colleagues and elected a Commonwealth Government that has been savagely cutting funds to the States. This State is suffering not only from the decline in general purpose grants and specific purpose payments but also because the Commonwealth Government will not honour the Medicare agreement. The Commonwealth does not reimburse the State for every 2 per cent reduction in private health insurance, as provided by the Medicare agreement. The Commonwealth Government has torn up that agreement, which contributes greatly to the cost of running hospitals. It is hits like that which have created financial difficulties for this State, not its inability to make savings.
The Hon. VIRGINIA CHADWICK: I refer the Treasurer to Budget Paper No. 2, page 1-13, table 1.6, and the sum of $297 million shown against advances repaid to the budget sector. Could he explain that line item?
The Hon. M. R. EGAN: Mr Pearce might be able to explain that.
Mr PEARCE: Primarily, that relates to asset sales by the government trading enterprises sector as distinct from the budget sector. The asset sales
figure of $322 million relates to budget sector asset sales, the figure of $297 million relates to government trading enterprises or trading corporations asset sales - non-budget sector agencies.
The Hon. VIRGINIA CHADWICK: Am I correct in assuming, then, that the return on government trading enterprises assets, when sold, goes to Treasury?
The Hon. M. R. EGAN: Not in all cases.
Mr PEARCE: No, that depends very much on the commercial position of a particular government trading enterprise. If there is an opportunity for that revenue to be returned to Treasury in a way that maintains the commercial position of that organisation - maintains the capital structure targeted as part of the statement of corporate intent or the financial performance agreement the Government has with that organisation - then revenue from those asset sales will come back to Treasury. If it cannot then it is maintained within the organisation as retained earnings. In order for Treasury to know what is going on, it is preferable to have the revenue identified.
The Hon. VIRGINIA CHADWICK: Is the Treasurer able to give an indication of the proportion of revenue that is involved? Would it be about 50 per cent or about 20 per cent of government trading enterprises asset sales that are returned to Treasury?
The Hon. M. R. EGAN: One of the asset sales by a GTE for the 1996-97 year is that of the Pacific Power building, the proceeds of which will come back to Treasury or to consolidated revenue. I would expect that to be the case with the major part of asset sales by authorities. If government trading enterprises were selling their assets and squirreling the proceeds away, I would be very cranky. I assume that Treasury would advise me of that.
Mr PEARCE: Straightaway, Minister.
The Hon. VIRGINIA CHADWICK: If not earlier. Would the Treasurer consider the $297 million we are speaking of to be a one-off situation, or would it constitute 20 per cent or 50 per cent of the return from government trading enterprises asset sales?
The Hon. M. R. EGAN: I really do not know, but my guess is that it would be fairly close to almost the total.
Mr PEARCE: Yes, that is correct, and it would be a fairly consistent amount each year.
The Hon. M. R. EGAN: The State's total assets amount to some $60 million or $65 billion. The figure stood at $80 billion before the transfer of assets to local government and before some revaluations were made.
The Hon. VIRGINIA CHADWICK: Would I be correct in assuming that, basically, if the Treasurer thinks a government trading enterprise can afford to return sale proceeds to Treasury and remain commercially viable then he will ask for the money back and that it would be only if the Treasurer considered an enterprise to be in commercial danger that he would allow it to absorb the results of an asset sale?
The Hon. M. R. EGAN: Government trading enterprises have to maintain a commercial capital structure. In determining a commercial capital structure, Treasury usually relies on expert advice from financial consultants. For example, if Pacific Power were to have retained the $100 million plus from the sale of the Pacific Power building, its debt-to-equity or equity-to-debt ratio would have been well out of kilter with what would be regarded as a commercial capital structure, so, yes, Treasury would take the sale proceeds. It really would not get to an organisation being undercapitalised because the Government would attend to that.
The Hon. VIRGINIA CHADWICK: Would it be acceptable for me to put a question on notice to try to get an indication of what proportion of sale proceeds is involved?
The Hon. M. R. EGAN: Yes. I would assume that if every government trading enterprise had an appropriate commercial capital structure then the proceeds of any major asset sale would come back to the budget. If proceeds did not go back to the budget, that would indicate there was something wrong with the commercial capital structure of an agency.
The Hon. VIRGINIA CHADWICK: If the Treasurer takes the question on notice, Committee members will be able to determine whether it is 100 per cent of the proceeds of government trading enterprise asset sales that come back to the budget. I refer again to Budget Paper No. 2, page 1-13, table 1.6, line item Taxes, Fees and Fines. Does Treasury have an estimate on the amount of revenue it might have lost over the past 12 months or more as a result of gambling and other transactions moving to the Internet, and, if so, what measures is the Government taking to counter the revenue loss?
The Hon. M. R. EGAN: I do not think that would be measurable. The breakdown of revenue in
Budget Paper No. 2 provides a comparison for the past two years of revenue received from the TAB, lotteries and poker machines. My recollection is that an increase is shown in all categories. It could well be that there would have been a bigger increase had there been no Internet gambling. I am not sure that there is much Internet gambling at the moment but certainly there is a huge potential for that to happen and the revenue items referred to would be quite vulnerable. I have had discussions with the Minister for Gaming and Racing on a few occasions about the long-term threat to gambling revenues from the technological advances that are being made. I recall that the Department of Gaming and Racing was doing something, but I do not recall what that was.
The Hon. VIRGINIA CHADWICK: As well as gambling, people are increasingly using technology for banking and other operations, all of which, I would have thought, represent a potential threat.
Mr PEARCE: The technological changes that are occurring are certainly an issue, particularly for States because of their tax bases. One of the big six accounting firms - I cannot recall at the minute which of them - issued a report nearly 12 months ago stating that this was a huge threat that would cut a swathe through State tax revenues. At that time all of the State treasuries combined commissioned work and undertook their own research into the issue, the conclusion of which was that whilst those sorts of technological changes would in the medium to long term pose a problem, they would not do so in the short term. Whenever new technology is introduced one has to take with a degree of scepticism the rate at which proponents of those technologies believe they will be taken up.
The Hon. VIRGINIA CHADWICK: I refer again to the bed tax and to Budget Paper No. 3, Volume 2, page 649. Was the Treasurer provided, in the preparation of advice on budgeting targets and strategies, with any information on the situation for accommodation providers who have pre-existing contracts on conferences, conventions, exhibitions and so on that have been pre-quoted and in many cases prepaid?
The Hon. M. R. EGAN: Obviously, I was aware that a proportion of accommodation bookings would be made in advance. As Sydney is probably the only city in the world that did not either have a specific bed tax or a VAT-type tax, I would have thought it highly unlikely that people would enter into contracts that did not contain a provision for the adjustment of prices in the event of legislative changes. I have had a meeting with the Australian Hotels Association and have asked the association to provide me with information about pre-bookings. I point out also that one of the reasons that the bed tax is not proposed to begin on 1 July 1997 is the Government's expectation that the industry would need a few months to adjust. I would consider the four months between 6 May and 1 September sufficient time for the industry to make whatever necessary arrangements it had to make, but I am waiting on the Australian Hotels Association to provide that advice - although I am not saying that they are delaying it.
The Hon. VIRGINIA CHADWICK: They certainly are not.
The Hon. M. R. EGAN: I did not anticipate I would receive it by tonight.
The Hon. VIRGINIA CHADWICK: The Treasurer has mentioned bed taxes or similar taxes elsewhere. In some areas, such as Hong Kong, Singapore and the Northern Territory, the revenue derived from a bed tax is hypothecated back to tourism promotion and the tourism industry. Has the Treasurer considered this as an option?
The Hon. M. R. EGAN: No. The Government spends, from recollection, about $20 million annually on the activities of Tourism New South Wales.
The Hon. VIRGINIA CHADWICK: It is a bit more than that.
