Wednesday, 15 May 1985 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 10 a.m., and read prayers. The Clerk-Petitions have been lodged for presentation as follows: Nuclear Disarmament To the Honourable the President and the members of the Senate in Parliament assembled. The Petition of the undersigned citizens of Australia respectfully showeth and in concern for peace support: 1. A move towards unity, co-operation and peaceful co-existence amongst all peoples of the earth. We pledge our agreement to an immediate bilateral FREEZE of the development and deployment of all nuclear weapons and to speed negotiations to dismantle all such weapons of mass destruction under the supervision of a neutral peace-keeping force. 2. The establishment of a Ministry for Peace to focus our energies towards non-violent resolution of world conflicts, encouraging our government to pursue its own independent policies in foreign affairs, non-aligned to any one polarity, with the aim of bringing about lasting and peaceful co-existence worldwide. 3. The establishment of a Senate Select Committee on Nuclear Disarmament and Peace to examine and debate all submissions by way of petitions and proposals and to assist in the creation of the Ministry for Peace. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 179 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The humble petition of the undersigned citizens of Australia respectfully showeth that: Upon evidence from within Australia and overseas, the introduction of Plant Variety Rights legislation would not be in Australia's best interests because: 1. Plant genetic resources should remain a public resource; 2. Australia's public plant breeding programs could be undermined; 3. Such legislation may lead to a reduction in the genetic diversity of commercial varieties; 4. There is reason to fear that choices of seed and other plant propagation materials may be restricted due to the controls placed on their use; 5. Plant Varietal Rights legislation could lead to higher costs for the grower, the consumer, the plant-breeder and the tax-payer; 6. Plant Variety Rights will lead to a further increase in foreign control of Australia's plant genetic resources; Your petitioners therefore humbly pray that Parliament ensure that it recognises the widespread public opposition to PVR and promote alternative means of royalty collection for plant breeders. And your petitioners as in duty bound will ever pray. by Senator Macklin (from 113 citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of the undersigned citizens respectfully shows: That:-the Australian flag symbolises the continuity between Australia's past, its present and its future; the presence of the Union Jack on the flag represents not a subservience to Britain, but a reminder of our inheritance of the fruits of hundreds of years of struggle for individual liberty against the forces of tyranny and oppression; Nonetheless recognises the rights of the Australian people should they wish as a people to change the design of their flag. Your petitioners humbly pray that no change be made to the Australian flag except with the consent of the people in a referendum. And your petitioners as in duty bound will ever pray. by Senator Collard (from 60 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of the Commonwealth of Australia respectfully showeth: That in the light of the Labor Governments failure to act to correct the anomalies in the Assets Test on pensions bring to its notice and due to have effect from the 21 March, 1985 the Labor Government's legislation should be repealed before it has an unduly unfair impact on pensioners, and calls upon the Australian Democrats to support Senator Messner's Bill for the abolition of the Assets Test. Your petitioners most humbly pray that the Senate in Parliament assembled should immediately seek the passage of the Social Security and Repatriation Assets Test Abolition Bill to repeal the Labor Governments iniquitous and unfair Assets Test. And your petitioners as in duty bound will ever pray. by Senator Messner (from 238 citizens). To the Honourable the President and members of the Senate in Parliament assembled the petition of the undersigned respectfully showeth: Introduction of any additional capital gains taxes, wealth taxes or death duties is opposed on the grounds that: They adversely affect the small and medium businesses in Australia, destroying incentives and discouraging investment in this important area of the economy; The Australian economy, and employment in particular, is heavily reliant on growth in small businesses; Any capital gains that might result when owners of small businesses finally sell the business are not 'windfall gains' but the result of many hard years of work and sacrifice, with very little being taken out of the business by way of salaries so that the maximum amount of money can be ploughed back into the business to create growth and jobs; The owners of small businesses often depend on a capital gain-which are simply deferred salaries-when they eventually sell their business to sustain them in retirement; Your petitioners request that the Senate in Parliament assembled will protect the rights of private enterprise and reject any inequitable additional taxes. And your petitioners as in duty bound will ever pray. by Senator Brownhill (from 831 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned respectfully showeth: 1. That the present Federal tax system is not equitable, readily understandable or manageable. It is making a material contribution to the decline in ethical standards in Australia, and in the opinion of many eminent Australians it is a tax system that basically makes us into a nation of cheats. 2. Some classes of taxpayers are more heavily taxed than others and two groups, wage and salary earners and small businesses, through the impact of inflation on the progressive rate structure, have suffered disproportionately in recent years. 3. A great many people see cheating the tax system as a necessary response to what they regard as cheating by Governments. 4. Through excessive marginal income tax rates, the spirit of free enterprise and hard work is being stifled. The groups in the community who generate savings are being discouraged from investing those savings in capital for business. 5. Any reform of the taxation system needs to be comprehensive and not piecemeal. Further, it requires an unimpeachable commitment from all political parties and parliamentarians to adopt a totally bi-partisan approach in debating tax reform proposals and legislation. Your petitioners humbly pray that the Federal Government will use the forthcoming Taxation Summit meeting as the occasion to announce the formation of one or more working parties committed to the development of a taxation system that will ensure that the necessary Government revenue is raised in the most equitable and efficient manner possible and that such working party (parties) be provided with adequate resources so as to permit the tabling of their recommendations in the Parliament not later than June 30, 1986. Further, your petitioners believe that one of the most significant ways this country could celebrate its Bi-Centenary is through the introduction, by 1988, of legislation that will give the people a fair and equitable taxing system. And your petitioners as in duty bound will ever pray. by Senator Brownhill (from 14 citizens). Senator Sir JOHN CARRICK(New South Wales) —by leave-I present the following petition, which is not in accordance with the Standing Orders, from 342 petitioners praying that the existing national flag not be changed: We Australian citizens, residents in the RSL Veterans' Retirement Villages, at Narrabeen in the State of New South Wales, whose signatures are subscribed hereon, declare our desire for the retention of the existing Australian National Flag and would deplore any change in its design or of its colours. Petitions received. Senator HAMER(Victoria) —I give notice that, on the next day of sitting, I shall move: That, in the opinion of the Senate, the Government should move to refer to the United Nations Decolonisation Committee the question of the colonial territories of the old Russian Empire, which are now forcibly incorporated into the Soviet Union. Senator PRIMMER(Victoria) —I give notice that, on the next day of sitting, I shall move: That the following matter be referred to the Senate Standing Committee on Finance and Government Operations: Whether the claim by the Australian Broadcasting Corporation that certain information should not be made available to Senate Estimates Committee C, on the ground of commercial confidentiality, is justified. I seek leave to make a statement relating to the notice of motion. Leave granted. Senator PRIMMER —At the Senate Estimates Committee C hearing on 15 March 1985 the Australian Broadcasting Corporation declined to provide information about salaries paid to staff on the program the National on the ground of commercial confidentiality. Estimates Committee C cannot receive information on a confidential basis. For this reason Estimates Committee C was unable to receive the material confidentially and make a decision as to whether the claim for commercial confidentiality was justified. To overcome this problem the Committee has decided to move the reference of which I have given notice to enable the matter to be determined. Senator MASON(New South Wales) —I give notice that, on the next day of sitting, I shall move: That, in the opinion of the Senate, the agreement dated 11 March, 1981 between Australia and the United States of America on the staging of United States Air Force B-52 aircraft through Australia should be renegotiated to: (a) include a new article reading 'No aircraft carrying nuclear weapons shall use any facility in Australia or be based in Australia without the prior agreement in writing of the Australian Government'; (b) secure amendment of article VII of the agreement to require approval by the Australian Government of developments affecting staging operations, rather than consultations on such developments; and (c) review article II of the agreement to alter the location of the B-52 aircraft and their support aircraft, removing them from Darwin, and basing them at a site well removed from major population centres in Australia. Senator BOSWELL(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) notes with concern that the following Queensland shires or portions of Queensland shires have been declared drought-stricken: Bowen, Blackall, Ilfracombe, Isisford, Longreach, Murwah and Richmond; (b) recognises the damaging effect drought has, not only on primary producers, but on provincial towns and small businesses dependent on these primary producers; (c) condemns the Federal Government for scrapping the Commonwealth fodder subsidy scheme, the Commonwealth interest payment subsidy scheme and the bicentennial water resources program; and (d) calls on the Federal Minister for Primary Industry to urgently clarify his Government's policy on drought relief. Senator MACKLIN(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate- (a) accepts the fact that the indigenous people of Australia, now known as Aborigines and Torres Strait Islanders, were in possession of this entire nation prior to the 1788 First Fleet landing at Botany Bay; (b) recognises the Aboriginal and Torres Strait Islanders People's right to land; (c) urges the Australian Government to admit prior ownership by the said indigenous people and to introduce legislation to compensate them for the dispossession of their land in accordance with the following five basic principles: (i) Aboriginal land to be held under inalienable freehold title; (ii) protection of Aboriginal sites; (iii) Aboriginal control in relation to mining on Aboriginal land; (iv) access to mining royalty equivalents; and, (v) compensation for lost land to be negotiated. Senator JONES(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate, taking note of the latest figures produced by the Australian Bureau of Statistics which show the number of days lost because of strikes in the month of February 1985, notes- (a) that 148,200 of the 199,200 days lost because of industrial action in February occurred in the State of Queensland; and (b) that the reason for the massive increase in strike days lost in Queensland, from 3,400 in January to 148,200 in February, was the total refusal of the Premier and Government of that State to conciliate in the ongoing power dispute, a position that is still being maintained. Motion (by Senator Hill) agreed to: That the following matter be referred to the Standing Committee on Constitutional and Legal Affairs: National uniformity in laws relating to in vitro fertilisation and the status of children deriving therefrom and the role of the Commonwealth in achieving such uniformity. Senator HILL(South Australia)(10.08) —I seek leave to incorporate in Hansard a short statement explaining the basis of the reference. Leave granted. The statement read as follows- The Constitutional and Legal Affairs Committee recognises, as I am sure do all honourable senators, that advances in medical and reproductive technology have taken place in recent years at an astounding pace, and indeed in an almost bewildering fashion. At the same time the law, where it is touched by or touches upon these medico-technological advances, has totally failed to keep pace. Reports from Committees such as those headed by Professor Louis Waller in Victoria or Dame Mary Warnock in the United Kingdom have attempted to grapple with some of the problems resulting from this lack of adequate legal responses, as well as addressing other ethical, moral and scientific issues. Two points however need to be made regarding the purely legal recommendations of these reports. In the first place these reports have addressed either the law of one State only, or else have been conducted in unitary States where none of the problems arising from a federal system exists. The second point to be made is that where State legislation exists, or is in draft form, such as is the case in NSW, Victoria, the ACT or SA, significant differences are already emerging in the legal regimes relating to key issues such as the status of children born as a result of in-vitro fertilisation procedures. In seeking this reference, the Committee wishes to play a constructive role in identifying for the Parliament some of these legal issues and problems and suggesting what positive role, if any, might be played by the Commonwealth in promoting national uniformity of such laws in a way consistent with our federalist system of law and government. Your Committee is aware that on 23 April 1985 Senator Harradine introduced the Human Embryo Experimentation Bill 1985 as a private senator's Bill. In that Senator Harradine's Bill deals with embryos produced for the purposes of experimentation, it relates to an aspect of in-vitro fertilisation which the Committee did not intend to address in this inquiry. The intention of the motion is that the Committee would primarily concern itself with the legal regime that surrounds the production of embryos by in-vitro methods for subsequent implantation with a view to full development to birth, and with the legal status of children born by such procedures. We would hope to call for submissions at an early stage and leave plenty of time for their receipt. We would not expect to commence our substantive work on this reference for some months, especially in view of our program of ongoing inquiries, including that into the Bill of Rights question. We would hope to use the interim period to seek submissions, commission research and put preliminary matters under detailed study. We appreciate that this will be a complex and time-consuming exercise, but we believe it to be one of significance and one appropriate for a Senate Committee to undertake. In all our inquiries and deliberations, the Committee will be guided by the fundamental principle of identifying what is in the best legal interests of children conceived and born as a result of in-vitro fertilisation procedures. At the same time we are conscious of the need to reflect and promote the overwhelming community support for the protection and strengthening of family life in Australia. We commend our reference to the Senate. Motion (by Senator Grimes) agreed to: (1) That Business of the Senate, Order of the Day No. 1 (Presentation of Standing Committee on Finance and Government Operations report) and Order of the Day No. 2 (Presentation of Estimates Committee D report) be postponed until a later hour of the day. (2) That consideration of committee reports pursuant to Sessional Order be not proceeded with this day. Debate resumed from 14 May, on motion by Senator Gareth Evans: That the Bill be now read a second time. Senator Sir JOHN CARRICK(New South Wales)(10.10) —The Minister for Resources and Energy (Senator Gareth Evans) in his second reading speech said, amongst other things, when describing the cash bidding process: . . . it represents a self-contained selection process and also allows the explorer to determine and carry out his exploration strategy in the light of the commercial realities of the day, free from unnecessary government regulation. That is a remarkable approach, not a free enterprise approach but a libertine approach. On the one hand the Government is complaining that the terms of a lease are not being carried out and on the other hand it is saying: 'Let us give him a completely free laissez-faire go'. I looked at the Minister's second reading speech to examine the criticisms that were made of the work program. I will look at them and analyse what the alternative is. The Minister, in his second reading speech, stated: To be more precise, the work program system: First, encourages companies to propose substantial exploration programs that may later prove to be uneconomic either because of changes in economic conditions or a downgrading in prospectivity following initial exploration. . . I pause to ask the Senate: How would a cash bidding program do otherwise? For example, how would a cash bidding program overcome the problem that exploration programs may prove uneconomic because of changes in economic conditions? How can some action, in which the highest bidder gets the lease, be unaffected by an economic situation? How can such a system escape the problem of a downgrading in prospectivity following initial exploration? So the first dolly goes down. The Government has decided to abandon the work program on that level. Yet, on analysis, the cash bidding program is even more vulnerable; It is certainly vulnerable to the economic situation. How can it change? How can it not be vulnerable, after initial exploration, to the discovery that prospectivity will not be as high as was initially considered? The second argument the Minister put forward was: . . . secondly, forces of the Government, where a work program becomes uneconomic, to either agree to exemptions from parts of the work program, which undermine the credibility of the system and is inequitable to unsuccessful bidders, or require the permittee to undertake the uneconomic exploration under threat or cancellation of the permit; neither course is in the long term interest of exploration industry . . . Under the cash bidding system, will there be no compulsion upon the explorer to do anything at all? Apparently the work program includes a dreadful measure. It asks the person who gets the lease-the lessee-to carry out the terms of the lease. It asks the successful tenderer to carry out the terms of the tender and that is seen to be wrong, not right. The alternative of the cash bidding system is to take away all of these sanctions. Under the present work program if the lease terms are not being carried out, of course it is possible for the Government at the expiration of the lease to request that it be surrendered. It is possible at any time to alter the terms of the lease, and that is a sensible thing to do. If exploration experiences some problems, it is sensible to vary the lease. The Minister also stated: . . . thirdly, requires a subjective selection of the winning bid where competition is high, as no amount of technical advice can differentiate readily between work programs of a similar character and size, nor can that advice predict whether the work program will actually be completed by the applicant . . . I pause here to say what an extraordinary kind of an argument for rejection that statement is. Here, according to the Minister, we have a number of applicants who are highly skilled in their expertise, their financial reputations, their equipment and their ability to do the job, and the real reason we are going to abandon the system is that there is some difficulty in determining between one applicant and another. In other words, we have the luxury of expertise, all the requirements of money in the bank, drilling gear, expert craftsmen in the job and a background of success, and the Government is going to destroy it because it is finding it hard to distinguish between Smith, Brown and Jones. I have never in my life heard more nonsense than this. The Minister said that the advice cannot predict whether the work program will actually be completed by the applicant, but of course under the cash bidding system there is no way in which that can be done. The main consideration is which applicant is going to pay the most. The Minister said of the system: . . . fourthly, is costly and complex to administer, as work programs must be verified throughout the life of the permit in order to maintain the credibility of the system. Is it to be thought that there is virtue in the fact that leases shall be granted and that in future the Department of Resources and Energy and the Minister will not undertake the responsibility of verifying a program throughout the life of the permit in order to maintain the credibility of the system? If I were to devise four methods which in fact supported the works program rather than rejected it, I would have to end up with three of the four considerations mentioned as arguments for retaining the works program and not abandoning it. I put it to the Senate: Can there be any other reading of this situation at all? Wherever we turn in this situation we have got the problem-this is one of the great worries I have under this proposal-of people who, because they have considerable money, can win a lease and then sit on it-in other words, virtually sterilise it. As Minister I constantly asked for advice as to whether that was happening. It is always possible either by persuasion or by the power that exists for the ultimate surrender of the lease to ensure that there is no sterilisation. But how will this be possible under a cash bidding system? The Government is to abandon the four situations I mentioned. It is not going to supervise. It says that it is wrong to supervise; it is too costly. Bear in mind that it is not going to do the supervision because it is costly and complex to administer this works program. It says that the works