The Hon. M. R. EGAN: But the investment made in tourism goes well beyond the appropriation given to the Tourism New South Wales each year. I mentioned earlier projects such as the New Southern Rail line from the central business district to the airport, at a cost to the taxpayer of $600 million. There are other expenses also, such as the amount spent by the Government in conjunction with Sydney City Council on the George Street project.
The Hon. VIRGINIA CHADWICK: Is the Treasurer saying that only CBD hotels benefit from that expenditure?
The Hon. M. R. EGAN: No, of course not, but neither do I expect CBD hotels to pay the total amount spent by the Government on making Sydney the city it is. Even with the bed tax, international visitors and interstate visitors will pay only a tiny fraction of the total cost. What I do object to is New South Wales taxpayers - including mums and dads who pay their taxes but have kids to raise and educate - having to bear the whole cost of the
benefits, some of which are enjoyed by international visitors and interstate businesses. It should be remembered that by international standards the cost of four- and five-star accommodation in Sydney is dirt cheap. I was in Hanoi two years ago and paid about three times more than an international visitor would then have been paying at Sydney's Intercontinental Hotel.
The Hon. VIRGINIA CHADWICK: Did the Treasurer consult and take advice from the relevant Minister, the Minister for Tourism, when Treasury officials were considering strategies for the budget and evaluation the possible imposition of the bed tax?
The Hon. M. R. EGAN: I am not going to talk about internal Government mechanisms. The Hon. Virginia Chadwick has been a member of Cabinet; she did not discuss these things and nor will I.
The Hon. VIRGINIA CHADWICK: I thought I would try.
The Hon. M. R. EGAN: I do not know that she was ever elevated to being a member of the budget committee.
The Hon. VIRGINIA CHADWICK: Briefly.
The Hon. M. R. EGAN: Briefly, yes.
The Hon. FRANCA ARENA: This is why they lost the election.
The Hon. M. R. EGAN: Did they dump you or was it a budget cut?
The Hon. VIRGINIA CHADWICK: Have the Treasurer and his officials had the opportunity to examine the work of Access Economics in relation to the bed tax? It is shown that one in nine jobs in Australia are dependent upon tourism and tourism-related industries. Did the Treasurer take this matter into account when he decided to proceed with the imposition of a bed tax?
The Hon. M. R. EGAN: Access Economics is the consultancy firm that the Liberal Party trots out whenever it wants to. I think it was the organisation that largely put together Dr Hewson's fight-back package. I do not want to be defamatory about Access Economics, but if I wanted an objective, authoritative report on something I do not think I would go to Access Economics.
The Hon. VIRGINIA CHADWICK: Does that mean you did not read that report?
The Hon. M. R. EGAN: I am told that the Access Economics study was undertaken on behalf of the Tourism Council. Is that the case?
The Hon. VIRGINIA CHADWICK: That is right.
The Hon. M. R. EGAN: I wonder why the Tourism Council is at this stage refusing to release any details of the Access Economics calculations.
The Hon. VIRGINIA CHADWICK: Well, that is a very interesting point.
The Hon. M. R. EGAN: Who is the Tourism Council? That is Bruce Baird's little outfit, is it not? I once had a lovely day with Bruce Baird and Chris Brown. They both came to see me and it was fascinating.
The Hon. VIRGINIA CHADWICK: Indeed, they are of like mind. Mr Chair, if the Treasurer wishes to make a statement unrelated to any question of mine I ask that it be deducted from my total time.
The Hon. M. R. EGAN: I would be quite happy to give the Opposition an extra five minutes for that.
The Hon. VIRGINIA CHADWICK: The Treasurer does not appear to agree with Access Economics. I wonder whether he has noted the survey by JLW Transact that reveals that the proposed 10 per cent bed tax has put in jeopardy some $800 million worth of development projects in the CBD and surrounding areas. Is he concerned -
The Hon. M. R. EGAN: What was the name of that little outfit?
The Hon. VIRGINIA CHADWICK: JLW Transact.
The Hon. M. R. EGAN: I have never heard of JLW Transact.
The Hon. VIRGINIA CHADWICK: Is the Treasurer concerned that -
The Hon. M. R. EGAN: Such assertions are nonsense. As I pointed out earlier, tourism is growing at about 7 per cent per year and will continue to grow at a very, very healthy rate. That
means that there will be more jobs in tourism, including the CBD tourism industry. Surely the Hon. Virginia Chadwick is not seriously suggesting that total tourism numbers are going to decline, because that is the only way there would be a reduction in the total number of jobs. Given the facts that the Olympics will be held here and that Sydney is just far and away the greatest city in the world, we can confidently and realistically expect tourist numbers to keep on increasing. Mr Pearce has just given me information that shows that even though average hotel tariffs have been increasing in Sydney that has not prevented room occupancy rates from increasing at the same time.
The Hon. VIRGINIA CHADWICK: Because there was a shortage of hotel beds at the time.
The Hon. M. R. EGAN: The average cost per occupied room in Sydney has increased from $155 to $212 in the past two years. By international standards that is, as I said earlier, dirt cheap. When I go to New York or anywhere else on business, I expect to pay my way. I do not want to be subsidised by the good burghers of New York. I will pay my way and I get charged a bed tax. In fact, the last time I was in New York, or it might have been Washington, there were about three different taxes on the bill. What we are experiencing in Sydney is a great deal of special pleading by very highly paid lobbyists, a couple of old pollies, who have decided - you know Bruce Baird and John Brown have been mortal enemies for years.
CHAIR: The honourable member could make her point through a question. Does she wish to table the results of surveys?
The Hon. VIRGINIA CHADWICK: No, I most certainly do not. The reason I will not table the results is that the survey is not my property. As the Treasurer rightly said, Access Economics was commissioned to do that work for the Tourism Council and it is the property of the Tourism Council.
The Hon. M. R. EGAN: Then why did the Hon. Virginia Chadwick ask whether I had seen it?
The Hon. VIRGINIA CHADWICK: Because I did not know whether the Treasurer had seen it. Has the Treasurer or Treasury given consideration to maintaining the bed tax should, as a result of national debate on taxation, some form of goods and services tax be introduced? In the event that a national goods and services tax of some type were introduced in the future, would the Government maintain a bed tax -
The Hon. M. R. EGAN: That is a hypothetical question; it is not related to this year's estimates. I am not planning any GST in New South Wales, nor is the Federal Opposition. Perhaps the Hon. Virginia Chadwick has some inside information that her Federal colleagues are about to impose a goods and services tax. If so, she should let us know, because that would change the question from being hypothetical to being a very real threat. The Government would like to know about such a move so that it can plan for that.
The Hon. VIRGINIA CHADWICK: Surely if the Treasurer regarded the introduction of a goods and services tax as a very real threat, he would have carried out some study or evaluation as to whether he would or would not maintain a bed tax in Sydney in the event of such a goods and services tax.
The Hon. M. R. EGAN: That, again, is entirely hypothetical. If the Hon. Virginia Chadwick would like me to answer a hypothetical question, I would say that clearly the imposition of a GST by Messrs Howard and Costello would mean that all of the existing taxes on goods and services would have to be put in as part of that GST rather than as separate or additional taxes. I ask the Hon. Virginia Chadwick to please let us know if those gentlemen are about to dump a GST on us.
The Hon. VIRGINIA CHADWICK: I am sure the Treasurer will know about that before I do. Has the Treasurer or his Treasury officers considered the special situation of cruise ships in relation to the bed tax?
The Hon. M. R. EGAN: I do not know whether Treasury officers have done so, but certainly I have. I consider it appropriate that cruise ships pay the accommodation tax.
CHAIR: I declare open for examination the proposed expenditure for the program area of the State Development, State and Regional Development.
The Hon. FRANCA ARENA: The Treasurer would be aware that people often say that NSW stands for Newcastle, Wollongong and Sydney, but I recognise this Government's commitment to regional development. There is one area of particular importance to me, because there are a lot of immigrants there. What has the Government done in relation to the creation of jobs and investment in the Port Kembla region?