program must be verified throughout the life of the permit in order to maintain the credibility of the system. But it is not going to do it under the cash bidding system. Therefore, I ask: How can the Government be sure that nobody is sitting on the lease, that nobody is aiming to sterilise it? One of the great dangers is that those who have the biggest amounts of money can afford to stack up the leases and, indeed, there were some classic illustrations of that during my time as Minister. I was compelled in the end to make a decision in respect of one of the biggest of the lessees that we would not renegotiate a particular lease and that we would in fact accept the surrender of the lease. Those kinds of big people are capable of saying: 'Let me stack up my options let me in fact sterilise the situation until I can come to it in my own good time'. In my judgment, what is happening under this proposal is the creation of the very ills that in fact the Minister wrongly diagnoses in the present works program. He fails to see the virtues of the present works program and creates a laissez faire system under which, to use Kipling's words, 'He who has the largest purse has the longest life'. That is a nonsense situation, and a very ugly one. The argument put throughout the second reading speech, that this cash bidding system works in the United States of America, indicates a failure-previous speakers have made this point-to understand the vast difference between the exploration difficulties in Australia and those in America. In Australia the prospects of finding oil are very small indeed compared with the enormous prospectivity of America. In Australia, a country with a handful of population, seismic and other exploration is very superficial compared with that in America with its two hundred million people and all its massive capacities whereby virtually every acre of ground can be gone over. The risks in Australia are far more enormous than those in America. The situation is entirely different. The costs per well are different and the off-shore nature of our most prospective wells, in relation to disabilities, costs and so on, is different. The comparison is an impossible one. I ask myself: Why would anyone abandon a successful program? When the Fraser Government took over from the Whitlam Government in 1975 it faced an alarming downturn in exploration. It found that we were facing a future in which our self-sufficiency in oil was going to fall alarmingly and put into place a series of programs that have worked superlatively-that has been acknowledged throughout the world-and are continuing to work. When we all know that unless we make every step a successful and a vital one the danger is that our self-sufficiency will fall, when we know that every 10 per cent drop in Australia's self-sufficiency will put more than $1 billion extra drain upon our foreign resources-a drain that we cannot cope with and which would bankrupt us in the eyes of the world and force our dollar down further and therefore our costs up further-why would we change something that has been working? Why would we change the system when the works programs in question are the mechanisms whereby leases have been determined and granted and are responsible for the success of this oil discovery? That to me is very puzzling indeed. Like Alice in Wonderland, I can only say that it gets curiouser and curiouser. When one takes the Minister's arguments one by one, one finds that they are like George Orwell's double talk. When I examine the four reasons given for the contention that the works program is wrong I find in them the very virtues of supervision, the ability to correct, to press, to persuade and to take back a lease. I find in the alternative the vices of a loose system in which the Government simply says: 'If you have the most money you can get the lease'. In that lies the great danger, as I have said, that those with the most money will be able to stack up and sterilise the leases and those with the best abilities will be left out. I find no merit in this Bill. I feel it is very sad indeed that steps should be taken to threaten the quality of a successful program. Senator GARETH EVANS(Victoria-Minister for Resources and Energy)(10.25) —in reply-Nothing that the Government has heard in this debate or during the long course of consultation which has preceded it has dissuaded us from giving our support for this measure. I think it ought to be appreciated that that consultative process has been a long one. It dates all the way back to January 1984, with the issue then of a discussion paper, and it has continued with accelerating momentum ever since. In the course of that consultation it has been apparent that there has been some opposition to the measure from some, but by no means all, of the States. But that opposition has disappeared since I undertook a few weeks ago to delay the application of cash bidding legislation to State adjacent waters for a period of two years to enable the practical operation of the legislation in its initially proposed area of application in the Ashmore and Cartier Islands to be closely monitored. Certainly, Premier Brian Burke, despite his perhaps rather extravagant speech in Perth on one occasion, has indicated to me that he no longer has the objections which have been attributed to him in this debate by Senator Durack and that he is very happy to consider the application of cash bidding to Western Australia adjacent waters in two years time and to do so with a completely open mind. There has also in that process of consultation been opposition expressed, I am well aware, from industry, particularly through its lobbying agency, APEA-the Australian Petroleum Exploration Association-but there always is on occasions of this kind, as Senator Sir John Carrick, I think, will well remember from his occupancy of this portfolio. I believe that overall the dialogue with the industry has been calm, rational and constructive. Industry is well aware that cash bidding is not some extravagant antipodean invention of the Labor Government, but does work very well elsewhere in off-shore exploration in several other countries. Industry is well aware that the cash bidding proposal in its present form is thoroughly consistent with free enterprise business principles, and generally it is well aware that it is nothing like the ogre that has from time to time been painted. I think the best demonstration of this comes from a speech which was given only last week, on 8 May, by Mr Alec Gorrie, the Managing Director of BP Australia Ltd and the outgoing Chairman of the Australian Institute of Petroleum to that Institute's annual general meeting in Sydney. What he said was this: There has been much discussion lately about the proposed introduction of cash bidding for exploration licences. I believe that the industry as a whole, and certainly the majors have in the past submitted tenders on both a cash bidding and work program basis, and therefore, conclude that under the appropriate circumstances the industry is not opposed to either form of license bidding. The success of either method, however, is very much dependent on the degree of exploration data available and the prospectivity of the area concerned and hence is very much 'horses for courses' rather than one system being superior to the other. I readily acknowledge that there are qualifications in that statement and there is a difference of opinion about the prospectivity of the area, as to whether it is sufficiently high to justify this, but it is, albeit with those qualifications, a very firm and explicit statement that cash bidding has attractions and advantages and really is not something which justifies the opprobrium that has been heaped upon it as a system by so many contributors to this debate. If I have not budged, as Senator Jack Evans said in the course of his contribution, one inch from the position where I started, it is not because I have been, I believe, pig-headed or closed minded about the issue-in fact, I approached it when I inherited it with a completely open mind-rather, it has simply been because neither I nor the Government have been persuaded by any of the arguments that have been put. I believe that there is a rational and persuasive answer to be made to every one of the criticisms that have been advanced of the cash bidding proposal. Perhaps the briskest way of putting those criticisms and answers on the record is to seek the leave of the Senate to incorporate, if I may, in Hansard the relevant sections of my speech to the Australian Petroleum Exploration Association's annual conference in Perth on 26 March 1985. Leave granted. The speech read as follows- Cash Bidding For some time now the Government has been concerned about the equity and efficiency of our system of awarding offshore exploration permits. We have difficulty in continuing to support a system which, in competitive situations, produces numerous more or less identical offers of work commitments which are almost impossible for Governments to pick and choose between, and which may then subsequently not in fact be met by the successful bidder because the work program proves not to be commercially viable. The inherent weakness of a work program bidding system (at least one whose integrity is maintained) is its inflexibility: it requires resources to be committed not on the basis of current assessments of prospectivity and commercial reality, but those of up to six years ago. To allow exemptions from a work program once commenced undermines the credibility of the system and is inequitable to unsuccessful bidders; but if pursued to its logical conclusion, the work program system requires the Government to force permittees to complete uneconomic work programs, which is a clear waste of national resources. It is overwhelmingly for these reasons-our desire to improve upon the economic efficiency, equity and administrative workability of the allocation of exploration permits in competitive situations-that we have moved to introduce legislation enabling the use of a cash bidding system in areas considered to be highly prospective. While there is a secondary revenue objective-viz. to ensure, by the combination of cash bidding and RRT, that the community receives its appropriate share of economic rent-the primary objective is to enable the free play of market forces to substitute for Government regulation in the interests of allocational efficiency: an objective which one might reasonably expect to be vigorously supported in an industry gather such as this. Cash bidding systems of one kind or another are used extensively in the U.S., U.K. and Canada, so quite apart from their inherent economic rationality, the Government's proposals do not even have the quality of untested novelty (which, I am well aware, can provoke shivers of apprehension in the business community for even the most worthwhile proposal!) The elements in the Government's cash bidding proposal are well enough known by now not to require repetition to this audience. It is the case that in the long process of evolution of this legislation, very careful consideration has been given to the extensive comments received from industry, the States and the Northern Territory, and the legislation when shortly introduced will contain some minor modifications to the original proposal to address particular concerns. But the basic elements in the proposal remain as they have been communicated to you, and I believe the most useful way in which I can spend the remaining time available to me is to specifically address the main criticisms which APEA has put forward. (1) ''Cash bidding will reduce the funds available for exploration'' The assumption underlying this argument is that the funds available for exploration are fixed-that the Australian exploration industry is a ''closed shop'' within which a given amount of funds circulate, without either escaping or being topped up. But there is no reason at all, either in principle or as a matter of practical experience, to suppose that this is so. While it may be that the payment of a cash bid to acquire good acreage will require some companies temporarily to divert funds from other exploration activity (rather than arranging new funds or diverting funds from some other company activity), it is not likely that other petroleum prospects with attractive profit potential will be neglected for very long. It is simply a matter of the companies' priorities being rearranged in a normal commercial decision-making manner. Whatever might be the case in the very short term, in the medium term exploration funds are not fixed; there is nothing wrong-from the point of view of the national interest or anything else-with exploration being channelled into the more prospective areas first. So far from cash bidding operating to irrecoverably divert a given quantum of funds from Australian exploration activity, information which has come to my Department from overseas sources in the last week suggests to me that the net effect of the introduction of cash bidding may be to add substantially to the pool of investment funds available for exploration in the medium term. It appears that a number of overseas companies with no previous experience in Australia, who have been very reluctant hitherto to compete against those with local knowledge and experience in work program bidding, have now expressed an inclination to participate in cash bidding auctions, where they see their lack of on the ground experience as no hindrance. If the objection is that, within a particular highly prospective and high priority cash bidding area, there will be a shortage of available capital for subsequent exploration, the answer again is straight forward. In deciding to bid for a particular permit, a company will both design an exploration program that enables it to properly assess its petroleum potential, and estimate the expected return from that program. The extent to which the estimated return will exceed the company's required return will determine the size of its bid. The bid may be large or small depending on the particular circumstances but, if rationally calculated, will not reduce the amount of exploration expenditure identified as appropriate for that particular permit. Generally speaking, I continue to believe that the farm-in analogy is an apt one when assessing the implications of cash bidding for funds availability. In the 100 or so offshore permit areas released in the last five years, there have been at least 50 occasions where parties have paid up front premiums to farm in to a permit, sums of an order of magnitude that could be expected to result from cash bidding. The decision to acquire a farm-in right is a normal commercial one based on the commercial realities of the day, and often made very quickly: in one recent farm-in proposal an Australian company was able to decide within 30 days to pay tens of millions of dollars to a foreign company for the latter's interest in an attractive permit, which action appears hardly consistent with the notion of a fixed corporate exploration budget. If the point is made that at least in the case of farm-ins the funds remain within the industry rather than being drained off into the public purse, the short answer is that not only will it make no difference in practice to the decision of a farming-in company what happens to the premium it has paid, but it simply cannot be assumed that the recipient of farm-in funds will in fact reinvest them in petroleum exploration in Australia. (2) ''Cash bidding, involving an upfront payment, is inconsistent with the spirit of the RRT concept, which requires a threshold rate of return'' The Government does not acknowledge any inconsistency between cash bidding and RRT. They are complementary measures which will operate together to collect for the community a share of the economic rent, or super profits, which results from the exploitation of Australia's petroleum reserves. Because of the lack of complete knowledge about a prospect before it is fully explored, the amount of any particular cash bid is likely to prove either too high (disadvantaging the bidder) or too low (disadvantaging the community). The co-existence of cash bidding with RRT evens out these risks. The existence of RRT (and the non-deductibility of cash bids against it) means that companies will be deterred from overbidding; at the same time the existence of an RRT regime of certain dimensions, in place alongside the cash bidding system, means that companies will not face the risk that, in the event of a cash bid proving too low in the light of subsequent discoveries, some additional form of tax will be imposed to increase the community's take. Putting it in summary form, by combining cash bidding with RRT, companies can bid with certainty as to the return the community expects, and because of the RRT, will be deterred from over-bidding. Revenue the Main Motive? This is a convenient point to deal with a further objection to cash bidding which, although not put explicitly by APEA in these terms, underlies much of the negative industry response: this is the assertion that the Government's main motive in introducing cash bidding is revenue. There is, to put it brusquely, no foundation whatever for this assertion. The primary objective is to enhance the economic efficiency and equity with which highly sought after permits are allocated, and to overcome deficiencies in these and other respects in the present work program bidding system. (I shall return below to the question of the relative merits of cash and work program bidding). While there is, as I have already said, a secondary revenue objective (viz. to ensure, by the combination of cash bidding and RRT, that the community receives its appropriate share of economic rent), it should be clear from any examination of our proposed cash bidding legislation that the Government is not seeking to maximise revenue from this source. If revenue was the key concern then the Government would be offering large permits with unlimited renewal options; it would be encouraging speculators; and it would be allowing deductibility of cash bids against RRT and company tax. I might add that the argument that cash bidding only works overseas because of higher petroleum potential, and will not work in Australia, is not an argument against cash bidding as such but merely an argument for lower cash bids. (3) ''Cash bidding will be a disincentive to offshore exploration because of the extra financial risk involved'' The short answer here is that companies will take into account the expected risks and costs involved in exploring a permit when they are considering bidding for the permit, and the size of the cash bid will reflect that calculation. The cash bid in no way changes the risks or the costs involved (other than the up front cost of the cash bid itself); rather it is the risks and costs-the expected return weighed against the required return-which influence the size of the cash bid. Compared with the work program system, the cash bidding system will actually reduce the risks faced by companies. Under the cash bidding system, companies will be free to undertake the most commercially viable exploration program consistent with changing economic conditions and prospective assessments. Under the work program system, by contrast, companies are committed to an exploration program designed up to six years in advance, and must face the considerable risk that changing circumstances will make that exploration program uneconomic. (4) ''Cash bidding is an inferior system to work program bidding in the Australian context'' In answer to this objection, I can only repeat and expand upon the points I have already made in outline. We believe that in economic terms, cash bidding systems are the most efficient means of allocating exploration rights when competition is high; and that cash bidding has in addition significant advantages in terms of equity and administrative workability over the work program bidding system. To be more precise, the work program system: first, encourages companies to propose substantial exploration programs that may later prove to be uneconomic either because of changes in economic conditions or a downgrading in prospectivity following initial exploration; secondly, forces the Government, where a work program becomes uneconomic, to either agree to exemptions from parts of the work program, which undermines the credibility of the system and is inequitable to unsuccessful bidders, or require the permittee to undertake the uneconomic exploration under threat of cancellation of the permit: neither course is in the long term interest of the exploration industry; thirdly, requires a subjective selection of the winning bid where competition is high, as no amount of technical advice can differentiate between work programs of a similar size; nor can that advice predict whether the work program will actually be completed by the applicant; and fourthly, is costly and complex to administer, as work programs must be verified throughout the life of the permit in order to maintain the credibility of the system. Recent experience in the Gippsland Basin illustrates these difficulties. Applications were invited in 1980 for three permits for highly prospective areas, attracting 29 bidders overall with more than 8 for each permit. Most bidders proposed large work programs, but a whole variety of different exploration philosophies were involved, and acute difficulties were experienced in choosing administratively between them. In the result, after all this effort, there is no evidence that the Government got it right: one permit was surrendered after only four wells were drilled from a commitment of twelve; in another, only six wells have been completed from an original program of nineteen and there is doubt about the future program; and the third permittee has deferred some commitments and applied for a reduced program. Various modifications to the work program system have been suggested from time to time, but none of them address the problems I have outlined. Performance bonds could force uneconomic work to be completed; don't address the problem of differentiation between bids; and, because of the problems of verifying the cost of work completed, would add significantly to administrative complexity and cost. Dry hole bidding would overcome some of the problems associated with over-bidding, but would exacerbate the problem of differentiation in that it is likely that a number of applicants would specify the same number of wells. Even more stringent administration of the present work program system, as urged by APEA, would not make the problem of differentiation any easier to solve, and would only reinforce the problem of inflexibility which lies at the heart of the present system. What cash bidding will do is give explorers the opportunity to adopt the optimum and most economically efficient exploration philosophy based on progressive acquisition of information about the permit area. Commercial judgments can be made about the appropriate level of exploration at any given time, without the heavy (albeit well intentioned!) hand of government regulation intruding. In that happy state of innocence which prevailed until I took on this portfolio, I had thought that this is what private enterprise was all about. (5) ''Cash bidding will discriminate against most Australian companies, which do not have access to large amount of exploration capital from production cash flows'' It has to be squarely acknowledged that there are and always will be difficulties in local explorers taking offshore leases, because of the very high capital outlays involved. In keeping with the high costs, the high risks and the high level of technical skills necessary, it is only the stronger companies that will be able to participate-but this has been as true of work program bidding as it will be for cash bidding. Under either system, the applicant who values the permit highest will be the one prepared to bid the most. As has been the case in the past, it is very likely that consortia including Australian companies will be formed to bid for permits under the new system. Although there are no Australian equity requirements at the exploration stage, many foreign companies seek to include Australian companies in their consortia because of the 50 per cent local equity requirement should petroleum be found and developed. Under cash bidding, there is no reason whatever to anticipate a change to this practice. Senator GARETH EVANS —I will summarise the answers there made very briefly and put it this way. In the first place, cash bidding will not reduce the total funds available for exploration in this country. It is not, as I have said on numerous occasions, to be regarded as some kind of closed shop for funds available for exploration expenditure or a zero sum gain whereby money directed to up-front cash bids is necessarily to be regarded as money thus unavailable for expenditure elsewhere. Senator Durack himself acknowledged in the course of his speech that foreign investment, in terms of the supply of funds from overseas, is likely, in fact, to increase under this regime. He seems to have accepted the statements that I have made on several occasions that the cash bidding auction system has been perceived by a number of exploration companies overseas that have not hitherto ventured into Australian waters as being an admirable opportunity to do so that does not demand the same kind of knowledge of local conditions and government behaviour that is so much an indispensable prerequisite for living with a work program system. It is also a point in relation to this criticism that farm-ins have operated on a massive scale in recent years in relation to off-shore acreages after their release and that farm-ins are analogous in a number of crucially irrelevant ways to the cash bidding system. A lot of money has been spent other than from companies' exploration budgets to take advantage of buy-in opportunities of this kind. When money has been spent in this way, a lot of it has left the country rather than being redirected into further exploration expenditure by the recipients of it. The second answer which I made and which I repeat now is that cash bidding is not inconsistent with resource rent taxation. Its primary motive is, of course, not to secure more government revenue. Revenue is, as I have always publicly acknowledged, a secondary objective in this exercise. It is certainly not and never has been the primary objective and the scheme would have been constructed on a very different basis had it been a primary objective. I will come back to that point later. The third point that I would make by way of answer to the critics is that cash bidding will not be a disincentive to off-shore exploration because of the extra financial risk that is involved. The amount of the bids that is forthcoming will, of course, be contingent on the assessments by bidding companies of the likely returns from the exploration in question. There will be, as a result of this system, a complete flexibility of operation with no need on the part of the participating companies to pursue uneconomic prospects in the way that they are obliged to do under the letter of the present work program system. In other words, all sorts of financial disabilities are attached to the present system which will not flow through to the cash bidding regime. The final point I make in answer to an oft repeated criticism is that cash bidding will not discriminate against Australian companies, especially small Australian companies, any more than the present system does. The reality is that off-shore exploration is a very expensive business which is beyond the resources and capacity of all but the most substantial companies unless, now, under the work program system, they can band together in consortia of one kind or another. Similarly, there will be all sorts of incentives for that to occur in the context of cash bidding and I and the Government cannot believe that the result there will be any different. Of course, the positive case for cash bidding depends not just on answering the criticisms that are specifically directed at the Government's legislative model but rather by establishing that this model is superior to any other system now available or that might reasonably be created for allocating exploration acreages at least for highly prospective areas for which there is a great deal of competition. In the course of discussions and negotiations with the industry and, it must be said, with the Australian Democrats, that have taken place in recent months, three basic alternatives to our cash bidding proposal have been canvassed: First, the maintenance of the existing work program system; secondly, the supplementation of that existing work program system with some arrangement for performance bonds, perhaps further backed by bank guarantees; and, thirdly, a replacement of the present work program system with a system of dry hole bidding. Let me quickly advert to each of these suggested alternatives. First, as to the existing work program system the difficulty is that, while it works well enough for non-competitive acreages where there is not much competition to get into some particular area, it simply does not work well-this has been the proven Australian experience-for the kinds of highly prospective and highly competitive acreages that we are talking about, and only talking about, as appropriate candidates for the application of cash bidding. There is a fundamental logical problem about the application of the present work program system that I have been trying-I think ultimately with some success-to explain to the Australian Democrats and to others, which I summarise as follows: Either one enforces a successful work program bid with absolute rigour, which may then well result in forcing the company after an initial run of unsuccessful drilling to engage in further activity which is obviously uneconomic and a waste of resources; or, on the other hand, one enforces the successful work program bid with discretion, not requiring a company to go on drilling uneconomically when it is clear that a prospect has been thoroughly worked over and found to be, in effect, dry, in which case one loses the capacity of the system to deliver for the purposes of initial selection. Let me put the point another way by saying that once it becomes apparent that any work program bidding system is not to be followed up by absolutely rigorous requirements that the full successful bid is worked through, there is no disincentive on the bidders to strike a bid which is artificially high and which they never have any intention of honouring. Once that happens and one loses the credibility and integrity of the bidding system, one loses the capacity, when one is at the government end of the process of trying to pick and choose between bids, of doing so on rational grounds. One simply knows the bids one is getting are inflated bids-inflated by the knowledge on the part of the bidders that they will not have to honour the particular bid they are putting in. That is the basic difficulty. Associated with that are all sorts of difficulty in picking and choosing between competing work program bids when one is talking about highly competitive and highly prospective areas. The example I have used in the past, and I use again because it is still very present to the Government's recollection, is the applications that had to be dealt with in 1980 for three Bass Strait permits for highly prospective areas, P17, P18 and P19, which attracted 29 bidders overall and more than eight for each permit. As I said in the speech to the Australian Petroleum Exploration Association, a copy of which has already been incorporated, most bidders proposed large work programs with a whole variety of different exploration philosophies, and it was enormously difficult to pick and choose between them. In the end, after a great deal of effort was put into that process there is no evidence that the Government actually got it right in the sense of the subsequent experience. One of the permits was surrendered after only four wells were drilled from a commitment of 12; in another only six wells were completed from an original program of 19, with doubt now about the future of the whole program. In the third the permittees deferred some commitments and applied for a reduced program. There are all sorts of difficulties about the operation of the work program system even with the great skill, dedication and competence of my Department, and even with the best will in the world in trying to make it work. Senator Jack Evans —Are you suggesting that cash bidding would have got it right in Bass Strait? Senator GARETH EVANS —Cash bidding to the extent that it is a straight auction system necessarily resolves the problem in terms of initial selection. It is a necessary incident of cash bidding that the companies be given the flexibility in the five-year period of their permit to operate the program in the way they see fit. One expects that they would have engaged in a substantial exploration program. If they had, one would not have confronted the sort of problem of generating expectations which are unsatisfied, to which I am referring. The performance bond system has been advanced as an alternative to this. It was originally urged by the Australian Democrats and flirted with the industry for as long as it seemed a useful vehicle for knocking off cash bidding, but not once it seemed as though it might actually come into force because, obviously, it is not the answer. I think that is not generally acknowledged. The difficulty with the performance bond system, which is designed to put acute financial incentives on companies to make sure that they do work out the full extent of their original work program commitment, is that while it might in that sense help to preserve the integrity or credibility of the initial bids it nonetheless accentuates the irrationality from an economic perspective that is involved in forcing people to drill uneconomic holes. I think it is not necessary to go into that in any more detail. The third option that has emerged as the preferred position of the industry-again with the Democrats tagging along in support-is the option of dry hole bidding or what in less suggestive terminology might be referred to as guaranteed activity permit systems. The essence of that is that companies bid on the basis of not the full program they might anticipate but a minimum program in which they identify the number of holes they are prepared to drill and find dry before, in effect, abandoning the prospect. There are advantages in this system as compared with the basic work program system because it is readily and easily enforced to the extent of that minimum commitment and it does not force uneconomic, irrational exploration to occur. The difficulty with dry hole bidding is that it does not help with the problem of initial selection. One loses one's capacity to discriminate between bids simply because, given the very nature of this bidding system, the bids will come in almost identically, with almost everyone nominating exactly the same minimum drilling program. The only way one can then move to distinguish and pick and choose between the bids is by adding a series of additional criteria. A number of those additional criteria that can be added in order to enable one to make the selection after the initial dry hole bids have come in identically are technical and objective. Some of them have been mentioned by Senator Evans in the debate. But the extent that they are technical and objective criteria-for example, the amount of Australian content in the drilling packages companies are prepared to offer-one will still have problems of discrimination because most bidders will satisfy readily enough those hurdle requirements. What one is left with ultimately-this has been the experience in the United Kingdom, where this system has tended to operate for North Sea acreage allocation-is the necessity to have some very broad discretionary criteria up the Government's sleeve in order to make the final decision between company A, company B and company C which are bidding the same number of holes, the same minimum work program, and which are satisfying to the same extent the objective technical criteria. In the United Kingdom that residual discretionary criterion is extraordinarily open-ended. It is in terms of the contribution the bidders are thought likely to make to the overall economy of the United Kingdom. I simply make the point-I have made it with quite a lot of vigour to the Democrats and the industry-that it is simply not appropriate in the Australian system, and with the way in which parliaments have reacted to governments, for governments to be given extraordinarily wide discretions to pick and choose between applicants for potentially very lucrative returns. It is at odds with the very kinds of principles the Australian Democrats have constantly espoused through Senator Haines and others in the Senate Standing Committee for the Scrutiny of Bills. It is just at odds with the notion that legislation should not vest in government open-ended discretions to make decisions of this kind. I can make that point only so often. I think perhaps the best way of getting it on the record again without going on too long and occupying the time of the Senate is to seek leave to incorporate in Hansard the letter of the Australian Petroleum Exploration Association of 29 April which was sent to me and which I think may have already been incorporated in Senator Jack Evans's speech. More particularly, I seek leave to incorporate my reply of 7 May which sets out in some considerable detail the Government's reaction not only to the performance bonds system and other proposals that are made but particularly to the dry hole bidding proposal. Leave granted. The documents read as follows- Dear Mr Ives PETROLEUM (SUBMERGED LANDS) CASH BIDDING) AMENDMENT BILL 1985 Following the discussions between the Department and the Association on 21 April as well as our subsequent contact by telephone and telex, APEA Council has again discussed the offshore administration issue in detail. The Council wishes to re-iterate at the outset its belief that an effective, rigorously enforced form of work programme bidding is in the best interests of petroleum exploration in Australia. The Government has emphasized that it sees the key issue in 'highly prospective' permit areas as being the selection of a successful applicant in a highly competitive situation. The other political view is that enforcement of commitments made by operators to win permits is the major issue. The Association believes that latter point has more validity than the selection issue which, APEA asserts again, is capable of being handled adequately under the existing legislation. The Association wishes to draw to the attention of all parties that the Petroleum (Submerged Lands) Act was amended last year to significantly strengthen administration and an insufficient period has elapsed to evaluate its effect on the award or administration of permits. However, given that the Government appears to be determined not to use the existing P(SL)A system in the Ashmore and Cartier Island Adjacent Territory, the Association suggests the following approach be considered: 1. The present cash bidding Bill be withdrawn and the Government pursue the necessary amendments to existing legislation to permit it to- (a) Declare 'guaranteed activity permits' where successful applicants will be required to guarantee their initial work programmes for the first two or three years of the life of a permit on a dry-hole, trouble-free basis; (b) Institute a review system as practised in the North Sea by the UK Government to short-list applicants for these specially-designated permits and subject them to a detailed technical review on a range of criteria which will establish the optimum application. 2. Under the 'guaranteed activity' system the successful applicant to be penalized for non-compliance with programme commitment by having to pay to the Government a sum equivalent to the difference between work carried out and work committed on award of the acreage. Capacity to meet such a financial commitment should be one criterion of consideration of a company or joint venture for short-listing for application review. 3. The System could be structured to allow further for subsequent years' work to be similarly committed on a year-by-year basis. 4. It is necessary for some Government discretionary power to be applicable as to timing where force majeure, unavailability of contractors or equipment, or exploration disasters interfere with timely fulfilment of a commitment. 5. The successful work programme and the financial commitment should be matters of public record. 6. Except for the 'guaranteed activity permits' the Act should remain in force in its present form. The Association wishes to make clear its continuing firm opposition to the Government's cash bidding proposals. APEA Council requests an early opportunity to discuss further the suggestions contained in this letter with the Government. Yours sincerely KEITH ORCHISON Executive director Dear Mr Fitzgerald, PETROLEUM (SUBMERGED LANDS) (CASH BIDDING) AMENDMENT BILL 1985 I appreciate the opportunities we have had to discuss your Association's objections to the Government's cash bidding proposal. As I indicated in my speech to Parliament introducing the cash bidding Bill and at our meeting on the matter, the Government's objectives in introducing cash bidding are: (i) to allow explorers to determine and carry out the most economically efficient exploration strategy in the light of the commercial realities of the day, free from unnecessary Government regulation; (ii) to avoid the significant shortcomings of the work program system as a selection mechanism which arise when competition for permits is high; and (iii) to collect for the community a rent associated with award of the exclusive rights to explore, the amount of which is determined by the applicants. The Government has not set out to introduce this system of awarding exploration permits with a view to progressively applying it to all offshore areas: our intention is to apply it only to those areas which would be generally acknowledged as highly prospective. Nor has raising revenue been a significant consideration. As I pointed out in my speech to the APEA Conference earlier this year, if revenue was of prime importance the Government would have chosen a very different formulation of the cash bidding system. During discussions with myself and my Department, and in subsequent correspondence, you have identified possible alternative arrangements which address only some of the objectives outlined above. You will recall this was my principal difficulty with the proposed work performance bond system and I am afraid that it remains my difficulty with the guaranteed activity system you propose in your letter of 29 April. Difficulties with Performance Bonds Further refinement of the work performance bond proposal has made it clear that, once steps are taken in order to meet the Government's first objective stated above (i.e. to allow the work program to be governed by considerations of economic rationality), the system's inherent integrity and credibility-and its utility as a selection mechanism-will inevitably be compromised. The difficulty in administering such a system arises once the obvious prospects in a permit area prove to be unsuccessful. A performance bond system requiring, say, bank guarantees of around 15 per cent of the value of the work program commitment to be lodged against satisfactory completion of 75 per cent of the work program in fact concedes that a substantial part of the original work program will not be undertaken. In highly competitive areas, the remaining 25 per cent of the work program could involve several wells and many millions of dollars. Clearly, such a system invites applicants to inflate their work program bids. Other difficulties with the work performance bond system were also noted by some of the smaller exploration companies with limited assets or cash flow in Australia. They included difficulties in raising and maintaining large bank guarantees that would clearly tie up vital capital. Unlike a cash bid, which is a sunk cost and which does not affect the future cost of exploration, a bank guarantee involves interest payments which are ongoing and will influence future decisions on exploration. We note further that performance bonds have been seen by smaller companies as conferring advantages on the large exploration companies, who-unlike their smaller brethren-would not be likely to be required to actually lodge funds to obtain a bank guarantee. I can well understand, in the light of considerations such as these, that your Association should now have moved away from its earlier tentatively expressed support for a work performance bond system. Difficulties with a ''Guaranteed Activity'' Permit System The system of awarding permits which you now propose in your letter of 19 April would undoubtedly be more rational, in the sense that it would be based on a dry-hole work program for the first two or three permit years, followed presumably by negotiated work commitments on a year-by-year basis. Since the initial commitment is in effect the absolute minimum needed to explore the area in question, it is unlikely that many bona fide permittees would fail to comply with the work requirements. I acknowledge, generally, that this approach certainly avoids the dilemma of trying to maintain the credibility of a permit award system without requiring uneconomic activity to be carried out in order to maintain title over the area. But there are, nonetheless, a number of difficulties with the proposed system which make it ultimately much less attractive than the cash bidding system proposed by the Government. The most fundamental arise from the fact that any dry-hole bidding system, such as that proposed, is unlikely in itself to constitute an effective selection mechanism-since bids of this kind are