The Hon. M. R. EGAN: About this time, or a little earlier, last year I visited Japan, where I met with two companies, Furikoya Company Limited and Mishoiway Corporation, to encourage them to take up an option to purchase the old southern copper smelter from its previous owner, CRA. That is a project the Government has been working on for a year and a half, and, as a result of the work by the Department of Regional and State Development and, I would like to hope, my visit to these two companies in Japan, that hard work is paying off. The announcement of the Port Kembla-Australia consortium certainly represents an enormous economic boost to, not just the Port Kembla region but the Illawarra region generally.
The project involves investment of $230 million, the sort of money that most of us can only dream about, and will create 940 direct and indirect jobs in the Illawarra. To give a breakdown of those figures, it is estimated that some 360 new jobs will be created during the construction phase, with another 270 jobs to be created once the plant is operational. In addition, analysis of the flow-on benefits from the project has found that a further 180 jobs and an extra $55 million in local wages will be created in other Illawarra industries during the construction phase. One hundred and thirty new permanent jobs will be created in the Illawarra once the plant is operational, and it is estimated that the project will create some 1,600 jobs throughout New South Wales each year and will inject an additional $715 million into the New South Wales economy every five years.
The plant will produce 23 per cent of Australia's smelter output. It will also serve as a new local source of copper and sulphuric acid for downstream industries in the Illawarra, particularly the production of metal-based goods and fertiliser. The smelter will place around 120,000 tonnes of copper per year into the New South Wales market. That is very significant because it will replace about 60,000 tonnes of copper that is currently imported either from overseas or from other States. By increasing the national capacity to process copper ore, the smelter will increase exports of a higher value-added product, which is estimated to be worth more than $109 million a year. The Hon. Franca Arena would well understand the sort of kick along that gives to our balance of payments. The smelter will replace imports, it will increase New South Wales exports and it will create hundreds of new jobs and significant wealth in the Illawarra.
The Hon. FRANCA ARENA: When will that project start?
The Hon. M. R. EGAN: A court challenge is taking place currently. There has in the past day or two been introduced into the Parliament legislation that will facilitate the development. I anticipate that the legislation will be dealt with by the upper House as soon as the parliamentary session resumes the week after next. It is important that I point out that all of the new investment, new output, new wealth and new jobs will be achieved by using the most environmentally friendly smelter technology the world has ever seen.
The Hon. P. T. PRIMROSE: I refer to Budget Paper No. 3, Volume 2, page 698, program 72.1, Development of the New South Wales Economy. How will Government programs such as the new agribusiness alternatives, export advisers and Consul General tour initiatives work to produce improved economic development outcomes for regional New South Wales?
The Hon. M. R. EGAN: I shall talk about the agribusiness alternatives program first. The Government is placing 12 facilitator positions throughout regional New South Wales to provide strategic advice on agribusiness issues to regional development boards and others. The aim of the program is to facilitate the development of networks, business plans for individual proponents, sustainable alternative business development land use and export opportunities. The program will also enhance the marketing performance of agricultural industries. It will continue to deliver elements of the former business advice in rural areas program which Committee members probably knew as BARA, which unfortunately was abandoned by the Commonwealth.
The Government will seek from the Commonwealth a funding contribution to the agribusiness facilitator program. The advisers will be located throughout regional New South Wales. On Monday I attended a luncheon hosted by the western division of the shires conference. I was pleased that the Premier was able to point out that three of the advisers will be located in the western region of the State. There will be advisers in Bourke, Broken Hill, Cobar, Baronga, Deniliquin, Wagga Wagga, Goulburn, Dubbo, Port Macquarie, Armidale, Grafton and Bathurst. The regional business export focus program will create six export advisers in regions which have a sufficient number of firms able to consider export growth.
The evidence indicates that many small and medium-size firms do not consider participation in international markets an option because of the failure of the market to provide information to them
on opportunities and because of the impediments created by often very complex regulations relating to export activity. It will be the role of the export advisers to give hands-on advice to export capable businesses, help businesses develop their business plans, examine the development of partnerships with overseas buyers through licensing or through joint ventures and business networks and look into import replacement.
The Government is also, as this question indicates, seeking to boost trade in regional New South Wales by hosting four consular corps familiarisation tours to regional areas each year. Consular staff made a very successful visit to the Riverina back in November last year and there was another very successful visit to the central west just last month. Further visits are planned for the Hunter, western Sydney, the Illawarra and northern rivers later this year. A number of business opportunities have flowed directly as a result of these visits. The visits allow Consuls General to obtain direct knowledge of regional investment and trade opportunities and they are an ideal way of fostering goodwill. Each tour targets local, industrial, manufacturing and agribusiness operations. The itinerary also tries to allow for meetings with local government officials and local business people. Those three programs together are proving very effective.
The Hon. FRANCA ARENA: Could the Treasurer outline steps taken by the New South Wales Government to assist the development of the New South Wales food industry? I am sure that the Government recognises an enormous export potential for this industry, especially in the booming tiger economy of South-east Asia.
The Hon. M. R. EGAN: Certainly the food industry is of tremendous importance and of great value to the economy. In this State alone food producers, food processors and food wholesalers have an annual turnover of about $17 billion - smaller, I might add than the State budget; the State budget is $23 billion and the food industry turnover is $17 billion - which is about 11 per cent of the total gross State product. The industry employs about 50,000 people. Those are impressive figures, but, as the question recognises, there are still ways that the industry can be assisted to enlarge its capacity and grow even bigger. We are located in the fastest-growing economic region of the world. One has only to go to any city throughout Asia-Pacific to realise the rapidly improving standard of living and therefore the rapid increase in potential export markets for clean, green Australian food.
Last year the Premier announced that he would chair the New South Wales food forum as part of a drive to expand this State's food growing and processing industries. Members of that forum include prominent food industry representatives, and the forum is already providing a vehicle for industry to contribute its views on policies for the food industry. The Premier has also announced a new statewide strategy called ProFood New South Wales. That program identifies new products and food-growing areas and provides assistance to industry entering new markets.
One of the ProFood priorities is the expansion of the State's horticultural sector. One aim is to double the value of farm-gate production to $1.4 billion a year by the year 2001. Another goal is to squeeze the market share of imported fresh and processed foods and to expand our producers' share of domestic sales. The Government is very confident that the ProFood strategy will help identify new markets for producers in areas such as the Lachlan and Macquarie valleys, the Murrumbidgee Irrigation Area, the northern tablelands and the north coast. In addition to domestic efforts for the food forum the Government is also working to support the promotion of Australian food produce and producers on an international stage.
Already this year it has supported the presence of New South Wales food producers at major food exhibitions in Tokyo and Seoul. One really has to go to Tokyo to understand the potential for those markets for our food industry. At a fruit shop in Tokyo a rockmelon costs about $40. It is just a knockout. In April this year the Government gave a helping hand to 10 New South Wales companies participating in the Food Australian '97 Expo for agrifood exporters in Seoul. Despite the fact that the Republic of Korea is now Australia's second-largest export market, involving $6.6 billion worth of goods and services, food and agricultural products remain substantially underrepresented in that trade.
The aim of the exhibition in Seoul was to reverse that trend. The Korean market is obviously one of the most lucrative markets in the world. Everyday foods that we take for granted, such as honey and organic and non-organic cooking oils - I do not know why beef jerky is always mentioned; I think it is a terrible product, although I recognise that a lot of people like it - are rapidly finding a place on Korean dinner tables. Ice-cream is the new boom food in Korea.
The Hon. FRANCA ARENA: Does this State export a lot of ice-cream?
The Hon. M. R. EGAN: I do not think so, but ice-cream consumption in Korea has been growing at between 30 per cent and 40 per cent per annum for the past few years, so there are tremendous export opportunities for that product.
The Hon. FRANCA ARENA: I know Italian and Australian firms that are exporting ice-cream to Korea.
The Hon. M. R. EGAN: Actually, an Italian firm gave a briefing to members of Parliament a month or two ago. That firm has purchased an operation in New South Wales and is looking to expand its operations.
CHAIR: It is time for me to ask questions in my capacity as an Independent member. I wish to follow up on the question about the food industry. Budget Paper No. 3, Volume 2, page 698 makes reference to the creation of sustainable jobs to enhance the quality of life of people throughout the State. I have been in touch with some orange farmers in Mildura who say they cannot sell their fruit juice as cheaply as it is being imported from South America. On a recent visit to Bateman's Bay I was shocked to find that fish there is being imported from Chile. I deduced that it must be frozen but was told that fresh fish was being transported by air, and the imports were starting to have a crippling impact on the fishing industry. Is there any way of trying to save our local food industry, which provides jobs?
The Hon. M. R. EGAN: The State Government cannot do much about tariffs or protection of local industries, and, in any event, that is not a course I would recommend. We have to assist our rural industries to be competitive on world markets but we also have to examine what we can do to enable Australian produce to get to other destinations in the world. One of the initiatives - which is not an initiative of the New South Wales Government but one of the local people - is the proposed Inland Marketing Corporation, which is being backed by more than 40 local councils in the central west and involves the construction of an international freight airport at Parkes. I think that is certainly an idea worth considering.
Goods produced in New South Wales could be loaded on a plane in Parkes and flown to Asia-Pacific locations virtually overnight. What was picked up from an Australian farm one morning would be fresh produce on supermarket shelves somewhere in the Asia-Pacific virtually the next day. The Government has assisted the Inland Marketing Corporation with $300,000 for feasibility studies. The Commonwealth Government promised an amount for further work but, unfortunately, has not delivered on its promise. As I have said, that proposal comes from the ground, from the producers and the local councils. It is a project worth encouraging and studying, and I hope the Federal Government recognises its merit.
CHAIR: Some Mildura farmers thought that prices had perhaps been artificially lowered by the people in, say, South America. Orange orchards in Mildura are now being bulldozed. They cannot be replanted overnight if prices increase again after the prime local industry has been killed off. Is there any way the Government could conduct investigations on import pricing? Could these imports be prevented? Aside from tariffs, could the Government not physically prevent food from, say, Chile entering New South Wales?
The Hon. M. R. EGAN: No, but that again would be a matter for the Federal Government. Under Commonwealth legislation there are various anti-dumping provisions. In practice those provisions prove very difficult to police and often involve a great deal of time, but that is a matter that could be raised with the Commonwealth Government. If the people in Mildura suspect that produce is being dumped, the Government would look into that.
CHAIR: I am sure the people of Mildura would be very pleased to know that. Budget Paper No. 3, Volume 2, at page 698, line item Jobs attracted or retained, shows an estimate of 6,000 for 1997-98, as against a figure of 3,447 for 1996-97. The Treasurer has mentioned some new industries. How would he explain the optimistic prediction that this figure will jump from 3,000 to 6,000? Is the estimate based on statistics?
The Hon. M. R. EGAN: It would be based on the number of projects in the pipeline and an assessment of the likelihood of those projects coming on track -
CHAIR: I note that the line item relates to metropolitan projects facilitated or financially assisted. Does it not include regional programs?
The Hon. M. R. EGAN: The regional figure is shown as the next item.
CHAIR: The figure of 6,000 is shown for both line items.
The Hon. M. R. EGAN: That is correct.
Mr WATKINS: As has been noted, the figures have been publicised fairly widely in the past three to four months. There is in the pipeline about $11 billion of investment in New South Wales. That covers a range of industries. New glass manufacturing is involved. This is important for Australia because a monopoly on glass manufacturing is creating difficulties for a number of industries. A number of minerals processing activities are being examined by the department, because it is important to achieve value-adding to the raw materials produced in New South Wales. Agribusiness is also involved. At the moment in country New South Wales there are two significant investments, one from Korea.
Deregulation of the dairy industry in the foreseeable future will provide a great opportunity, as New South Wales is the second-largest dairying State behind Victoria. We need to ensure that we have a number of companies coming in to create a large supply of dairy products to the domestic market and a significant export market. The Government is also facilitating a number of projects not of a traditional nature. This year, the Fashion Week was highly successful, bringing in many millions of dollars in tourism and in investment in New South Wales.
The Fashion Week was attended by international fashion buyers and was subject to significant media publicity through Cable News Network. That kind of publicity cannot be bought. For every job created through these projects in places such as Young and the Hunter Valley, we can expect a flow-on effect of four to five times. This whole concept of clustering is being fostered throughout the State.
CHAIR: Has the Department of State and Regional Development been able to resolve the situation with the proposed cheese-cutting factory in Bega, which the Australian Capital Territory is trying to seduce across the border?
The Hon. M. R. EGAN: Yes. In fact, I think the Premier made an announcement on that yesterday.
Mr WATKINS: Yes, he made the announcement.
The Hon. M. R. EGAN: I do not have a copy of that announcement, but I gather that New South Wales was successful?
Mr WATKINS: Yes, we were successful. That is good news for New South Wales and particularly for the Bega district. The facility will mean significant employment for Bega. Other States, including Victoria and the Australian Capital Territory, tried to lure that new process away. A lot of good work by a number of local people and Sydney people has secured that facility for New South Wales. From here on the facility will be part of the lifeblood of that important country centre.
CHAIRMAN: That is certainly good news. To my knowledge, about 150 jobs will be involved.
Mr WATKINS: Yes, and about $20 million in investment.
The Hon. M. R. EGAN: Has a new site been obtained?
Mr WATKINS: Yes, there is a new site.
CHAIR: I refer to Budget Paper No. 3, Volume 2, page 697, Capital Program, line item Acquisition of property, plant and equipment. I note a budget allocation of more than $1 million for acquisition, but only $210,000 was spent. Is there a simple explanation for that? Only $210,000 is budgeted for this year, whereas the allocation for last year was $1 million. Is there an explanation for the big leap in 1996-97 and then a return to a figure of about $200,000?
The Hon. M. R. EGAN: Last year's actual allocation was about $200,000 yet expenditure of more than $1 million was made. I am advised that the discrepancy was due to an upgrade of the department's computer network.
CHAIR: I note that $20 million was budgeted under the line item Capital grants and advances yet only $6 million was spent. Does the Treasurer have any explanation for that?
The Hon. M. R. EGAN: The Department of State and Regional Development is one which essentially does not have a capital program. Usually a small amount is allocated for expenses such as computer upgrades, but the department does not make capital investment decisions or acquire significant assets or properties. The Committee will recall that last year the Government committed itself to expenditure of $32 million for the rehabilitation of the Sydney Showground. Remediation of the showground site included sewer and stormwater diversions, pollution traps and so on. Last year $20 million was allocated for that but total expenditure amounted to only $6 million. This year an allocation of $18 million is being made, which is a big increase on the amount indicated in last year's
forward estimates. I expect the amount allocated this year for 1997-98 to pick up most of the $14 million not spent last year.
CHAIR: I refer to Budget Paper No. 3, Volume 2, page 699, line item Rehabilitation Works at Moore Park Showground - the capital grant. What specific works are involved? Are items such as sewerage systems included in that? Does it relate to physical works being carried out on behalf of the Government, or is the money paid to Fox studios for the work?
The Hon. M. R. EGAN: I am not sure whether the work is being done by Fox studios or through the Department of Public Works and Services.
Mr WATKINS: I am unsure of that also. Details could be obtained. In the move referred to earlier, there were delays in finalising development applications and other matters of that nature. The move to Homebush is now well on track and funds were allocated for infrastructure related to that move. Fox studios is meeting that organisation's redevelopment costs, but this expenditure relates to infrastructure costs associated with many of the items mentioned.
The Hon. M. R. EGAN: A more detailed breakdown of the infrastructure works could be obtained. I shall take that question on notice.