likely to be almost identical in character-unless accompanied by unacceptably wide discretions vested in Government decision- makers. You acknowledge the need for a supplementary discretionary procedure by proposing that the Government should ''institute a review system as practised in the North Sea by the UK Government''. But on the basis of our enquiries, I do not believe that application of the UK practices in the Australian context are as straight forward (or would be as acceptable to the Parliament) as you infer. I am advised that under the UK system, work program commitments only represent an agreed, achievable, program of work which excludes unrealistic proposals designed simply to attempt to win the licence. They are by no means the most important consideration in the selection of a successful bidder. In each UK North Sea licencing round, a range of extraordinarily diverse selection criteria apply, and the UK Minister exercises almost open-ended discretion in awarding permits based on these criteria (see, for example the most recent set of selection criteria at Attachment A). While the discretionary criteria involved may have some superficial attractions, there are at least four serious practical difficulties in their application in Australia: (i) There would be obvious difficulties for the Commonwealth and the States/NT in reaching agreement on the criteria to apply in relation to each area and in the relative weighting to be given to each of the criteria. (ii) Administrative law in Australia has developed considerably from that applying in the UK, particularly in relation to review of discretionary decisions. The rigidities imposed by the Administrative Decision (Judicial Review) Act and the Administrative Appeals Tribunal Act-accepted as desirable in confining otherwise free-ranging official discretions-do not encourage the adoption of a highly discretionary system along the lines of the UK system. (iii) The adoption of such a system in Australia will be at odds with the view taken by the Commonwealth Parliament on the inclusion of highly discretionary provisions in legislation. As you will be aware, the Senate Standing Committees on both Regulations and Ordinances and the Scrutiny of Bills report adversely on legislation or regulations which makes rights, liberties and/or obligations unduly dependent upon insufficiently defined administrative powers or dependent upon non-reviewable administrative decisions. I do not believe it would be possible to justify the adoption of such a highly discretionary system in a way which would be acceptable to the Parliament. (iv) A highly discretionary system would seem to be a disincentive to those potential investors, not presently involved in Australian petroleum exploration, who have indicated a willingness to participate in a cash bidding round, where familiarity with the local political and administrative systems is not a practical prerequisite. Discussions with companies not presently exploring in Australia suggests that they are attracted by the prospect of a system where there are few advantages to be gained by ''knowing-the-ropes''. In the absence of such a discretionary system for awarding exploration permits in highly competitive areas, I do not believe a ''guaranteed activity'' permit system could work any more efficiently than the existing working program bidding system. In fact, it is likely to involve considerably more administrative work than the current system and is likely to add to the complexity of that work. Difficulties with Proposals to Strengthen the Administration of the Work Program Bidding System A recurring theme in the discussions that have taken place on the cash bidding system is that there is room for improvement in the particular administration of the present work program bidding system. But quite apart from the difficulties, from the point of view of economic rationality, that flow from a work program system that is too rigorously and insensitively enforced, it should be said that in recent years a more stringent approach to administration of the existing provisions of the legislation has in fact been undertaken. This has involved tougher criteria for work program variations, early cancellation of permits where commitments have not been met and tougher negotiation on proposed work program commitments. Over the past two years, 13 exploration permits were cancelled for non-compliance with work conditions and a further 25 permits surrendered by permittees not willing to carry out further work in the areas. I believe an even more stringent approach to permit administration would not be conducive to the maintenance of ongoing exploration in Australia's offshore areas, nor would it be consistent with the economically rational approach industry is suggesting we pursue. Your Association has also suggested that the Petroleum (Submerged Lands) Act was amended last year to significantly strengthen administration and that an insufficient period has elapsed to evaluate its effect on the award or administration of permits. I have difficulty in understanding the significance of this proposal as the only amendments which are relevant to our current discussions are of a purely drafting nature and have no bearing on the stringency of permit administration. To sum up, I believe that neither the work performance bond system, nor the ''guaranteed activity'' system, not any other variation on the present system of work program bidding, satisfies the Government's objectives in introducing the cash bidding legislation. The Government has closely, carefully and in an open-minded way examined all the alternatives to cash bidding, and the views expressed both publicly and privately about cash bidding. We are convinced that cash bidding is the most efficient means of awarding exploration rights in the circumstances identified by the Government and is the only system which allows companies to pursue the most commercially attractive exploration strategies free from unnecessary regulation. Yours sincerely, GARETH EVANS Senator GARETH EVANS —I draw towards the end of my remarks by saying that the Government's clear preference remains for cash bidding because we believe, first, that it will avoid the significant shortcomings of the work program system as a selection mechanism which arise when competition for permits is high and, secondly, that it will allow explorers to determine and carry out the most economically efficient exploration strategy in the light of the commercial realities of the day free from unnecessary government regulation. In the event that this Bill is defeated, as has been clearly enough foreshadowed by the Opposition and the Australian Democrats together, it will be a matter of the Government setting up, or shoring up, the selection system as best it can. In that respect, as I have said to the Democrats and the industry, I will certainly give consideration to at least some of the alternative mechanisms that have been floated during the debate and the consultative process. There is something to be said for the dry hole bidding system, but how on earth we make it work consistently with the opposition that this Parliament has traditionally had to open-ended discretionary criteria remains to be seen, I suppose, on another occasion. It will also be a matter of the Government having a closer look not only at the selection mechanism but also at the financial implications of a decision not to support this legislation. The proposals to introduce cash bidding in highly prospective areas have been misrepresented on a number of occasions as an attempt to obtain additional revenue for the Government. Throughout the debate, as I said earlier in the Parliament and in the public arena, I have made it clear that additional revenue was not our primary objective. Had it been our primary objective, we would have proposed a quite different formulation of the cash bidding model. For example, we may have included provision for reserve prices, which is a feature of the United States model, and allowed certainly deductibility of cash bids for resources rent tax purposes which would have had the effect of inflating them beyond that which will be the case where they are, as now, non-deductible. We would also no doubt have made permits for larger areas than they are at the moment. We would perhaps have made unlimited renewal rights part of the package. We would have done nothing to discourage speculators bidding for these areas. We would not have been talking in terms of the bidders having to satisfy threshold, hurdle requirements of technical competence and capacity actually to get out there and drill. Had we gone down any of these tracks, that could have been expected to very substantially increase the Commonwealth's revenue from cash bidding and would have been demonstrative of the claim that we were in fact in this for the business of revenue raising. It is, however, the case that, even though cash bidding has never had revenue as a primary objective, some revenue, it has been acknowledged always, would accrue from the cash bidding proposals, and that revenue has been taken into account in the Government's deliberations on the 1985-86 Budget. If the cash bidding legislation is rejected the Government will be forced to look to alternative measures to make up the expected revenue shortfall. Two possible measures in this respect to which the Government is giving consideration are retention lease premiums and signature bonuses for bidders in highly prospective areas. A requirement for companies to pay a premium of, say, $10m for the award of a retention lease would recognise that companies awarded a lease will retain title over a valuable community asset for an extended period. Under the draft legislation currently before the House of Representatives retention leases may be granted over currently non-commercial discoveries which are likely to be commercially viable within 15 years. The requirement for the payment of a premium would ensure that the community receives part of its share of economic rent from the resource at an early stage. Furthermore, introduction of a premium would discourage permittees from tying up extensive amounts of prospective acreage without ongoing exploration programs. Permittees not wishing to take up a retention lease could retain title over a discovery provided a meaningful exploration work program were undertaken during each term of the permit. The introduction of a system of fixed signature bonuses such as used overseas in some United Kingdom North Sea licensing rounds and in the China off-shore area could also be considered. The combination of a fixed signature bonus of, say, $1m for each applicant for a highly prospective area combined with a rigorous work program bidding system would help to eliminate excessive work program bids. Such an approach had the support last year of the Broken Hill Proprietary Co. Ltd as one possible alternative to cash bidding. Clearly these measures do not represent our preferred position. However, one or other or both of them would meet some of our revenue objectives which, I repeat, are and always have been very much secondary objectives in the context of this measure. Our clear preference remains to proceed with the cash bidding amendments as set out in the draft Bill without going down any of those other tracks. I hope that in the final analysis, notwithstanding what has been said in the course of the second reading debate, there may be some last minute reconsideration of the position adopted by the Opposition and the Australian Democrats and that this legislation, which has been acknowledged to be perfectly rational and perfectly consistent with good petroleum industry exploration practice in many other parts of the world-answers to such criticisms as there have been systematically placed on the record-will command the support of the Senate. Question put: That the Bill be now read a second time. The Senate divided. (The President-Senator the Hon.Douglas McClelland) Ayes . . . . . . . . . . . 31 Noes . . . . . . . . . . . 37 —— Majority . . . . . . . . . 6 —— Aulich, T. Jones, G. N. Bolkus, N. McClelland, DouglasChilds, B. K. McIntosh, G. D. (Teller)Coates, J. McKiernan, J. P. Colston, M. A. Maguire, G. R. Cook, P. F. S. Primmer, C. G. Cooney, B. Ray, RobertCrowley, R. A. Reynolds, M. Devlin, R. Richardson, G. F. Elstob, R. C. Robertson, E. A. Evans, Gareth Ryan, S. M. Foreman, D. J. Sibraa, K. W. Georges, G. Tate, M. C. Giles, P. J. Walsh, P. A. Grimes, D. J. Zakharov, A. O. Hearn, J. M. Archer, B. R. MacGibbon, D. J. Baume, Peter Macklin, M. J. Boswell, R. L. D. Mason, C. V. J. Brownhill, D. G. C. Messner, A. J. Carrick, Sir John Missen, A. J. Chipp, D. L. Parer, W. R. Collard, S. J. Puplick, C. J. G. Crichton-Browne, N. A. Reid, M. E. Durack, P. D. Scott, D. B. Evans, Jack Sheil, G. (Teller)Guilfoyle, Dame Margaret Short, J. R. Haines, J. Teague, B. C. Hamer, D. J. Townley, M. Harradine, B. Vanstone, A. E. Hill, R. Vigor, D. B. Jessop, D. S. Walters, M. S. Kilgariff, B. F. Watson, J. O. W. Lajovic, M. E. Withers, R. G. Lewis, A. W. R. Coleman, R. N. Bjelke-Petersen, F. I. Gietzelt, A. T. Knowles, S. C. Black, J. R. Rae, PeterButton, J. N. Chaney, F. M. Question so resolved in the negative. Debate resumed from 10 May, on motion by Senator Ryan: That the Bill be now read a second time. Senator LEWIS(Victoria)(10.59) —We are debating the Housing Loans Insurance Amendment Bill 1985. The Housing Loans Insurance Corporation established by Liberal-Country Party Government legislation in 1964 commenced operation in 1965. At the time it was most worthy legislation which established a marvellous organisation. I think that it was a great pity that at the time we did not put a sunset clause into the Bill. Of course, in those days sunset clauses were unheard of; they are an invention of modern politics. We were very proud of the establishment of this body in 1964-65, but it is a great pity that the legislation did not contain a sunset clause. It is certainly acceptable and is a good thing for governments to establish business organisations in the community when there is a need which is not being fulfilled by private enterprise. In the early 1960s, many Liberals who were involved in real estate, legal games and mortgage financing could see a desperate need for assistance to private owners to enable them to raise money on the security of their homes far in excess of what was currently available on ordinary lending terms. I think that at that time solicitors were restricted from lending more than 60 per cent of the value of the property from their trust accounts and there were similar limitations on lending institutions. Such a high security was totally unnecessary because in Australia there are very few losses in regard to mortgages on residential properties. Clearly, a lender can lend up to 95 per cent of the security and not lose funds if the mortgagee fails to meet the payments because when the property goes back on the market it has maintained its monetary value and, therefore, the mortgage is adequately secured. The most important thing to do is to make sure that the mortgagee has the ability to meet the repayments. That provision was contained in the original legislation to ensure two things: First, that the loans were made at relatively low interest rates; and secondly that the loans were for very high shares of the value of the property. Up to 95 per cent of the value of the property could be borrowed and the mortgage was insured. An investigation was carried out to make sure that the mortgagee had the ability to meet the commitments. At that time we not only introduced the legislation to establish this statutory authority to enter into this new field but we also encouraged the Mortgage Guaranty Insurance Corporation of America to establish a private enterprise body operating in the same field. In fact, the private enterprise body, MGIC, issued the first policy in Australia on 20 July 1965. I understand that there was some competition between MGIC Australia and the HLIC as to which would be the first body to issue a policy in 1965. In introducing this legislation on 12 November 1964, Mr Bury, who was the Minister for Housing at the time, said: . . . aim to assist people to borrow, by means of a single loan secured by a first mortgage, the difference between available personal savings and the cost of a home suited to their requirements . . . It is our hope and intention that this scheme will progressively remove the present need for many creditworthy borrowers to obtain a second mortgage loan. In those days I was a lawyer in private practice. I can remember the great difficulties we had in trying to arrange second mortgage loans to enable people who were clearly creditworthy to get enough finance to purchase a home. There was no difficulty at all in raising the first mortgage money. Up to 60 per cent-the figure was ultimately extended to 66 per cent-of the value of the property could be borrowed. Let us imagine being able to buy a property for, say, $60,000. The first mortgagor would lend, say, $40,000. The first mortgagor, lending only $40,000 on such a property, was in an enormously secure position with absolutely no risks at all. In those days a 7 per cent interest rate was in operation which was probably very close to a real interest rate of 7 per cent per annum. The first mortgagor was getting a good solid 7 per cent per annum on such a highly secured loan. The difficulty was in raising the balance. Taking an imaginary figure of $60,000-it would be much higher now than it was in the 1960s-a purchaser would have to raise an additional $20,000. Perhaps the purchaser had, say, $10,000. He would then have to raise another $10,000 on second mortgage. At that stage very high rates of interest were being imposed because of the added risk to the lender. Clearly, the borrower was being poorly treated in this area. The Housing Loans Insurance Corporation and the Mortgage Guaranty Insurance Corporation overcame those problems, as Mr Bury had predicted. I would say that the growth of credit unions and building societies that has occurred since those days is a clear indication of the success of the policy. Having got this policy on the road, we need to look carefully at the role of government. The role of government is to govern. It is not to run businesses, even when those businesses are being operated successfully. Governments raise their revenue from taxes, not from profits. The Housing Loans Insurance Corporation is currently successful and is making substantial profits. Of course, the interesting question is: Why is it making substantial profits? Partly, it may be because it is very well managed. I am not attempting in any way to criticise its management. It is also profitable because it is seen to be government backed, because it is the government's body. That fact may put it into a position in which it is able to compete unfairly with private enterprise. I am not referring to MGIC when I say I 'compete unfairly with private enterprise'. I am referring to the possibility that other insurance bodies could enter into this field but which are not prepared to do so because of the difficulty which they would have in competing against the HLIC. The reason for the establishment of the Housing Loans Insurance Corporation has well passed. As I said, it is a pity that there was not a sunset clause in our original Bill. Indeed, the growth of the whole industry suggests that private enterprise could run this body equally as well, that there may even be wider diversity and that competition may very well lead to lower interest rates. As I have said, the reason for the sort of two-airline policy which we adopted in 1965 in relation to this matter has now passed. I say 'the two-airline policy' because it was a bit like the situation with Trans Australia Airlines and what was probably then Australian National Airways. In those days the Government could see the merit of having a government body and a private enterprise body and so when it moved into housing loans insurance it adopted that sort of policy and established a government authority in competition with private enterprise. It is my belief that the time has come for that type of policy to pass by and that this organisation should be privatised. How should it be privatised? It is one of those bodies which could well have been included in last night's mini-Budget announcements. Clearly, the body could be sold. I understand that the MGIC company currently is two-thirds owned by the AMP Society. I do not doubt that some bodies, such as the AMP Society, would see the merits in purchasing an organisation and structure as the HLIC which would maintain, and perhaps improve, its current enterprise. HLIC could be sold to such a company. I make a plea for the public float of such a body. The small shareholders of Australia should be given the opportunity to take up shares in bodies such as this. I make a genuine plea to the Government to do something to encourage small investors to invest in Australian corporations. I have been trying to achieve this result ever since I became a senator over 8 1/2 years ago. In the last Budget introduced by the Liberal-National Party we succeeded because it contained a provision that the first $1,000 of income from dividends be tax free in the hands of the recipients. Let me explain that. Two lots of taxes are paid on dividends from a public or private company. The company pays tax on the profits that it has earnt. It then distributes its surplus profits to its shareholders and when the shareholders get that income they pay tax on it. What has been the result to this community? The result has been that the small investor has gone out of holding shares in this country as if they were too hot to handle. Large institutions have invested in Australian public companies and taken over the role of the small investor. Those large institutions have been instrumental in affecting the direction of the policy of the public companies. So instead of declaring taxable dividends they are involved in distributing their profits to the shareholders in some tax free form, some capital gains form. Instead of the Government rushing around trying to impose some capital gains tax on people in order to cope with the problem, why does it not see where the problem rests in the first place and say: 'The Liberal-National Party did have a good idea when it introduced this provision in its 1982 Budget'? This Government had a knee-jerk reaction and said: 'We have got to cut out this because it is terrible to think that small investors should get the first $1,000 of their dividend income free of income tax'. The Government adopted the knee-jerk reaction and chopped it out in its first Budget. If the Government, or some members of the Government, could see that the privatisation that it started last night was a good idea, it may very well be that it could see that this was a good idea. Enormous gains can be made by encouraging small Australian investors to move back into the share market. If they got the first part of their dividends tax free, even