The Hon. JENNIFER GARDINER: Further to the previous question, could the Treasurer also take on notice provision of the timetable for expenditure of all the $7 million allocated for rehabilitation of the site?
The Hon. M. R. EGAN: Yes, I assume the timeframe for that expenditure is only two or three years, because, essentially, it would precede most of the development work that Fox studios is undertaking. I would imagine yes, but I will obtain details on that.
The Hon. JENNIFER GARDINER: I refer the Treasurer to Budget Paper No. 3, Volume 2, page 699, line item Regional Headquarters tax concessions. That allocation was underspent by $2.1 million, which is over half the allocated funds of $3.6 million. Could the Treasurer say why the allocation was underspent and why the 1997-98 allocation has been reduced by $1.4 million? Secondly, could he detail which corporations have received the $1.5 million in assistance, or, alternatively, could he table a breakdown of those corporations? Thirdly, is the reduction in the allocation an indication of the failure of the Government to attract regional headquarters to New South Wales and an overall reflection of the dwindling competitiveness of this State in the Asia-Pacific region?
The Hon. M. R. EGAN: I shall deal first with the last part of the question. New South Wales is and has been extraordinarily successful in attracting regional headquarters. RHQs are being attracted at the rate of about 30 or 35 per year.
Mr WATKINS: We have just gone over the 200 mark.
The Hon. JENNIFER GARDINER: Since when?
The Hon. M. R. EGAN: That is since the program started in 1992 or 1993.
Mr WATKINS: Yes, the program is about five or six years old.
The Hon. M. R. EGAN: Our nearest competitor is Singapore, which has about 320 regional headquarters and is not adding to that number - there may be some new RHQs there, but the net number stays about the same. It is anticipated that Australia will overtake Singapore by about the year 2005. I point out that about two-thirds of the RHQs are being attracted to New South Wales, about 19 per cent of them to Victoria, with the remainder going to other States. So, New South Wales is doing well compared with major competitors in the Asia-Pacific region and this State is doing stunningly well compared with centres like Melbourne.
However, there are some obstacles, including the change announced in the Commonwealth budget only a few weeks ago by Mr Costello. This issue was raised with me at a recent meeting I had with the Australian Stock Exchange. There will be a change - from I think 61 to 6 - in the number of nations the Commonwealth Government recognises as having equivalent tax regimes. There has been some media publicity on this matter. Tax firms and legal firms in Australia have highlighted that this move will make it very difficult for Australia to compete as a regional headquarters location.
I suspect that this measure in the Commonwealth budget, which I understand will raise only a very small amount of additional revenue, was probably not fully understood by the
Commonwealth Government before it announced the change, and I will be taking the issue up with that Government. It would be a great tragedy if a measure that was going to raise a relatively small amount of revenue in fact resulted in being a significant obstacle to Australia attracting more RHQs.
The Hon. JENNIFER GARDINER: Further to a question asked by the Hon. Franca Arena about the export advisers program referred to in Budget Paper No. 2, am I correct in understanding the Treasurer to say that there would be six export advisers?
The Hon. M. R. EGAN: Yes.
The Hon. JENNIFER GARDINER: How long are those officers expected to be on the department's payroll? Will appointments be made for one year, two years or three years?
The Hon. M. R. EGAN: They will be there for three years. There is also the matter of the facilitators.
The Hon. JENNIFER GARDINER: What will be the term of those 12 positions?
The Hon. M. R. EGAN: They will be three-year positions.
The Hon. JENNIFER GARDINER: I refer the Treasurer to Budget Paper No. 3, Volume 2, at page 690. What is the total number of people employed in the Department of State and Regional Development in regional New South Wales, and could the Treasurer provide a breakdown of full-time and part-time positions?
The Hon. M. R. EGAN: As at 30 April, of a total of 230 positions, 46 are at Governor Macquarie Tower; 128 are at Grosvenor Place; five are in overseas offices; five are in the retail tenancies disputes unit; seven are in the western region; 11 are in the Hunter region; seven are in the Illawarra region; 13 are in the northern region; 11 are in the southern region, and nine are in the western Sydney region. Was there another element to the question?
The Hon. JENNIFER GARDINER: Could the Treasurer take the question on notice? Could he specify what regions and towns they are in?
The Hon. M. R. EGAN: I imagine that staff in the regions would be located at the regional office.
Mr WATKINS: I think we have something like 14 different locations in the central business district.
The Hon. M. R. EGAN: So we have more locations -
Mr WATKINS: Than we have regions, yes.
The Hon. JENNIFER GARDINER: The Treasurer just mentioned overseas staff. I refer to the previous year's estimates under the program for developing the New South Wales economy. For your department the international group had 25 staff located in overseas stations, including London and Tokyo.
The Hon. M. R. EGAN: Not last year.
The Hon. JENNIFER GARDINER: That is what is stated in the budget papers. Last year's budget papers show that there were 25 the year before, and then 25 is shown again.
The Hon. M. R. EGAN: Our only overseas offices are in London and Tokyo. I was in London in June 1995. At that stage there were, I think, two officers there and this time last year there were three officers in Tokyo.
The Hon. JENNIFER GARDINER: I am sure that the number of 25 officers is shown under the heading of international group for the department.
The Hon. M. R. EGAN: No, the international group does not include just those located in London or Tokyo. There is an international group within the Department of State and Regional Development based here in Sydney.
The Hon. JENNIFER GARDINER: How does New South Wales compare with the other State governments, which are increasing their overseas representation?
The Hon. M. R. EGAN: We have a minuscule presence in Tokyo and London. Some other States have huge contingents; Victoria has, I think, about 950 people throughout every city of the world - although I am not sure that it does that State any good; it does not get too many regional headquarters. I take the view that as an Australian State New South Wales should work through Austrade. Austrade provides a very good service to all of the Australian States and I believe the Australian States should work through Austrade rather than try to set up outposts of empire across
the globe. I suspect that in most cases the huge contingents of staff from Victoria and some of the other States are more about entertaining visiting politicians and mates of visiting politicians than about winning investment or exports for their home State. In any event, that is work which Austrade is better equipped to handle. I am sure the Hon. Virginia Chadwick would not like us to use, for example, the London office as a dumping ground for people after they retire.
The Hon. JENNIFER GARDINER: Do I take it, then, that the Government does not have any plans to change the balance of overseas representation, given markets in Asia?
The Hon. M. R. EGAN: We work through Austrade; we have very good relations with Austrade. I was in the United States recently and considered that the service provided there by Austrade on behalf of Australia and New South Wales was outstanding.
The Hon. JENNIFER GARDINER: The Treasurer has a number of times at this meeting mentioned his overseas trips.
The Hon. M. R. EGAN: Unfortunately, they are few and far between.
The Hon. JENNIFER GARDINER: They seem to be more frequent than his trips to places such as Bega and Mildura. Could the Treasurer give some indication of the proportion of time he spends on regional development matters as opposed to other matters within his responsibility?
The Hon. M. R. EGAN: Yes, I would have to admit that I have not visited either Bega or Mildura since being appointed Minister for State and Regional Development. I have visited many other towns. The trips I have made overseas since being appointed Treasurer, and Minister of State and Regional Development included a trip in June 1995 to the United States of America, England, Germany and Switzerland. That would have involved a fifty-fifty split in work between New South Wales Treasury responsibilities - visiting ratings agencies and so forth and giving financial road shows to financial markets - and Department of State and Regional Development work.
In November 1995 I went on a three-day visit to Vietnam as part of an Australian trade delegation headed by the then trade Minister Senator McMullan. A number of New South Wales firms attended that visit. Last year I visited Japan and the United States, mainly on Department of State and Regional Development work, although a couple of days were related to Treasury responsibilities - the Treasury Corporation and financial road shows to the financial community. This year I visited the United States. Those three overseas visits are the only ones I have made.
The Hon. JENNIFER GARDINER: Have you done anything else -
The Hon. M. R. EGAN: I should be doing more. As the Hon. Dr B. P. V. Pezzutti tells me, I should be doing more, but I do have very onerous responsibilities as Treasurer, as Minister for State and Regional Development, as Minister for Energy, as Minister assisting the Premier, as Vice President of the Executive Council and as Leader of the Government in the upper House.
The Hon. JENNIFER GARDINER: And as Minister in charge of keeping the Labor Party together.
The Hon. M. R. EGAN: I did not know that was my job.
The Hon. JENNIFER GARDINER: Has the Treasurer undertaken an analysis of the number of jobs that have come to New South Wales as a result of his visits overseas?
The Hon. M. R. EGAN: Yes, at various times. I do not have the relevant figures with me, but I could easily obtain them. This year I visited Digital, a company we were very pleased to lure to Australia. This essentially involved a relocation of engineering work from Singapore to New South Wales. I visited a very big firm in Omaha, Nebraska. I do not know whether Committee members are familiar with Omaha, Nebraska, but I am able to tell them that at the time the temperature was about minus 50 degrees. I cannot provide details about that yet because -
The Hon. JENNIFER GARDINER: There is no market for ice-cream there then?
The Hon. M. R. EGAN: No, I do not foresee it as a market for ice-cream.
The Hon. JENNIFER GARDINER: I should like to return briefly to the question about regional headquarters tax concessions. The 1994-95 allocation stood at $3.6 million but for next year it will be $2.175 million. Is the Treasurer anticipating less success in RHQs
The Hon. M. R. EGAN: No, I think the amount or the importance of financial incentives to most of the firms has been overestimated. What firms are generally looking for is a hospitable business and investment location. They are looking at things like availability of staff, staff costs, accommodation costs, office accommodation costs, and staff residential accommodation costs. Really, financial incentives are not all that important for firms that regard themselves as being long-time stayers.
CHAIR: I declare open for examination the proposed expenditure on energy.
The Hon. FRANCA ARENA: My question relates to environmental issues. Could the Treasurer advise what New South Wales is doing to address the greenhouse issue?
The Hon. M. R. EGAN: Yes, I shall ask Mr Neil and Ms Zoi to respond on this matter. At the outset I would have to say that the Australian Conservation Foundation has given New South Wales top marks for the position it has taken in abating greenhouse gas emissions. As I have told the House on various occasions, the energy market reforms which have been introduced in New South Wales are designed to deliver environmental benefits as well as economic benefits. They are designed to promote energy efficiency and energy efficient infrastructure and to encourage development of an application of renewable energy. The key initiatives which would reduce greenhouse gas emissions in the energy sector are the introduction of environmental requirements in electricity legislation, the establishment of the Sustainable Energy Development Authority and reforms in the gas industry, which will include the encouragement of wide use of natural gas.
I do not know whether Committee members have had the opportunity of catching up on today's press. I refer Committee members to an excellent article in the Australian Financial Review. The Government has supported a strengthened national greenhouse strategy. Some of the major greenhouse gas reduction benefits already flowing from the Government's energy policies include the Smithfield co-generation plant, which is in the final stages of commissioning. Other major industrial gas co-generation facilities have been proposed for Botany and Kurnell. There is a new methane-fired power plant at Appin and Tower collieries.
Renewable energy or electricity projects include landfill gas generation facilities and good connective photo-voltaic solar demonstration units. Of course, there is also the wind farm at Crookwell. That is all something one can puff out one's chest about - as I did when I was interviewed on CNN in New York recently. It was great to be able to tell 160 million television viewers in 210 different countries that our Olympic village would be the biggest solar-powered suburb in the world. I believe that made quite an impact.
The Hon. P. T. PRIMROSE: Can I ask about the energy-smart buildings program?
The Hon. M. R. EGAN: You can, but I think I will ask Cathy Zoi to answer that because it is a SEDA program. Both the Premier and I have been very pleased to be involved in the various launchings - the launching of that program at the Australian Museum, and I attended one of the recent seminars which SEDA organised. I think you will find that Cathy Zoi is a very eloquent advocate of that program. But you had better finish your question.
The Hon. P. T. PRIMROSE: What I specifically want to ask about is on page 692 of Budget Paper No. 3, Volume 2. There is a figure of $4.452 million under the line item Expenses termed Grants and subsidies. I was wondering whether that includes the energy-smart buildings program.
Ms ZOI: The answer to that is yes. The energy-smart buildings program was launched last August by the Treasurer and the Premier under a policy initiative to have the New South Wales Government reduce its energy consumption by 25 per cent by 2005. SEDA is helping government departments get that job done. We reckon that we will be able to save the State Government about $40 million over the next few years in energy bills. The interesting thing to note is our first milestone. We commenced in March and the Treasurer noted that the first projects had come in with the average internal rate of return on these energy efficiency projects of 43 per cent. So they are really terrific investments. They are improving government facilities across the State and they are obviously saving a lot of money.
The Hon. M. R. EGAN: Is there good take-up by the private sector as well?
Ms ZOI: We will be getting into the private sector over the next couple of months. We will be
launching a similar effort with the private sector to try to harness that level of savings as well.
The Hon. P. T. PRIMROSE: Reducing the demand for energy?
The Hon. M. R. EGAN: Reducing the demand for energy but also returning dollars to the Government and businesses. With those rates of return there are not too many investments that are as attractive as that.
The Hon. FRANCA ARENA: My question is about gas and electricity reform. Budget Paper No. 2, page 4-175, indicates that $1.5 million is to be expended on the reform of the gas and electricity industries in 1996-97. Would you please explain what the implications are for New South Wales in relation to the reform of these industries and the purpose of the increased appropriation in 1997-98?
The Hon. M. R. EGAN: I might ask Mr Neil to give details of the actual expenditure but, as members will be aware, there have been very significant reforms in the electricity and gas industries in New South Wales. We are in the process of converting what was essentially a privately owned monopoly industry in New South Wales into a competitive industry. You will recall the various legislation that has gone through the House that enables that to happen. That enables new gas distributors or retailers to use the distribution network that is currently owned by AGL. IPART has now completed its inquiry into, essentially, the access charges for that network, and that was featured in the press today. That means that the price of gas will be coming down and there will be enormous savings over time to industrial users of gas. That will mean lower costs of doing business for existing industrial gas users. It could also mean that a number of industries or firms will switch from electricity to gas as the competitive market brings down the price.
Again, that article in the Australian Financial Review highlighted some of the gains that will come to New South Wales industry. Now, that simply means that our industry has become more competitive: firms are able to compete in domestic and international markets. That means our firms win more orders, are able to provide more employment, and are encouraged to invest more money in their businesses. Mr Neil might be able to give you some idea of how the department has actually spent that $1.5 million.
Mr NEIL: That $1.5 million is for the 1997-98 financial year. I guess I had better step back a little and say that in the gas area as well as electricity New South Wales has taken a lead role in the national sense. What that involves is working out our positions and getting the national agenda to adopt what New South Wales wants. We are very forward thinking there. There is a gas reform task force, now called a gas reform implementation group. We fund our share of that.
The Hon. P. T. PRIMROSE: This is the national group?
Mr NEIL: This is the national group, yes. We prepare our positions. We have consultants, we have legal advisers and so forth. As we move to give more and more customers choice of supplier of electricity we get down to such issues as the degree of metering required by the domestic customer, so we have a detailed metering study coming up. Again on the electricity side, there is legal work to support the New South Wales position as the leading State in electricity reform.
I guess the final thing I would mention is that as the reforms are rolled out it is very important that customers understand what their choices are, what being contestable means, how to choose the player and get the best out of that and how to get the benefit of the lower prices. So there is a communications program by which we assist the media in communicating to those potential customers what options they have for taking advantage of the greater choice and the lower prices.