if the Government limited it to only the first $500, at least it would encourage some people to say: 'I can earn $500 tax free from dividends because company tax has already been paid on them'. That would encourage some small Australian investors to go back into the share market and would also encourage our Australian companies to start declaring dividends to investors instead of giving them their profits by way of some capital gain. If the Government were to take that step-that is what I hope my Party will do when it gets back into government-there could be a public float of the Housing Loans Insurance Corporation and its shares could be bought by small shareholders, not just large shareholders. Thus we would not end up with the shareholders in our public companies in Australia getting bigger and bigger. We would not have all the insurance companies and banks being the investors, and the small shareholders having to get out of that area because of this taxation policy. In my view, the way to privatise the Housing Loans Insurance Corporation would be by a public float. What is the Government proposing? Contrary to what I have put, the Government is proposing a four directional expansion of the Housing Loans Insurance Corporation which might-I do not say it will-ultimately result in the only private enterprise organisation in this field getting out because the competition from the Government backed statutory authority would become such that it might very well be that private enterprise would not be able to cope. That is what the Government is proposing. The measure was introduced by the Minister for Housing and Construction (Mr West), who everyone knows is a left wing member of the Government's Cabinet. Clearly, he is a dedicated socialist who sees that the only future in Australia is in government bodies, not private enterprise. Clearly the whole object of this legislation is to expand government enterprise and, where possible, to destroy private enterprise. That is why the Liberal and National parties will oppose the second reading of this Bill. We have a firm and unequivocal commitment to smaller government and lower taxation, and that is what should happen here. This body should be sold off to private enterprise and private enterprise should be encouraged to develop competition. Senator Grimes —Because it is successful. Senator LEWIS —The Minister is calling out: 'Because it is successful'. I have already explained that that is not so. The HLIC may very well be successful because it is government backed; it may very well be successful because people invest in it because the Government will step in to aid that body. It may very well be that the reason it is so successful-I am not arguing against its management; the management may be excellent-is that it is government owned and that is keeping away any competition. If our opposition to this proposal is not carried by the Senate-in other words, if the Australian Democrats join with the Government to reject our proposal on this Bill-two other matters will come up for consideration. The first is in relation to clause 8. What has happened is that the Chairman, Mr J. M. B. Fitzpatrick, is not only the Chairman but also the General Manager. My information is that he has been very successful. He is to be highly praised for his actions on behalf of the Housing Loans Insurance Corporation. His term of office is about to expire. It is due to expire on 18 June this year and I understand that he will retire and not be reappointed. It seems to those of us on this side of the chamber who have given consideration to this matter that this will provide an excellent opportunity to apply the general principles which are applied in regard to statutory authorities, that is, that the chairman of the board and the executive officer should not be one and the same person. I shall move an amendment to that effect in due course. The other matter is in relation to clause 9 which thoroughly expands the activities of this institution. The Opposition will oppose that clause. Senator HAINES(South Australia)(11.20) —Anybody who was listening to Senator Lewis could well be excused for believing that the contents of the Housing Loans Insurance Amendment Bill 1985 were primarily concerned with an ideological argument about whether governments have any right to enter into this field and whether the Housing Loans Insurance Corporation, like a lot of others, ought to be sold off in some way to private enterprise. The implication has been that this amending Bill is setting up the HLIC in direct, aggressive and rather damaging competition with a flailing and failing private enterprise sector. This, of course, is not the case. The main purpose of this Bill is to expand the role of an extremely successful government corporation, namely, the Housing Loans Insurance Corporation. It does it by way of four major initiatives which extend the charter of the Corporation and extend its activities in the market-place-not, I would suggest, with any ulterior motive of destroying the only private enterprise area set up in competition with it but in fact to assist that organisation in its activities. The main initiative relates to the secondary mortgage market and will impinge quite favourably on the access of Australian families to housing funds. This particular initiative, contrary to implications that were made in Senator Lewis's speech, has the unqualified support of the private sector-support that it surely would not have if the private sector thought that the purpose of this legislation, or indeed the effect of this legislation, was to make the private sector go under. Not only was a Press release issued by the Mortgage Bankers Association of Australia praising the Government's amendment to the Housing Loans Insurance Act-the organisation further welcomed this initiative at the launch of the Aussie Mac certificates in Victoria recently-but the President of the MBAA, Mr John Mark, took the time and trouble earlier this week to contact me because he did not know whether the Australian Democrats were likely to support the Liberal opposition to this legislation. Mr Mark told me that his organisation approved of the Government's actions and wanted as much support for it in the Senate as could be given. That sort of comment is not likely to come from a man representing an organisation which fears for its very existence or which fears that there will be some sort of deleterious effect from this particular piece of legislation. Mr Mark pointed out, among other things, that while private enterprise is sometimes critical, and rightly so, of governments for allowing or encouraging government bodies and corporations of one sort or another to compete unfairly in the market-place with private enterprise there was no quarrel at all in this case because the Housing Loans Insurance Corporation obeys, as he put it, the same rules as everyone else. It is not, as Senator Lewis implied, operating unfairly. The HLIC pays tax and, as Senator Lewis commented, that is one important way in which governments raise revenue. It pays all other required statutory charges. When it makes a profit, Consolidated Revenue benefits. In other words, the Housing Loans Insurance Corporation receives no special treatment at all and competes on an equal footing, as Mr Mark pointed out, with private enterprise in this case. Mr Mark went on to say that indeed we need a secondary mortgage market in Australia and that having the HLIC participating in insuring mortgage portfolios can only make it easier to shift them in the marketplace. Given that quite enthusiastic support from that Association, I cannot understand why the Opposition is not supporting the Bill. There is no objection to this Bill from private industry. There is no special treatment given to the Corporation, and by contributing to Consolidated Revenue through its profit-making and its payment of taxes and so on it must be assisting to keep the deficit to a minimum. This is something that the Opposition has been jumping up and down about for some considerable time, and yet here it is talking about a variety of ways of getting the HLIC out of the government sector, in which it is performing admirably, and into the private sector, where no advantage will accrue to the housing industry, to the mortgage market, to government coffers, to employment or to anything else. I think it is important that we realise exactly what the Housing Loans Insurance Corporation is. Much has been made of the fact that it is a government business enterprise, but it is a business enterprise which is operating in an extremely important area; namely, insuring lenders-building societies, banks and so on-against loss on housing and building loans. Therefore, it is no surprise, I would have thought, that the Building Societies Association came out in enthusiastic support of this legislation. As I have said before, it is self-financing, it pays taxes and dividends to the Government, and in that regard it is in every way the equivalent of a private organisation. Furthermore, the insurance services provided by the Corporation have assisted marginal home buyers into home ownership because mortgage insurance is now accepted as a substitute for large deposits and short repayment terms. That can only assist people in need to purchase or build a home and therefore get a roof over their heads and own an appreciating asset. As Senator Lewis pointed out, the Corporation was established under a 1965 Act introduced by the Liberal Party, I believe, for this very purpose; that is, to assist in home ownership. It was amended in 1977 and, of course, if it had had the sunset clause that Senator Lewis suggested it should have, presumably it would not have been operating in 1977 and therefore the then Liberal Government would not have been in a position to amend the legislation to provide the HLIC with a commercial charter and thereby widen the range of loans that it could insure. When the Australian Labor Party came into Government in 1983 it further amended the Bill to empower the Corporation to insure loans for commercial buildings. It is not a very predatory Corporation. It does have a limit to the business that it can conduct and that business is limited to the insurance of loans permitted by the Housing Loans Insurance Act. The main part of its business is connected with loans for the purchase, construction or alteration of houses, including home units, town houses and the like for occupation by the owner, or for rental or sale. It is therefore of assistance to the housing industry quite directly. The HLIC competes with three private insurers-the Mortgage Guarantee Insurance Corporation of Australia Ltd, the Australian Mortgage Insurance Corporation Ltd and AFG Insurances Ltd. It currently holds some 60 per cent of the market for insurance of home ownership loans and around 20 per cent of the market for commercial loans. If those three other organisations had strong objections to it, I would have thought that they would have made their objections known. As I pointed out earlier, the HLIC has consistently returned an underwriting profit and has healthy net operating profit figures. Indeed, 1983-84 was an exceptionally successful year for the Corporation. Sixty-eight thousand housing loans were insured and the net profit after income tax-and it does pay income tax-was some $5.4m, up 16 per cent on 1982-83. It is working well, and it is working well in concert with private industry. The main purpose of this Bill and the part which has received the most marked support from industry is that relating to the HLIC's involvement in the secondary mortgage market. The secondary mortgage market is not something new, although up until now we have had only a slowly emerging secondary mortgage market in Australia. That embryonic market has been based mainly on transactions in mortgage-backed securities rather than in individual mortgages and has existed in Australia for some years. Mortgage-backed securities or mortgage certificates typically have been issued by mortgage broking firms and have been backed by single short term, interest only mortgages, which are frequently applied to finance rental investment dwellings or commercial property. I believe that they have been purchased mainly by individuals such as people who have just retired and by institutions such as superannuation funds. They were available in only a fairly limited way until quite recently when three State governments-the New South Wales, Victorian and Queensland governments-undertook initiatives designed to act as catalysts for growth in the market in mortgage-backed securities. Of course, if the Queensland Government has become involved in it, it cannot be seen in any way as some sort of socialist plot. I think it is important to remember that the aim of this legislation and of related State legislation is to assist home ownership and to assist the private organisations that already are operating in this area. I think it is important for us to realise that the Federal Government has a role in assisting this market to develop in a rational and orderly way and in ensuring that it has the highest possible standards. I believe and my Party certainly believes that the Corporation will make an important contribution to this role and will complement and support other initiatives already taken by State governments. The insurance cover to be provided by the Corporation will have a strict commercial basis, as has all its other insurance cover. It will relate back entirely to the performance of the underlying mortgages. The Corporation will also, I believe, provide timely payment cover to ensure that funds flow as scheduled to the investor from the underlying mortgages. It is not surprising, then, that the National President of the Mortgage Bankers Association of Australia, at the quarterly luncheon of the Association held recently in Victoria, said, in his introductory remarks prior to the guest speaker rising to speak, that the Association approved of this piece of legislation. Mr Mark, in a Press release put out on 10 April, said: . . . the impending legislation . . . will make the Housing Loans Insurance Corporation more diversified and flexible, with the ability to play a stronger role in the government's range of housing policies. It will also have the power to enter into contracts of insurance in respect of Secondary Mortgage Market securities issued by the State Governments and other mortgage market corporations and thus complement and support other initiatives such as the National Mortgage Market Corporation Limited. He pointed out, as I have today: The new insurance covers will be on a strict commercial basis and will relate back to the performance of the underlying mortgages. The M.B.A.A. considers the Federal Minister's announcement most timely in view of the first issue of 'Aussie Mac' certificates by the National Mortgage Market Corporation Limited. Congratulatory and commending comments came not just from that Association. The Australian Association of Permanent Building Societies also took the trouble to issue to the media, late in March, its comments on this initiative. The Press release stated: The permanent building society industry was delighted at the expanded role for the Housing Loans Insurance Corporation announced by the Minister for Housing and Construction . . . That comment was made by Mr Jim Larkey, Executive Director of the Association. The Press release continued: 'Changes to the HLIC's charter will permit societies to insure any loans secured by mortgage, including loans where the purpose of the loan is not related to the mortgage security. This initiative by the Commonwealth Government will ideally complement for building societies the wider lending powers provided by some State Governments and expected from others'. Mr Larkey also welcomed the expanded role for the HLIC in the secondary mortgage market. Mr Larkey said: The further involvement of the HLIC in the important but fledgling secondary mortgage market will contribute significantly to its acceptance and growth. One presumes that he was giving it the Good Housekeeping seal of approval. Given that the Housing Loans Insurance Corporation does not compete unfairly against private enterprise, notwithstanding comments to the contrary from a previous speaker, and given that the moves made in this Bill to expand its operations have received enthusiastic industry support, the Australian Democrats are happy to applaud the Government's moves, to support the second reading of this legislation and not to go along with the Liberal Opposition's privatisation mania and its other criticisms of the effect of this legislation. Senator Lewis mentioned at the end of his speech the amendment that the Opposition intends to move at the Committee stage. I received it shortly before the debate started and have not yet been in a position to talk to Mr Fitzpatrick who, I hear in comments around the chamber, seems to approve of it; but I point out to Senator Lewis that a consequential numbering amendment is required if this amendment is to be supported. It will be proposed in the amendment to omit sub-section (2) completely and to replace sub-section (4) with a new sub-section (4). After the omission of sub-section (2), only three sub-sections will remain. So, some attention needs to be paid to that minor change. In the interim, while other speakers are on their feet, I will investigate the effect of the amendment put forward by the Liberals, with a view to seeing whether we can support it. Senator ARCHER(Tasmania)(11.37) —I recall very well the establishment of the first Australian mortgage insurance scheme in 1965. I enjoyed very cordial arrangements in those early days with Mr Frank Blundell, who was then the Victorian Manager of the Housing Loans Insurance Corporation, and subsequently with Mr Jim Fitzpatrick. I would speak for thousands of people in saying how much I regret that Frank Blundell retired recently from the position of Deputy Chairman due to ill health. He was with the organisation from day one and made a very valuable contribution to it. I find it difficult to support the Housing Loans Insurance Amendment Bill, for the same reasons as Senator Lewis has given. I do not disagree that it will make the business of the Corporation a better business, but I am not sure that that is in the best interests of the country as a whole. I do not believe that this Corporation, as a government instrumentality, needs an extension. I might well have expected it to be one of the items on the list last night. I think that, had it been in the free market-place, it would have been a worthy participant and would have performed a very valuable function. I think we have to look at the fact, while the shopping list is being written and the tin is being passed around, that the value of such a move as a means of raising money would probably amount to $100m to $150m. The efficiency of the Housing Loans Insurance Corporation would not be impaired if it were, in fact, the Housing Loans Insurance Company. I was interested in the question of providing insurance for the secondary mortgage market. Inasmuch as such a move would facilitate the second mortgage market, I certainly support the principle. A fully operating second mortgage market would, in my opinion, be the next most valuable adjunct to the housing industry that we could have in Australia. It would be second only to mortgage insurance. I am surprised to see that clause 9 (c) of the Bill proposes to insert the following new sub-section: (3C) The Minister may, from time to time, by instrument in writing, direct the Corporation to enter, under sub-section (2), into contracts in respect of loans included in a class of loans specified in the direction, being loans- (a) made for purposes that accord with the policies of the Government of the Commonwealth in relation to housing; and (b) in respect of which the Corporation would not so enter into contracts in the ordinary course of business . . . There is no way in the world that I could support a clause that binds a trading corporation to take direction from the Minister, even if a saving clause ultimately appears. I find this proposal quite extraordinary. If the Government at any stage should see that it requires to prop up a scheme of any sort, such provision should be included in the Bill covering that scheme. It should not under any circumstances be obliquely covered in a piece of legislation of this nature. I find it quite exceptional and quite objectionable. I find it difficult to understand that the Australian Democrats are unable to pick that up and to see that it has many connotations that are unpleasant and unreasonable. As I have already stated, there has been nothing either before or since that has made so much difference to the housing market and home ownership in Australia as mortgage insurance. It came at a time when people were able to borrow only 50 to 60 per cent of the valuation of their house. The fact that the HLIC was able to accept mortgages for amounts of up to 90 per cent of the valuation made a tremendous difference to the market. It changed the whole Australian housing position and the benefits initially flowed through the market for a period of probably 10 or 12 years before reaching the hump. It provided many people with houses who would never otherwise have been able to obtain them. It created all sorts of ripples for quite a while in regard to housing costs and housing prices. It put up the price of houses and the price of land considerably. It also considerably increased the home ownership percentage in Australia. About 11 or 12 per cent more people were able to own homes as a result of mortgage insurance. I should also say that the entry of a private insurer into the market at the same time added competition, gave a comparison and increased the awareness of mortgage insurance and the part that it played not only in regard to the housing industry in Australia but home ownership generally. The main statistics of the HLIC are interesting. It has done a very good job. I would not like anybody in this place to assume that my objection to aspects of the Bill is any reflection on the operation of the HLIC. In the 19 years in which it has operated HLIC has insured about 640,000 loans covering about $16 billion. It has collected $56.5m in premiums and paid out about $24m in claims. It now has accumulated assets of $68m and has paid dividends amounting to $14.5m. The private insurers have also been excellent operators and the industry in Australia, in my opinion, is very fortunate to have such good representation. I first became involved in the housing market in 1947. There has certainly been a vast improvement since then. The features over that period have been built very largely around mortgage insurance. By following the market fluctuations it is easy to identify the economic ups and downs of the country. Apart from the early years of mortgage insurance, no other government policies have ever really made any significant changes to what the macro-economics of the country did