The Hon. P. T. PRIMROSE: I would like to ask a question about the National Grid Management Council, and I refer to Budget Paper No. 3, Volume 2, page 689. Right down the bottom it talks about the National Grid Management Council, indicating that $600,000 was provided for the council's activities in 1996-97 but expected expenditure is $1.042 million. No appropriation is provided in 1997-98. Can you explain why expenditure exceeded the budget in 1996-97 and why no funding is required next year?
The Hon. M. R. EGAN: Why no funding?
The Hon. P. T. PRIMROSE: Yes, why is no funding required next year, and can you detail the reasons for this allocation?
The Hon. M. R. EGAN: I will answer the last bit first. The functions of the National Grid Management Council have now been taken over by NEMMCO, which is the National Electricity Market Management Company. So, the National Grid Management Council will no longer exist. Mr Neil
might be able to tell you why the costs for 1996-97 were more than budgeted for.
Mr NEIL: That was simply one of those things that happens in the energy reform area: the amount of work to be done by the National Grid Management Council was more than forecast at the time we put the budget together. So there is another $440,000 there which was actually found from the department's cash balances.
The Hon. FRANCA ARENA: My question is about energy research and development. I refer to Budget Paper No. 3, Volume 2, page 689, line item Energy research and development. I note that the appropriation for last year was only $1.6 million and that only $1.3 million will be expended, and the appropriation for 1997-98 is $1.4 million. Will you please explain why the appropriation was not fully expended last year, the reason for the decline in the appropriation for this item, and the nature of the work undertaken with these funds?
The Hon. M. R. EGAN: I can give you a rundown on the Energy Research and Development Fund but I am not sure that I can explain the variations. I will ask Mr Neil to do that.
Mr NEIL: The Energy Research and Development Fund is the principal research funding activity in the department. The appropriation, as you mentioned, was $1.6 million. The department does not do any actual research itself, so the funding goes to universities and to the private sector; and it typically turns out that they do not accomplish as much as they say they will when you put the budget together. It is basically a slippage on programs which will be paid for a little bit later. That is the reason for that.
For the moment we are not committed to any new research funding activities. One of the reasons for that is that SEDA is funding an extensive program of development and commercialisation so the combined Department of Energy and SEDA funding is much, much higher. Over the next few months SEDA and the Department of Energy will be doing a combined study to figure out which of those activities currently handled by the department are more appropriately handled under SEDA's auspices. So the funding may well be lower in future years.
The Hon. FRANCA ARENA: Do universities tender for research projects?
The Hon. M. R. EGAN: Essentially, they would make bids.
The Hon. J. H. JOBLING: In Budget Paper No. 3, page 687, under the Department of Energy, I would like you to look specifically at a line item entitled Other services. The budget for 1996-97 was $600,000, the 1996-97 revised budget figure was $13.6 million and for 1997-98 it is $9.4 million. What is reflected in these figures, and can you detail items of expenditure which exceed $10,000 per item? It is an enormous sum of money that is completely unexplained. You may wish to take that on notice.
The Hon. M. R. EGAN: Yes, I will take that on notice.
The Hon. J. H. JOBLING: Can I then refer to Budget Paper No. 2.
The Hon. M. R. EGAN: My recollection is that it may have been a payment that the Government made to distributors to even out changes in electricity tariff to domestic customers.
The Hon. J. H. JOBLING: Bearing in mind it went up from $600,000 to $13.6 million in the last budget, and it is $9.4 million in this one, it is a very large sum just to be lumped under Other services.
The Hon. M. R. EGAN: It will be coming down. This current financial year, 1996-97, it is $12.6 million and, essentially, it is a subsidy to the distributors to even out the domestic tariffs that they charge their customers. This year, it is down to $9.4 million. Next year, that is, 1998-99, we expect it to be down to $6.2 million, and in 1999-2000 to be down to $3 million; and, by the looks of that, that will be the end of it.
Mr NEIL: Yes, that is right.
The Hon. J. H. JOBLING: Can you still take on notice my question about how the break-up comes about?
The Hon. M. R. EGAN: Yes. Do you want the break-up for this year?
The Hon. J. H. JOBLING: I would be interested in the break-up for the previous year, the reason for the enormous increase, and this year; an explanation of how it is distributed.
The Hon. M. R. EGAN: The reason for the increase is that it only started in 1996-97; before that there was no subsidy.
The Hon. J. H. JOBLING: Are you saying that you budgeted for $0.6 million but you spent $13.6 million?
The Hon. M. R. EGAN: No, $600,000 would have been for other services.
The Hon. J. H. JOBLING: That is what is says in the budget papers.
The Hon. M. R. EGAN: What I am saying is that after that appropriation the subsidy to the distributors came into being, but it phases out over four years. Before that, in 1995-96, I do not think there was any.
Mr NEIL: No, there was not any.
The Hon. J. H. JOBLING: Could you give me the reply in detail?
The Hon. M. R. EGAN: I can give you the detail now.
The Hon. J. H. JOBLING: No, I would like to see it in writing if possible. Would you respond accordingly?
The Hon. M. R. EGAN: Okay.
The Hon. J. H. JOBLING: I refer you to Budget Paper No. 2, page 3-8. My question relates to the $100 million revenue. How did the Government calculate the $100 million revenue which it anticipates will be received as a result of the introduction of the electricity distribution levy?
The Hon. M. R. EGAN: That is the responsibility of Treasury rather than the Department of Energy. The calculation of that amount of revenue from that levy was done by Treasury rather than the Department of Energy, so I will get the Treasury people to put together a response for you. I would point out though that that levy will raise $100 million -
The Hon. J. H. JOBLING: At this stage.
The Hon. M. R. EGAN: It will be imposed on the distributors and it is imposed on contestable customers. They are largely the big industrial and commercial users of electricity, who are the first ones to become contestable and therefore be able to choose their supplier of electricity. As I mentioned in response to an earlier question, they have benefited in the first phase of the competitive market with price reductions of between 20 per cent and, I am told, 50 per cent. For example, I got a letter only yesterday - I do not know if I have mentioned this to the Committee - from a firm of meat abattoirs that has two abattoirs. In one abattoir the monthly electricity bill had been reduced by $11,000. The other abattoir at Gunnedah had its monthly electricity bill reduced to $40,000. That is a huge saving. So it is those contestable customers who will have to pay essentially the increases that will flow from the electricity distributors levy.
The Hon. J. H. JOBLING: Following on from that - bearing in mind that contestable customers will have to meet this levy from 1 July - and moving down to the lower tranche or the next tranche, can you tell me what revenue the Government is expecting to receive from this particular levy from now to the year 2001? What are your projections showing? Again, you may want to take the question on notice.
The Hon. M. R. EGAN: I think you will find from the forward estimates of revenue - and I am not sure what page they are on - that the forward projection for the revenue remains at $100 million.
The Hon. J. H. JOBLING: Are you saying that the tax is not proposed to grow, that it will be fixed at $100 million?
The Hon. M. R. EGAN: Yes, I think that is the likely outcome.
The Hon. J. H. JOBLING: So if it exceeds the $100 million you would revise the tax downwards so that the sum stays at $100 million?
The Hon. M. R. EGAN: We would have to look at the impact at the time and that will depend not only on our budgetary position at the time but also on the electricity cost savings that are being passed on to industry and to the community.
The Hon. J. H. JOBLING: I refer you to the same Budget Paper No. 2, page 3-20, table 3.5. Have the dividends and tax equivalents from Great Southern Energy been reduced as a result of its purchase of the Wagga Wagga gas reserves?
The Hon. M. R. EGAN: I could obtain that information. If you look at the dividends section of that table, Great Southern Energy's dividends are expected to increase from about $4 million in 1996-97 to about $14 million in this coming year. Great Southern Energy's tax equivalent payments are expected to increase from $8.5 million this year to about $10.5 million next year. I would not think that the capital investment on the purchase of the Wagga Wagga gas network would impact upon its dividends or tax equivalents in any great way. It would no doubt be borrowing that money at commercial rates and expecting a commercial return on that investment, so it should not make any great
difference - although, of course, the ratepayers and residents of Wagga Wagga are doing very nicely out of it.