anyway. All of the other schemes that have come and gone have never really affected the market in any appreciable way for very long. Usually new government schemes have tended to increase the price curve when prices were rising anyway. The cutting out of schemes or reducing them has accentuated the declines in the past, which is exactly what the adjustments to the first home owners scheme will do in the present. The position for mortgage insurers is not terribly good for the next year or two ahead because currently the housing situation is poised very lightly. It looks as though it could face a decline in many areas in 1986. All the signs are there. In 1984-85 there is a new housing estimate of 147,000. The figure for this year will include considerable borrowings in the future, in the next year or the year after. Prices in many areas-Canberra, in particular-have risen to the point at which buyers are developing a reaction against price. Real interest rates in Australia are the highest that they have ever been in Australia's peacetime history. Interest rates appear to have no alternative but to rise further. Deficits, et cetera, will create more competition for finds generally and housing funds in particular. The effects of devaluation have not yet shown up in new house prices, but they will do so. I think we can expect another increase in wages which will further increase housing costs. Very naturally, higher costs, less government assistance and higher monthly payments will turn the market. It just remains to be seen by how much. In the 20 years of the Housing Loans Insurance Corporation's existence, the biggest type of insurance, of course, has been inflation. We must not overlook the extent to which inflationary effects have saved losses by increased realisations on forced sales on the one hand and an increased ability to repay from higher wages on the other. But the number of people who have got into trouble has been fairly high. The economic circumstances have prevented this from showing up in the figures. Unfortunately, a majority of the cases of which I know that have resulted in sales and claims on mortgage insurance have been by people who are self-employed. It seems that their struggles have been far greater than the struggles of people who are receiving wages. The Minister for Housing and Construction (Mr West) has stated that the HLIC is to operate on a fully commercial basis, similar to the private sector. In view of that, there are two areas on which I would like some clarification. Firstly, as I recall it the Insurance Commissioner requires gearing of not more than 25 times the shareholders' funds plus reserves. I ask: Is that the level of funding being maintained by the HLIC? Secondly, the other matter which is not clear to me from the Bill is whether there is a similar requirement for the buying of reinsurance on commercial mortgage insurance as there is on residential cover. Perhaps the Minister for Education (Senator Ryan) in her summing up will clarify both of those issues. I have also contemplated the fact that Mr Fitzpatrick occupies the position of Chairman and Chief Executive of the HLIC. I regard this as being somewhat unusual for a government trading body. In view of his impending retirement, I suggest that the Government appoint an independent chairman, as is the case in other government instrumentalities. I have spoken with Mr Fitzpatrick, who also believes that the situation is unusual. I do not wish to have him believe that I am antagonistic towards his position or the way in which he has carried it out; nor do I wish it to be a reflection on whoever may be the heir apparent. However, I certainly feel that because of the nature of the business, the time it has run and the way in which it is run, it is something which has been overlooked by the Government at this time. Under the circumstances, I do not favour the extension of the powers to the HLIC which is proposed in this Bill. I support Senator Lewis's amendments. (Quorum formed) Senator RYAN(Australian Capital Territory-Minister for Education)(11.52) —in reply-I thank honourable senators for their contribution to the debate. I remind the Senate that the basic thrust of this legislation is to expand the operation of the Housing Loans Insurance Corporation. The Corporation will become more flexible and more responsible to its clients needs. The legislation will ensure that the Corporation keeps in line with developments in the nation's financial markets and it will give the Corporation a stronger role in the Government's overall housing policies. I point out to the Senate that the industry response to the Government's legislative proposal has been particularly pleasing. For example, the Executive Director of the Australian Association of Permanent Building Societies, Mr Jim Larkey, said that the industry was delighted at the expanded role for the Housing Loans Insurance Corporation and that the involvement of HLIC in the secondary mortgage market would contribute significantly to its acceptance and growth. The Mortgage Bankers Association of Australia also supports the legislation, saying that it is particularly timely in view of the first issue of Aussie Macs certificates by the National Mortgage Market Corporation Ltd. The HLIC has a good record of success. We believe that this will be a continuing record. I point out that 1983-84 was an exceptionally good year for the HLIC with 68,000 housing loans being insured and a net profit of $5.4m being recorded, which was a 16 per cent increase on 1982-83. Also, 1983-84 is likely to be even better. Payments by HLIC in respect of 1983-84 trading were: Income tax, $4.9m; dividend $2.5m; and special payment $0.4m. The Opposition parties have indicated that, if elected to government, they would consider the sale of HLIC. This is contrary to the views of industry and against the interests of the home buyer. The interest of all is best served by a vital and competitive mortgage insurance industry, which includes HLIC in open competition with private insurers. I place on record, too, the fact that the staff and board of HLIC deserve recognition of their success. Mr Frank Blundell, who retired recently as Deputy Chairman of HLIC, warrants special mention. He contributed to the success of HLIC over 20 years and is respected throughout the industry. A number of points were made by the Opposition in the course of the debate and I will respond briefly to the more significant of them. Senator Archer asked whether the HLIC is required to take out re-insurance cover on its commercial building loans as opposed to housing loans. I confirm the position announced in 1983, that HLIC will be expected to seek re-insurance cover in private for part of its business. Senator Archer also commented on the special interest clause. He said that he could not support a clause which enables a Minister to direct a trading organisation to pursue activities that it would not normally engage in, even with the proviso about tabling such directions in the House. I point out that to provide for the HLIC to offer insurance at the direction of the Minister for a limited number of projects that would contribute to the overall housing objective, but might otherwise fall outside normal criteria, is very well within the purpose of a body of this kind. The current situation is that HLIC must apply normal commercial judgments in its operations. It must deny mortgage insurance to persons and organisations whose proposals do not meet strict commercial standards. There is a precedent for this clause. The Export Finance and Insurance Corporation Act has a similar power of ministerial direction for contracts considered to be in the national interest. I remind the Senate that that provision was first introduced in 1961 by Sir John McEwen. Both provisions give the power of direction to the Minister in respect of contracts which the Corporation would not enter into in the ordinary course of business. This legislation requires consultation with the HLIC on the special interest provision. The point was made in the debate that the role of government is to govern and not to run business or to make a profit. In response to that, I point out that this Government has a commitment to great national institutions such as Qantas Airways Ltd, Trans Australia Airlines, the Commonwealth Bank and the HLIC. The whole concept of a successful public enterprise clashes with conservative ideology but it certainly very much in line with the policies and philosophies of our Government. It seems to me that the Opposition really cannot make up its mind about public enterprise: If it is successful, the Opposition wants it to be sold; if it is unsuccessful it still wants it to be sold. Senator Lewis —You are selling Belconnen. Poor old Belconnen. Senator RYAN —We are certainly not going to sell HLIC. I can give my views about the Belconnen Mall sale on another occasion. I think it would be a little irrelevant to introduce such a matter at this stage. However, the HLIC has been a success for its customers and for the Government. In 1983-84 it produced $7.8m of revenue for the Government. As I said, we expect a better year in 1984-85. I think the Corporation's successful performance is a justification for the expansion which this Bill provides. The Opposition seems to think that the Government's amendments will result in private enterprise being pushed out of the field. This will not be the case. I should remind Opposition senators that HLIC pays all normal commercial charges, taxes and dividends. This Bill includes a provision to introduce a new special payment which will put HLIC on an equal footing with the private mortgage insurers. This new payment relates to re-insurance costs and removes any possible claim that HLIC is in a position to push the private insurers out of the field. This Bill will not affect the capacity of private insurers to compete. In fact, quite the contrary is true. The Australian Democrats made a contribution to this debate. The Democrats have dissociated themselves from the Liberal Party's in-principle opposition to HLIC continuing in business and the Liberal Party's in-principle opposition to the Government's amendments. I believe that the Democrats' comments indicate that they can see that the HLIC is on the same footing as other operators in the industry. The Democrats are aware that important parts of the mortgage and finance industry strongly support the present amendments. They know that many people now in homes would not have been in homes if the HLIC had not been in operation. I thank Senator Haines, who unfortunately is not in the chamber at this stage, for her contribution to the debate and endorse her comments. Her comments, which were a realistic assessment of the value of the HLIC, contrast with the confused response of the Liberals. I shall make some further comments on behalf of the Government in response to the Opposition's proposed amendment, but it will be more appropriate to make them in the Committee stage. I ask the House to support the Bill. Question put: That the Bill be now read a second time. The Senate divided. (The President-Senator the Hon.Douglas McClelland) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 7 —— Aulich, T Jones, G. N. Bolkus, N. McClelland, DouglasChilds, B. K. McIntosh, G. D. (Teller). Chipp, D. L. McKiernan, J. P. Coates, J. Macklin, M. J. Colston, M. A. Maguire, G. R. Cook, P. F. S. Mason, C. V. J. Cooney, B. Primmer, C. G. Crowley, R. A. Ray, RobertDevlin, R. Reynolds, M. Elstob, R. C. Richardson, G. F. Evans, Gareth, Robertson, E. A. Evans, Jack Ryan, S. M. Foreman, D. J. Sibraa, K. W. Georges, G. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. Walsh, P. A. Hearn, J. M. Zakharov, A. O. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Boswell, R. L. D. Missen, A. J. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Collard, S. J. Scott, D. B. Crichton-Browne, N. A. Sheil, G. (Teller)Durack, P. D. Short, J. R. Guilfoyle, Dame Margaret Teague, B. C. Hamer, D. J. Townley, M. Hill, R. Vanstone, A. E. Jessop, D. S. Walters, M. S. Kilgariff, B. F. Watson, J. O. W. Lajovic, M. E. Withers, R. G. Lewis, A. W. R. Coleman, R. N. Bjelke-Petersen, F. I. Gietzelt, A. T. Knowles, S. C. Black, J. R. Rae, PeterButton, J. N. Reid, M. E. Grimes, D. J. Chaney, F. M. Question so resolved in the affirmative. Bill read a second time. Clauses 1 to 8-by leave-taken together, and agreed to. Proposed new clause 8A. Senator LEWIS(Victoria)(12.08) —I move: Page 4, after clause 8, insert the following clause: '8A. Section 15 of the principal Act is amended- (a) by omitting sub-section (2); and (b) by omitting sub-section (4) and substituting the following sub-section: ''(4) A person who holds the office of Chairman or Deputy Chairman of the Corporation shall not be the Managing Director or the Deputy Managing Director.''.'. Proposed new clause 8A proposes that a person who holds the office of Chairman or Deputy Chairman of the Housing Loans Insurance Corporation shall not be the Managing Director or the Deputy Managing Director. The first point I make clear is that this is in no way an attempt to be critical of the current Chairman, who holds the office of both Chairman and Managing Director. I understand from all around the chamber that Mr Fitzpatrick, the current Chairman of HLIC, deserves high praise for the way he has fulfilled both offices. He is about to retire from those offices and it seems appropriate at this stage that the HLIC adopt the more general practice. In fact, I think that this is the only government corporation where the Chairman can hold the offices of both chairman and managing director. As to the numbering of the proposed new clause, a matter raised by Senator Haines in her contribution to the second reading debate, the explanation is that section 15 of the principal Act is divided into four sub-sections. Sub-section (2) will be removed. The omission of that sub-section will leave a blank. Sub-section (3) will remain in existence. There is a substitute clause for sub-section (4). So, in effect, the existing sub-section (4) is deleted and a new clause put in. The new clause could go in as sub-section (2). But the fact is that there are literally thousands and thousands of omissions in the Federal Acts where sub-sections have been left out. It is not necessary to renumber the section but just simply to substitute sub-section (4) and leave out sub-section (2). Senator HAINES(South Australia)(12.11) —Before I came into this mad house I was a mathematician and perhaps that is why I notice these little things. I like numbers to be tidy and to follow consecutively and not leap about at the whim of politicians. Senator Lewis has made some fairly glowing remarks about the current Chairman of the Housing Loans Insurance Corporation. He seemed to be implying that the Chairman is about to leap off for good and all. I point out to Senator Lewis and Senator Archer that I understand that Mr Fitzpatrick has indicated to the Government that he is available for reappointment at the Government's discretion. Like, I am sure, Senator Lewis and Senator Archer, I certainly hope that the Government avails itself of his expertise and knowledge. He has done good work in the past for the Corporation. In principle I have to say that I think it is appropriate that dual positions not be held in the way they are currently being held by the Chairman and the Deputy Chairman of this Corporation as far as directorships and deputy directorships are concerned. However, I have to say that in view of a number of other considerations this is perhaps not quite the wisest time for us to be changing matters. To begin with, I understand that a White Paper is being written so that the Government can look at the whole policy on these sorts of positions in statutory authorities. I think it is a little premature at this stage to start amending the legislation when we have not seen what is in that White Paper. More particularly, in accepting this amendment we could cause tremendous housekeeping problems for the Corporation as a whole. We could well be leaving it effectively without a board for a while and thereby impeding its ability to get on with the job. I certainly would agree with the principle behind the action and will certainly look at it again after the White Paper is brought down and after the HLIC is out of this particularly delicate hiatus period. But I have to indicate to the Opposition that at the moment we are not inclined to support this amendment. Senator RYAN(Australian Capital Territory-Minister for Education)(12.14) —The Government does not accept the Opposition's amendment with regard to dividing the two roles of Chairman and Managing Director. Senator Lewis has moved the amendment on behalf of the Opposition but the Opposition has made no case for such a change. As Senator Haines has pointed out, the present arrangement has worked very satisfactorily. The Housing Loans Insurance Corporation is an increasing success and the chairmanship of Mr Fitzpatrick has been endorsed by several speakers throughout this debate. There is simply no immediate case for making the change that the Opposition has put forward. Perhaps we could engage in a discussion at a philosophical level about the most appropriate structure for statutory bodies of this kind. Again, as Senator Haines has pointed out, the Government is examining its general policy on the operation of statutory authorities, including business authorities such as the HLIC. I expect that that paper will include consideration of the most appropriate composition for boards of directors and the most appropriate role for a chief executive. But at this stage it would be quite premature to change the HLIC structure ahead of the completion of that review. Certainly those matters can be addressed at a later stage but they are not appropriately addressed now. I would also like to put on the record, in endorsement of Senator Haines's remarks, the fact that the present Chairman, who has been so successful, is not contemplating retirement at this stage. He has indicated to the Government his availability to continue in that position and the Government is currently considering this matter. We have a successful Corporation. We have a chief executive chairman arrangement which has been very successful. Mr Fitzpatrick is continuing in that position and, at this stage, there is no case for making changes. As Senator Haines has pointed out, to make premature changes could create problems for what has been a successful operation. We certainly do not want to do that. I ask the Opposition to reconsider its view and point out that the Government, supported by the Australian Democrats, will reject this amendment. Senator ARCHER(Tasmania)(12.16) —I am perfectly happy with the explanation we have had. I still disagree with the principle. But, as I said in the course of my remarks when the Minister for Education (Senator Ryan) was not in the chamber, the Housing Loans Insurance Corporation has operated very well since its formation because there has been such continuity and co-operation at all levels. Mr Fitzpatrick is one of the integral parts of that. However, he is approaching the end of his term and the position is to be filled again. While I certainly hope that he will be the successful filler of that position I believe that it is necessary that we continue to make the statement that, as a point of practice, it is not most desirable to have such positions filled by people with dual capacities. Senator Haines —I do not think anybody is disagreeing with the principle of that. Senator ARCHER —I thank Senator Haines very much. I thought, from Senator Ryan's point of view, that she was disagreeing with that. I do not intend to make a great issue of this matter but I think it is advisable that the Government take it on board. In the event of the reappointment of Mr Fitzpatrick to the dual position I think he should occupy that dual position only until such time as the results of the White Paper are available so that the matter can be reconsidered in those circumstances. Senator LEWIS(Victoria)(12.19) —I want to respond to some aspects of this matter. Firstly, I find it most surprising that the way the National Party discovers that the Government is about to bring down a White Paper in regard to statutory authorities and its views in regard to the options in relation to statutory authorities is in the course of a Committee debate on the Housing Loans Insurance Amendment Bill. I was a member of the Senate Standing Committee on Finance and Government Operations when it was involved in an enormously extensive investigation into statutory authorities of the Commonwealth. I think we produced seven reports in regard to that matter. The Minister for Education, Senator Ryan, might say that we have not argued this case. But if she were to bother to read some of those reports she would see quite clearly the views which the bipartisan Committee expressed in regard to statutory authorities. I agree totally with what Senator Archer has said. Apparently, Senator Haines, for the Australian Democrats, also agrees that it is not right that a chairman of a statutory authority should be the executive officer of the same body. Even if he is the most competent person in Australia to hold both those positions, the dictatorial nature of holding both positions in such an authority is frankly wrong. So although we will not go to a division on this matter, I certainly do not intend to withdraw the motion. Proposed new clause negatived. Clause 9 (Corporation to carry on certain insurance business). Senator LEWIS(Victoria)(12.20) —The Opposition is opposed to clause 9 which very substantially expands the operations of the Housing Loans Insurance Corporation. The Corporation, because it is government-backed, is able to operate unfairly in the private sector. I am not questioning that it has been managed efficiently in the past, but it has over $60m in investments. It is not responsible to any shareholders. I imagine that, had it been a public company, by now there would have had to have been a distribution of capital in some way to its shareholders, but because it is a government body it is able to maintain these investments. Certainly it is paying its fair share of taxes; no one is arguing that it is not paying all the outgoings which private enterprise would be required to pay, but it is able to maintain these profits. It has nearly $68m-worth of investments, yet the Government is talking about privatising some things like war service homes and the Belconnen Mall. If this organisation is not worth $100m plus its investments I should be surprised, so we are probably talking about an opportunity for the Government to capitalise about $168m to $170m and then to allow private enterprise to move into the area. It may very well be that the building societies support this extension, but that is because, as a result of this housing loans insurance organisation being in existence as a government-backed body, the premiums in housing insurance are artificially depressed. I know that some people say: 'That is a good thing. It is keeping down the premiums'. I can imagine hearing Senator Haines say: 'Yes, what a marvellous thing to keep down the premiums'. I see that Senator Walsh has come into the chamber. I am sure that he will understand, even if Senator Haines does not, that if, as a result of the Government being involved in private enterprise in this way, premiums are artificially suppressed-in other words, the market forces are not able to flow-something will erupt in some way. It is like trying to squeeze a sausage balloon; the air must be expanded to somewhere. Just precisely where that will be, I do not know; and I do not attempt to make any predictions. I merely say that, as a result of the Government remaining in this area, that squeeze is taking place and the air must escape somewhere. There will be some sort of explosion. Of course, the explosion could well be that private enterprise ends up withdrawing totally from housing loans as such. It is now proposed that this Government instrumentality be able to expand fourfold in effect and to move into other areas in relation to re-insurance in the private sector. The result of that will again be to involve some sort of artificial depressant in this area. The market forces will not be able to operate. There is no need for this body to move into this area. Re-insurance is taking place within the private sector, and I hope that it expands within the private sector because I see much merit in re-insurance. But I cannot see any merit in 1985 in this body now moving into that area. Finally, this clause which we are opposing contains a provision which will enable the Government to make a direction to the Housing Loans Insurance Corporation as to the nature and extent of contracts that it is able to enter into in this area. Clearly there is a first step towards the regulation and control of the insurance industry through this Housing Loans Insurance Amendment Bill. The Opposition will certainly be opposing clause 9. Senator HAINES(South Australia)(12.26) — The Opposition will not be getting the support of the Australian Democrats in its attempt to delete this clause from the Bill. For the reasons I indicated in my speech at the second reading stage, we do not share the privatisation mania of the Opposition. We believe that if a government corporation or other statutory authority is operating effectively, efficiently and, as in this case, at a profit, it ought to be let go, particularly if it is operating as fairly as possible with regard to private enterprise in the same area. That it has been doing this is reflected in the fact that Mr Mark, Mr Larkey and others from the Mortgage Bankers Association of Australia and from the Australian Association of Building Societies have all indicated very positively that they favour the initiatives contained in the legislation, including the expansion and enhancement of the Corporation's role in the insurance sector. I point out that part of clause 9 makes quite clear that the Government expects that the Corporation will ensure that a substantial part of its business relates to loans made for purposes of enabling persons to acquire or construct residential accommodation. That of course is the primary aim of the Housing Loans Insurance Act 1965 and subsequent amendments to it. It is the primary role of the Housing Loans Insurance Corporation to make sure that as many people as possible in as many ways as possible are able to acquire or construct residential accommodation. I am not in this place to impede home ownership in any way, shape or form; nor is the Party I represent. We will not be supporting the Liberals' amendment in this area. Senator ARCHER(Tasmania)(12.28) —For anybody who reads or listens to these debates I also would like to confirm that I am not here to impede the ownership of housing, if that was the inference that could be gained. There are a couple of points which I raised in the course of my speech at the second reading stage on which I would still like some more information. The first is the proportion of commercial re-insurance this organisation will be required to produce. The second is whether or not the 25 times gearing is to be maintained under this organisation. Also, we did not get any examples of the sorts of things likely to come under proposed new sub-section (3C) (b). I cannot really see how the whim of a Minister can be taken as being similar to what was referred to by the Minister as national interest with regard to the Australian Fishing Industry Council. I think there could be some considerable difference. I fail to see where national interest could be construed out of proposed new sub-section (3C) (b). Senator RYAN(Australian Capital Territory-Minister for Education)(12.30) —Briefly in response, the Government of course will persist with clause 9. The remarks made by Senator Lewis and Senator Archer are not supported by the industry. The industry does not believe that it is going to be pushed out by this. I do not think Senator Lewis's sausage balloon metaphor would persuade the industry to any other point of view. Clearly here is a support for this. There is a legal precedent in the Minister for Housing and Construction being able to give direction under certain circumstances. The Government already has made it quite clear that the special interest provision will be strictly limited in its use. It will be used only when proposals have particular importance in terms of the Government's housing policies and where mortgage insurance would not otherwise be provided because of the application of strict commercial principles. Examples of proposals that might be covered by special interest determination include housing in remote areas and multiple occupancies of developments, including communal housing. Therefore, we persist with clause 9. Senator ARCHER(Tasmania)(12.32) —I asked the Minister for Education (Senator Ryan) a couple of specific questions in regard to gearing and reinsurance. May I have the answers to those, please? Senator RYAN(Australian Capital Territory-Minister for Education)(12.32) —The Housing Loans Insurance Corporation is expected to seek reinsurance cover on the full portfolio of commercial and building loans. The Government will consider the HLIC's position in regard to gearing when the review currently under way looking at the regulation of the insurance industry is available to it. Senator ARCHER(Tasmania)(12.33) —Am I to understand that the Housing Loans Insurance Corporation is not subject to gearing at present and is not in the same position as required by the Insurance Commissioner of other private insurers? Senator RYAN(Australian Capital Territory-Minister for Education)(12.33) —The Housing Loans Insurance Corporation is not subject to the Insurance Act in this respect but generally complies. I am advised that currently there are no gearing provisions that apply to private insurance. Proposals are being examined by the Insurance Commissioner, but at this stage there are none. Question put: That the clause be agreed to. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 7 —— Aulich, T. Jones, G. N. Bolkus, N McClelland, DouglasChilds, B. K. McIntosh, G. D. Chipp, D. L. McKiernan, J. P. Coates, J. Macklin, M. J. Colston, M. A. Maguire, G. R. Cook, P. F. S. Mason, C. V. J. Cooney, B. Primmer, C. G. Crowley, R. A. Ray, RobertDevlin, R. Reynolds, M. Elstob, R. C. Richardson, G. F. Evans, Gareth Robertson E. A. Evans, Jack Ryan, S. M. (Teller)Foreman, D. J. Sibraa, K. W. Georges, G. Tate, M. C. Giles, P. J. Vigor, D. B. Haines, J. Walsh, P. A. Hearn, J. M. Zakharov, A. O. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Boswell, R. L. D. Messner, A. J. Brownhill, D. G. C. Missen, A. J. Carrick, Sir John Parer, W. R. Chaney, F. M. Puplick, C. J. G. Collard, S. J. Reid, M. E. (Teller)Crichton-Browne, N. A. Scott, D. B. Durack, P. D. Sheil, G. Guilfoyle, Dame Margaret Teague, B. C. Hamer, D. J. Townley, M. Hill, R. Vanstone, A. E. Jessop, D. S. Walters, M. S. Kilgariff, B. F. Watson, J. O. W. Lajovic, M. E. Coleman, R. N. Bjelke-Petersen, F. I. Gietzelt, A. T. Knowles, S. C. Black, J. R. Rae, PeterButton, J. N. Withers, R. G. Grimes, D. J. Short, J. R. Question so resolved in the affirmative. Remainder of Bill-by leave-taken as a whole, and agreed to. Bill reported without amendment, report adopted. Bill (on motion by Senator Ryan) read a third time. Senator WALSH(Western Australia-Minister for Finance) —I lay on the table a proposed amended statement of Commonwealth financial transactions and seek leave of the Senate for an explanatory statement on the proposed amendment to be incorporated in Hansard. Leave granted. The statement read as follows- EXPLANATORY STATEMENT Amendment of the format of the Monthly Statement of Commonwealth Financial Transactions-Sub-section 49 (2) of the Audit Act 1901. Sub-section 49 (1) of the Audit Act requires that, as soon as practicable after the end of each month, the Minister for Finance publish a Statement of Commonwealth Financial Transactions which is in accordance with, or substantially in accordance with, Form 4 in the Schedule to that Act. In accordance with the requirement of sub-section 49 (2) of the Audit Act 1901-that the format of the Statement of Financial Transactions may be varied only with the prior approval of both Houses of Parliament-I hereby table particulars of an amended Statement for approval by the Senate. The Statement, or CFT as it is commonly known, is in functional format and shows the receipts and outlays of the Commonwealth, the deficit and the ways in which the deficit has been financed. It compares transactions to date with budgeted receipts and outlays and with comparable figures for the previous year. The proposed revisions are designed to improve the presentation by providing information in a form which is more readily comparable with the information provided in the Budget Papers, involving: the addition of new items to separately identify the receipts from the new Prescribed Payments System, Bank Accounts Debit Tax, ACT Taxes and Charges, and crude oil and LPG excise duty; reordering the presentation of receipts to accord more closely to that used in the receipts tables included in the Budget Papers; deletion of redundant items; amalgamation of some of the existing revenue heads which are now of lesser significance; and expansion of the detail reported on financing transactions. Parliament's approval of the revised format is sought in the current Session in order to have the necessary changes in place at the start of the 1985-86 financial year. Senator WALSH(Western Australia-Minister for Finance) —by leave-I give notice that, on the next day of sitting, I shall move: That, in accordance with sub-section 49 (2) of the Audit Act 1901, the Senate approves the variation to the form of the Statement of Financial Transactions of the Commonwealth presented to the Senate on 15 May 1985. I seek leave to make a short statement relating to the notice of motion. Leave granted. Senator WALSH —I have presented to the Senate particulars of an amended form of statement of Commonwealth financial transactions together with a statement which outlines the proposed changes. Honourable senators will be aware that section 49 of the Audit Act 1901 provides for the statement to be in a particular form unless varied with the prior approval of both Houses of the Parliament. The form of the statement is set out in form 4 in the Schedule to the Audit Act. This is the first time since the form was incorporated in the Schedule to the Act in 1979 that an amendment has been proposed. The original format was based on the then Budget presentation of receipts, outlays and financing transactions. Since then, particularly in the receipts area where new taxes have appeared, the format of the statement has diverged significantly from that used in the Budget documents and it is desirable to realign them more closely. Indeed, the existing format of the statement is not providing Parliament with the detail of information to which it is entitled. I commend the proposed new format to the Senate. Sitting suspended from 12.41 to 2 p.m. Senator DURACK —My question is directed to the Minister for Finance. Is it a fact that the Hawke Government in its first two Budgets took policy decisions which reduced Forward Estimates by $1.2 billion and $500m respectively but added, in the final Budget process, $2.5 billion and $1.1 billion in extra spending on new programs? Given this record of the Hawke Government in the past two years and two Budgets, what guarantee can the Minister give that what was cut last night will not be restored twofold in August? Senator WALSH —I do not know how good Senator Durack's understanding of what was announced last night is. I hope that it is better than the understanding which the Deputy Leader of the Opposition and present shadow Treasurer displayed not just when he appeared on television-therefore could be forgiven for a certain amount of imprecision, implying ignorance-but in a Press statement which he issued, which removed any doubts as to whether there was imprecision and displayed abysmal ignorance. It is correct that there were reductions in the Forward Estimates of the magnitude-I do not know whether the figures are precisely right-indicated by Senator Durack and that some additional considerable new policy expenditure proposals were adopted in the 1983 and 1984 Budgets. Two major items were adopted in those Budgets. The first home owners assistance scheme replaced the tax expenditure policy of the Fraser Government. The Fraser Government had an interest rate subsidy available to housing loan borrowers-of course it was a scatter-gun approach-which applied right across the field. It was a tax expenditure subsidy for everybody who had a housing loan. This Government decided to scrap that tax expenditure of the previous Government and make a direct payment through the first home owners assistance scheme, which was targeted at the lower income area of potential home buyers. Therefore it was much more cost effective than the scheme of the Fraser Government, which was a scatter-gun, right across the board interest subsidy, and interest subsidy which was skewed in favour of higher income earners. In typical fashion the Fraser Government's policy was deviously hidden away because it was a tax expenditure and not subject to public scrutiny. We replaced that scheme with an outlay. Likewise there was a Medicare subsidy which, from memory, amount to $600m a year. It was a tax expenditure subsidy for the payment of private health insurance premiums. This Government decided to convert that hidden tax expenditure subsidy of the Fraser Government into an outlay through the Medicare program. In the first year of this Government those two items alone amounted to something like $800m of the new policy to which Senator Durack referred. The Opposition having been proven to be absolutely wrong, having fallen in the mud on its face, like Sir John Kerr at a country show, in predicting the Government's announcement that at least $1 billion would be cut off the Forward Estimates would not be achieved, I can understand the Opposition being somewhat piqued that not only was the target which I had publicly announced some months ago, and which the Prime Minister and the Treasurer have announced more recently, met but it was in fact exceeded. This is distinct from the feeble exercise which the former Government went through just four years ago when, after months of publicity, after months of beating up the issue, it managed to produce a feeble statement which claimed that there would be ultimate savings in recurrent expenditure of $560m-that is way off in the never-never-most of which, of course, never occurred. The Opposition is, of course, piqued that the target has been met and exceeded. It now believes that it must shift the speculative attack into some other area by saying that there will be massive increases in the funding of new programs in the Budget. There is a possibility of there being some new programs in the Budget but that has yet to be decided. I suggest that Senator Durack wait until the Budget is announced to find out what new programs, if any, are contained in it. Senator Durack asked for a guarantee. I can give a guarantee that this Government will not behave in the fiscally irresponsible manner in which the previous Government behaved when it left us a legacy of a prospective $10 billion Budget deficit. We all know about the infamous 1977 rubbery figures Budget that was Sir Phillip Lynch's swan-song as Treasurer. What is not so well known is that in every year Mr Howard was Treasurer actual outlays exceeded Budget projections. It is true that in one of those years actual outlays exceeded Budget projections by only $2m but in the other years actual outlays exceeded Budget projections by between $175m and $1,915m. I can guarantee Senator Durack one thing. When the Budget outlays are finally announced they will be honest estimates of outlays, in marked distinction, in contradistinction, to the estimates of outlays which were produced by the Opposition's last Treasurer when it was in government. Senator TATE —Is the Minister for Finance aware of statements made last night by the Deputy Leader of the Opposition, both in a written statement and on television, to the effect that the Government was now likely to abandon all fiscal restraint when it came to the Premiers Conference later this month? In particular, I ask whether he is aware of Mr Howard's remark: . . . even if you hold them-- that is, the Premiers-- to the same in real terms . . . you're going to add $600 million. Can he say whether there is any substance to this prediction? Senator WALSH —In answering the previous question I alluded to this matter. Senator Tate has quoted what Mr Howard said on television. That concurs with the extract from the transcript which was given to me of what Mr Howard had said. The short answer to the question is that no, there is no substance in Mr Howard's prediction. Mr Howard ought to have known that very well because the correct position was set out quite clearly and concisely on the first page of the Press statement which I issued last week in association with the publication of the Forward Estimates. Either Mr Howard is not doing his homework or he has memory problems on quite fundamental aspects of government financing and government policy. As I have said, Mr Howard could perhaps be forgiven for a momentary lapse in concentration and for misstating the situation while he was on television. What is much more difficult to forgive-indeed it is unforgivable to the degree that a person who makes such a statement should not have pretentions ever again to be Treasurer or a Minister in an economic portfolio-is that in a Press statement issued by Mr Howard last night, he said: Even the basic assessment is open to serious question. The Government will not save $1,250 million next year because in one stroke half of the so-called ''savings'' will be wiped out at the forthcoming Premiers' Conference. Even if grants to the States are held to the same amount in real terms as in the current year-which is tougher than the Premiers are expecting-they will wipe out $600 million of Mr Keating's much proclaimed ''savings''. That is not what the Deputy Leader of the Opposition and shadow Treasurer said; that is what he wrote and had publicly released. Had he bothered to consult the Forward Estimates, or had he been capable of understanding them, he would have seen expressed quite clearly even in the covering Press statement, that the Forward Estimates per se assumed the same money payments would be made to the States as were made this year. The reason that it was done in that form is that the tax sharing legislation expires at the end of June and there is no legislative obligation for the Commonwealth to provide any percentage of taxation revenue to the States in the next year, but of course there will be some replacement policy. It was judged by the Department of Finance officials and by me that it was unrealistic to suggest that the States would be held to the same money amounts in 1985-86 as they had received in 1984-85 and therefore a notional $1 billion was put in, principally to cover whatever actual increase in money payments the States receive pursuant to the Premiers Conference. If Mr Howard had done his homework at all or if he were capable of understanding fairly simple figures and fairly simple arithmetic, he would have known that; apparently he does not. It is absolutely wrong to write, as Mr Howard did, and subsequently publish, that if the States were held to the same amount in real terms next year as this year $600m of their savings would be wiped out. That is completely incorrect. Whatever the ultimate figure in tax sharing payments to the States overall may be, it will be accommodated within the same money amount which was published in the Forward Estimates and the additional $1 billion to which the name 'conservative bias' was applied. It will be accommodated within those totals and it will not, as Mr Howard asserted, wipe out at least $600m of last night's savings. Senator CHANEY —Is the Minister for Finance concerned that Mr Dolan of the Australian Council of Trade Unions believes that the Government has tackled the expenditure problem from the wrong end? They are the words Mr Dolan used. Is Mr Dolan justified in saying that the needy have been hit hardest and, if so, would the Minister have preferred measures affecting more affluent people, such as income tested tertiary fees? Senator WALSH —In point of fact, Mr Dolan is wrong in saying that Government measures attacked the needy. That statement is demonstrably incorrect. I suppose-and I noticed some screaming headline in the Melbourne Sun this morning-that some people not fully aware of the facts might say that some needy people have been affected by a decision to terminate family allowances for 18 year-olds and above. The Melbourne Sun described that as cutting money from the kids. I thought that since even the legal age of majority is now 18 that a person of 18-plus ought not be regarded as a kid. Those persons probably do not regard themselves as such. Those not fully aware of the savings provisions or the protection built into that decision for low income households might have thought that that was to some extent a withdrawal of a privilege from the needy. The only people over 18 who receive family allowances, by definition, are those who are still students and the students' households will be protected from that reduction in the family allowance. On the more general question, at least some members of the Opposition from time to time advocate the means testing of virtually all or of a large number of benefits and payments, although of course when a means test is actually applied to a particular benefit they spend the next two years bitterly attacking it. Senator Messner, like a masked figure on Halloween, has spent the last couple of years running around trying to frighten pensioners by saying that the Government is going to