The Hon. J. H. JOBLING: I would appreciate an answer on notice as to what would happen if they overbid by $20 million.
The Hon. M. R. EGAN: Yes. I would not accept your assertion that they overbid by $20 million.
The Hon. J. H. JOBLING: I will accept $18 million if you push the point.
The Hon. M. R. EGAN: No, I would not accept that assertion either.
The Hon. J. H. JOBLING: Budget Paper No. 3, page 689, dealing with the Department of Energy, the line item Policy development and regulation of energy resources, shows that average staffing in 1996-97 was 63 and that in 1997-98 the average staff will be 66. What was the maximum number of staff employed at any time during 1996-97 and what proportion of such staff could be categorised under the following three categories: permanent public or Crown employees, temporary public or Crown employees, and specifically consultants and other independent contractors?
The Hon. M. R. EGAN: I am sure we can obtain that information but I really wonder whether such obscure information really serves any purpose.
The Hon. J. H. JOBLING: It is not obscure, I can assure you. There is a reason.
The Hon. M. R. EGAN: If the honourable member assures me it has some significance we will see if we can find it.
Mr NEIL: Yes, indeed. We will have to take that on notice.
The Hon. M. R. EGAN: Are you sure this is not just an Opposition plot to have the Department of Energy devote hour upon hour of staff time to compiling useless information?
The Hon. J. H. JOBLING: Knowing the gentleman there as I have done over many years, that would be the furthest thought from my mind. Can we look then at Budget Paper No. 3, page 692, in this instance relating to SEDA - the Sustainable Energy Development Authority. Obviously there is a degree of variation in the budgeted figure for grants and subsidies in 1996-97 of $15.7 million and the revised figure of only $4.5 million used, and this year it has gone back up to $9.8 million. I understand that it is a new department and obviously it took some time to establish and that the projects are there. Obviously, if only one-third of the original expenditure was made, I would be interested to identify the 10 top recipients that exited either from the 1996-97 budget or proposed in 1997-98 and in which electorates these particular recipients reside? I expect you would also want to take the question on notice.
The Hon. M. R. EGAN: I suspect that the reason the expenditure was below budget was either because SEDA was new or because the industry itself has not been geared up to the tremendous opportunities which SEDA provides.
The Hon. J. H. JOBLING: I think I admitted that in the question earlier.
The Hon. M. R. EGAN: I do not think Ms Zoi would have a clue what electorates they are in.
Ms ZOI: No, not a clue, but there is a big reason that the figure goes from $15 million to $4.4 million, and that is an accounting thing. When SEDA was set up it was going to receive a pass through to help fund Pacific Solar from Pacific Power; and what is happening instead is that that money is going directly from Pacific Power to Pacific Solar. That is what that big gap is, but as far as being able to prepare the items, we will take that on notice.
The Hon. J. H. JOBLING: I think that is important for understanding where you are developing in the State. It is an important area and I certainly look forward to seeing that. At page 690 of Budget Paper No. 3, again under the Department of Energy, in 1996 the revised budget for electrical appliance testing was $633,000 and in 1997 it fell to $50,000. Could you indicate to me what was the policy decision or what were the implementation criteria which caused this reduction, which is a twelvefold decrease?
The Hon. M. R. EGAN: Yes. I have a feeling we have actually transferred to Fair Trading.
The Hon. J. H. JOBLING: That just confirms what I thought. Would you look at page 687 of Budget Paper No. 3, line items User charges revenue and Other departmental revenue. The total
retained revenues in the 1996-97 budget were $1.278 million, revised to $2.9 million, and in this year's budget they are only $0.875 million. Can you indicate the reasons for the change in the revenue? As there are only a few seconds, would you be kind enough to put the answer on notice? Can I also put to you a question about Budget Paper No. 3, page 689, dealing with the line item Remote area power assistance scheme. Why does it appear to have been dropped? I guess you will have to put that one on notice too.
The Hon. M. R. EGAN: Yes, although I think that program has simply come to an end. It was a very bad program.
The Hon. J. H. JOBLING: That is another argument. I am just curious as to what is replacing it.
The Hon. M. R. EGAN: It would have been much cheaper to have had stand-alone systems than to connect everybody to the grid.
CHAIR: Some of the questions that I had selected have been asked by the Hon. J. H. Jobling. I still have one or two left. There may be a simple explanation for this, but in Budget Paper No. 2, page 3-20, there is a list containing a number of the non-budget sector agencies, such as Australian Inland Energy for which there was a budget for 1996-97 of $1 million, revised down to $137,000, then you budget again this year for $1.4 million. The same situation seems to be occurring in EnergyAustralia which was revised down to $41 million and then for 1997-98 you are budgeting $222 million; the generation sector is going the opposite way - it is down 50 per cent. Then Integral Energy was $22 million, but the budget for 1997-98 is up to $91 million. What is the explanation for this great variation in what you anticipate and what actually happens?
The Hon. M. R. EGAN: These are new organisations and it is very difficult for Treasury to assess exactly what their dividends, or their profits, will be in any given financial year because the market is very new. Whilst these are certainly best estimates and would be based on information given to Treasury by the utilities, I would think for a year or two at least there will be a fair element of guesswork about where the market is going to be and what the price of energy is going to be. These organisations would have a fairly good idea, a fairly precise idea, about what their costs are in terms of their operating staff and so on. But it would be very difficult for them to predict the cost of the energy that they will buy during the year and the price they will have to sell it at. So, I think for a few years we might find that those figures could go up and down a bit.
CHAIR: That is what I was hinting at. You mentioned earlier the 50 per cent discount. Have some of them been so competitive in dropping their prices that they miscalculated?
The Hon. M. R. EGAN: That is certainly an argument that has been put in the media, mainly coming from Victorian sources. I will be happy if the organisations pay me the dividends that they project at the beginning of each year. I expect them to operate in a commercial way. I do not oversight the commercial decisions they make. I suppose in some circumstances it makes commercial sense to be a loss leader, but certainly I would expect that any commercial decision that any of these utilities makes is a sound one and I have no reason to believe that they are not making sound decisions.
I think a lot of the complaints about the low energy prices in New South Wales emanate from some of the Victorian utilities, which are a bit surprised at the low prices in New South Wales. But essentially I think the Victorian utilities assumed that we would not have real competition in New South Wales simply because the owner of these utilities was the one owner and rather than a fully competitive market we would have a sort of collusive set of arrangements. That is not the case; it is a fully competitive market and the government of the day certainly does not intervene in any of the commercial judgments that the utilities make. I suppose our utilities, as well as the Victorian utilities, are going to take a bit of time to work out the market and actually get their own judgments right too. It will be a bit of a roller-coaster market for a while and it will be a roller-coaster ride for some of these businesses.
CHAIR: On page 694 of Budget Paper No. 3 there is reference in the program objectives to "enhanced fuel substitution to more environmentally benign fuels". I suppose it depends on your point of view, but is there any way in which research could be carried out or some evaluation made as to the potential peaceful, safe use of nuclear power in New South Wales?
The Hon. M. R. EGAN: We are certainly not engaged in any program that would evaluate the
potential of nuclear power. It was very interesting to hear in the upper House the other day our small "g" green colleague, the Hon. R. S. L. Jones, espousing the benefits of nuclear energy. It was a turnaround. But certainly it is not something that we will be looking at in my lifetime here in New South Wales.
The Hon. J. H. JOBLING: Should the technical requirements of proofreading Hansard delay its production until late tomorrow, and bearing
in mind the long weekend, will the Treasurer consider allowing questions to be placed on notice as late as midday on Monday?
The Hon. M. R. EGAN: Yes, I am quite happy to take questions on notice, even beyond noon on Monday.
The Committee proceeded to deliberate on the recommendation of the vote.