steal the savings under their beds and steal the beds as well. Other members of the Opposition spent a good deal of their time saying how payments of all types should be subjected to a means test and be paid out to only the really needy. That is the sort of internal contradiction which we have come to expect from this Opposition. It is clearly wrong to say that the needy have suffered because of the cuts that were made last night. On the other question raised, I think Mr Dolan did make some reference to taxation. The Government does have the taxation matter under review, as is well known. Senator CHANEY —I ask a supplementary question. The Minister, in his answer, said that some people who are not aware of the facts might say that the needy have been hit. Is the Minister suggesting that Mr Dolan was not aware of the facts when he made his statement? Senator WALSH —I think it is not only excusable but almost predictable that somebody in Mr Dolan's position-that is, I think, some hundreds of miles from Canberra-an hour or two after the mini-Budget had been presented would not be aware of the fine detail of that policy or of a number of others. Senator COATES —I refer the Minister representing the Minister for Transport to today's Tasmanian Press reports which claim that removal of the Tasmanian air fare subsidy will be a blow to Tasmania's tourism industry. Is it a fact that since a large proportion of tourists travel on package deals, APEX fares, 45 per cent concession fares and so forth rather than full fares, that the likely impact upon the tourism industry may not be as severe as has been suggested? Can the Minister comment upon the possibility that the airlines might seek to maintain the full fare at current subsidised levels in any case? Can the Minister outline in what respects transport and fare circumstances have changed since the subsidy was introduced? Senator RYAN —I have been provided with some information on the matter raised in Senator Coates's question. The subsidy that the honourable senator refers to was introduced in April 1981 to offset sharp increases in fares on short haul routes which came into effect at that time. Since then a number of significant changes have occurred. The air fare formulas for Trans Australia Airlines and Ansett have been revised, leading to smaller increases for short distance fares than for medium distance fares. East-West Airlines Ltd has considerably expanded its operations to Tasmania, providing increased competition. Ansett, TAA and East-West have introduced a number of discount fares of up to 40 per cent off economy fares which are freely available to all passengers. As an example of the magnitude of these changes, the lowest return fare now available between Hobart and Melbourne is the 45 per cent flexi-fare at $129, which is some 15 per cent lower than the APEX fare of $152.10, which was the lowest fare type available when the subsidy was introduced. In addition, there have recently been a number of further discount fare initiatives by TAA which have included routes to Tasmania and I am sure that these new discounts are welcomed by the Tasmanian tourism industry. There is now greater competition on air routes between Tasmania and the mainland than there was in 1981 and there is a greater range of discount fares available. In these circumstances the competitive pressures on the airlines may well lead them to maintain the fares at their current level, as the honourable senator has suggested. Senator MACKLIN —Can the Minister representing the Acting Minister for Veterans' Affairs rationalise the conflict between the Prime Minister's statement this morning that the cuts in the economic statement last night have been borne across the board and the fact that the veterans are undoubtedly the worst hit of any group with cuts of $123.6m, affecting the care of even veterans in psychiatric institutions? Does the Government propose to renege on the categorical promise given by the Minister to veterans' organisations that no legislative change would be made to the Repatriation Act until the Budget session? Does the decision to reverse the onus of proof also destroy another categorical promise given by the Minister in this place? Senator RYAN —If Senator Macklin wants to assess the effect of last night's decisions on veterans as compared with other groups in the community, I think he should read the detailed statement and pay attention to what those decisions actually mean. It is certainly not my impression that veterans will be adversely affected in comparison with other groups in the community that will be affected. I think any detailed examination of the decision would produce a different result from that which Senator Macklin's question suggested. I will have to refer the specific matters concerning legislation to the Minister and get the information for Senator Macklin. Senator AULICH —Is the Minister for Finance aware of statements from Australian business leaders in support of last night's economic statement? Can he say whether the statement is likely to increase business confidence in the Australian economy? Senator WALSH —That is undoubtedly the case. I am aware of such statements. Fortuitously, I happen to have with me the transcript of the interview with Mr White on the National program last night. Mr White said: I think there will be widespread support. It will be very difficult for any single area of the community to criticise the Treasurer's policies or the Treasurer's announcement tonight because no areas of activity have been exempted from the Government's attempt . . . In response to the next question, Mr White said: I think this will restore a lot of confidence in the investment community. I assume that Mr White, in making that statement, was aware of the facts to a degree that the shadow Treasurer clearly was not. It has just been drawn to my attention by Senator Button that the Leader of the Opposition followed his Deputy down the paths of ignorance even this morning when he repeated on the AM program the fallacy that any money increase in payments to the States would be an add-on to the expenditure which had been allowed for in the Forward Estimates published last week. That, of course, was completely wrong. Mr White, although an important businessman, does not have any particular responsibility for the proceedings in the Parliament, but he was probably much better informed than was the Deputy Leader of the Opposition last night about a matter for which the Deputy Leader of the Opposition has central responsibility. The ignorance which the Deputy Leader of the Opposition showed last night persisted this morning as far as the Leader of the Opposition was concerned. There can be no doubt that if there were any remaining doubts in the business community that this Government, unlike its predecessor, is a government which exercises fiscal discipline, those doubts have been removed by last night's statement that the targets which we set and announced some time ago have been met or achieved. As a result of that it is reasonable to expect-indeed, one can almost guarantee it-that because of the increased confidence in the business community there will be significant increases in private investment and therefore in production, incomes and ultimately government revenues. It is growth of that sort which is essential to achieving the private ambitions of Australian citizens and ultimately, perhaps, delivering a better quality of government services on behalf of those citizens back to the public. Senator PETER BAUME —My question to the Minister for Education relates to that part of her Press release of 14 May which states: . . . in the case of the schools programs, expenditure reductions had been made from the beginning of 1986 in respect of the programs for English as a Second Language, Special Education, Multicultural Education, Country Areas . . . So it goes on. As each of the programs mentioned is directed towards the relief of disadvantage, will the Minister provide details of where the cuts will fall and what form they will take to achieve the savings of $13.3m referred to in the Press release? Senator RYAN —I can give those details to the Senate now, but I should point out that not all special programs of the Commonwealth Schools Commission have been reduced. Those that have been reduced have had very slight reductions in relatively large budgets, so the effect should be relatively minor. The program specifically aimed at disadvantaged schools-the disadvantaged schools program-has not suffered any reductions at all. The effect that these small reductions in several of the programs will have on schools will be a matter for discussion with the Schools Commission. The detailed information that Senator Baume seeks is as follows: There will be a $1.3m reduction in the English as a second language program for the financial year. I point out that that is for the general element of that program and not for the new arrivals element. The new arrivals element, which is aimed at assisting children most needing the English as a second language course, has not been reduced. The special education program will be reduced by $0.8m, and the integration element by $0.12m, in the financial year. The libraries element of the capital program will be reduced by $10.8m in the financial year. I should point out that the reason the Government decided that that program could be wound up is that the review of the capital program which is currently being completed by the Schools Commission indicates that the purpose of that earmarking of capital funds for libraries has now substantially been achieved. That earmarking of capital funds was designed to raise the standard of libraries in schools throughout Australia and, with very few exceptions, a report to the Schools Commission has assessed that objective as having been successfully achieved. Also, schools which wish to make application for the building of libraries as part of the general capital program will still be able to do so, and extra recurrent funds, which have been legislated for in respect of all schools, will be able to be spent on library materials. So we do not expect that there will be any downgrading of libraries as a result of that decision. The multicultural educational program will be cut by $0.1m for the financial year and the country areas program will be cut by $0.2m. That represents a total saving of $13.3m. As I said, each program which has suffered a slight reduction is a large program. The general effects should be very slight. They will not be known in detail until I have had discussions with the Schools Commission. Senator COLSTON —I direct my question to the Minister for Education. I ask whether the spokesperson for the New South Wales Teachers Federation, in referring to last night's statement by the Treasurer, said: Our only major concern is with the cuts in school libraries. The Government should look at alternatives to substantial cuts in school libraries. As long as other cuts are applied fairly as responsible Australians and taxpayers we should take a responsible attitude to it. We, the teachers, did get out of it quite well. Is it significant that the Federation made no reference to the re-scheduling of participation and equity program funds and presumably included that item amongst those to which the Federation, to use its own words, should take a responsible attitude? Senator RYAN —My attention was drawn to a transcript of comments by Ivan Paget from the New South Wales Teachers Federation on a Channel 9 program using the words which Senator Colston has read out. I must say that I am very heartened to know that the New South Wales Teachers Federation seems to understand that the Government, at a time of necessary cut-backs, has had to address itself to all major areas of government expenditure, including education. I think it is significant that the only decision that Mr Paget commented on in particular was the libraries element. I explained to the Senate in response to a previous question from Senator Baume that there should be no downgrading of libraries as a result of the decision because the purpose of that program was to upgrade libraries and that has substantially been done. I think it is significant that the Teachers Federation has chosen not to criticise the decision to slow down the amount of funds flowing into the PEP program. I hope that the teachers, with whom I will be having meetings, as well as parents and other interested parties will appreciate that adequate funds are still flowing to maintain the program at a constructive level, but given that we have had to slow down the flow of funds into that program, we will have the opportunity for a consolidation of what has happened to date. We still have the opportunity to review the operation of the program. As there have been some administrative problems in the past in that program, that is an opportunity that we should all use constructively. I know that the New South Wales Teachers Federation had some criticisms of some aspects of the administration of the program-not of its overall objectives, of course. I hope that, in continuing this responsible attitude, it will seize this opportunity of a slower flow of funds into the participation and equity program to see in which areas the administration or targeting of the program needs improvement. In conclusion, I must say that I am appreciative of the view expressed by Mr Paget on behalf of the New South Wales Teachers Federation that the Federation will adopt a responsible attitude and accepts the basic strategy of what the Government is attempting to do and has succeeded in doing. Senator COLLARD —Can the Minister for Finance explain how the receipt of proceeds of the sale of property is a saving of expenditure? Should not items such as the proposed sale of the Belconnen Mall and disposal of some defence properties more properly appear as an estimate of revenue and not have been included as part of last night's reductions in expenditure? Are these not classic examples of the sort of sleight of hand which typified the Treasurer's statement? Senator WALSH —The answer is no, there has been no sleight of hand. The measures announced last night are unpadded and non-rubbery reductions from the Forward Estimates of expenditure. The Forward Estimates are determined or defined by internationally accepted accountancy conventions. So the answer to the question is no, there has been no fiddling with the figures and no attempt to conceal the truth. Conceptually, I agree with Senator Collard. There is a case to be put that items such as the sale of assets should not be regarded as savings on expenditure. But because of the internationally accepted accountancy rules under which Australia operates-I think they are exactly the same rules that operated under the previous Government-it is technically a reduction in the Forward Estimates. There is a case to be put, but if Australia is to operate under internationally accepted accountancy conventions, we either abide by those conventions or we do not. Since Senator Collard is interested in matters like this, I refer him to the fact that when the Government of which he was a back bench supporter went through its feeble cost cutting exercise in 1981, it claimed that there would be $560m eventually ongoing savings in Budget outlays, most of which, of course, never happened. The reason that the statement was so feeble in the first place-most of the feeble measures which the statement forecast never happened anyway-was that that Government carried in its saddle bags both the lead of the then Country Party and the lead of the then Prime Minister, who ought to have been a member of the Country Party, anyway. Even after items such as those which Senator Collard has identified have been notionally subtracted from the total, the figure is well in excess of $1 billion. But if Senator Collard wishes to take into account actual changes in outlays from one year to the next, which are not necessarily the same thing as actual changes in Forward Estimates, he also ought to add to the savings figure an additional $110m for the community employment program. Under the decisions announced last night expenditure on the community employment program in 1985-86 will be $120m less than the estimate for this year, but only $10m of that was counted in the statement, because only $10m was a saving, from the Forward Estimates as defined. Throughout that exercise the Government stuck to the technical definition of Forward Estimates. So we did not add on to the $1,259m the extra $110m from the community employment program which we could have added; nor did we subtract from that $1,259m the figure for the sale of the Belconnen Mall and a number of other smaller proposed sales of government property. We stuck to the correct rules and conventions throughout the exercise. Senator SIBRAA —Has the attention of the Acting Minister for Foreign Affairs been drawn to the five points made by the Lebanese Christian delegation which appeared before the Joint Committee on Foreign Affairs and Defence yesterday? The points are that the Australian Government should: Condemn civilian massacres in Lebanon; call on all foreign forces to withdraw from Lebanon; take measures through the United Nations Security Council to guarantee Lebanese neutrality; initiate action for a United Nations or multinational peacekeeping force to go to Lebanon; and take humanitarian measures to alleviate the suffering in Lebanon. Is the Minister able to advise what measures the Government can take to respond to those demands? Senator GARETH EVANS —I am aware of the five points to which the honourable senator referred. I draw his attention at the outset to the answer which the Prime Minister gave to a question on the situation in Lebanon on 8 May. The Prime Minister then expressed, on behalf of the Government and the whole of the Parliament, our great distress at the continued violence which is taking place in Lebanon. He also expressed the Government's deepest sympathy to the Lebanese community in Australia. I offer the following comments in response to the specific points raised by the Lebanese Christian delegation which appeared before the Joint Foreign Affairs and Defence Committee, chaired by Senator Sibraa. As to the first point, the Government is aware of reports of alleged massacres during the recent fighting in Lebanon. We are particularly concerned that these reports and the continued violence will breed more violence. We continue to call upon all parties in Lebanon to exercise maximum restraint at this time. As to the second point, the Government's policy on foreign forces in Lebanon has been clearly stated previously. We believe that all foreign forces should withdraw, except those which are there at the request of the Government of Lebanon, and that external interference in Lebanon's internal affairs should cease. As to the third point, we note the proposals for a new United Nations or multinational peacekeeping force in Lebanon. Australia supports, in principle, arrangements which would give Lebanon and its neighbours confidence that their security would be assured. However, to have any chance of success, such an initiative-whether it occurs in the Security Council or elsewhere-should come from, or at least have the concurrence of, the Lebanese Government. As to the fourth point, Australia has expressed its support for the operation of the United Nations Interim Force in Lebanon and we hope that all parties concerned will create the necessary conditions for the effective operation of UNIFIL. Australia has been a generous contributor of funds to UNIFIL operations and that support will continue. As to the final point about humanitarian measures, since 1983 the Australian Government has provided to Lebanon over $13m for humanitarian assistance and reconstruction efforts. I add that the Government is fully alert to the dimensions of the problem in Lebanon and is anxious to do anything that it can to assist. Accordingly, I have today requested the Australian permanent representative in New York to explore with the Lebanese permanent representative, as well as with the representatives of the other major actors on the Security Council, the scope for constructive action that might be taken by the Security Council. Senator MESSNER —My question is directed to the Minister for Community Services. What new steps will be taken to achieve the Government's estimated $25m savings on social security administration costs by cracking down on fraud and overpayment? What estimate has been made of the extra cost of enforcement involved? Is that $25m a net figure? Senator GRIMES —Many changes have been made to the social security system in the last two years in order to cut down the amount of fraud. Further changes will be introduced by the present Minister for Social Security to the Department to ensure that the problem of fraud, which varies from State to State and benefit to benefit, is attacked without affecting, as has happened so often in the past, the innocent recipient of pensions or benefits who so often has been caught up in efforts such as the blitzes on post code areas, et cetera, to try to cut down on fraud. Senator Chipp —Would you consider an ID card? Senator GRIMES —I think there has been plenty of publicity about the possibility of an ID card. Of course, all governments have considered that in the past. I only make the point and express the personal view-and I am certainly not putting it forward as government policy-that if such a system should be introduced, I think there should be an ID card for everyone and not just social security recipients. I also remind the honourable senator, though, that one of the biggest complaints in the United States of America and Canada, which have had ID cards for many years, is the problem of social security fraud. Therefore, those countries do not seem to have been very successful in this respect. To take up Senator Messner's point, the $25m saving outlined in the statement made by Mr Keating and Senator Walsh last night is the estimated saving from new mechanisms which are to be introduced in the Department by the Minister. I do not have before me the exact details of those savings. I certainly do not think we would be able to give the honourable senator all the details, nor do I think he would consider it would be wise to do so. I can remember once in the past giving such details in confidence to the Opposition spokesman because one does not want to publicise the methods used and therefore assist those who would take part in fraud. Senator Messner —It wasn't me. Senator GRIMES —I think it was the honourable senator, actually. Anyhow, I will certainly approach the Minister. I will get the exact details, I hope this afternoon, of the other matters that Senator Messner raised. I will give him as much of the details as I can after Question Time. Senator HEARN —Is the Minister representing the Minister for Veterans' Affairs aware that some misleading newspaper reports today have caused alarm among war widows, veterans and disability pensioners who now fear they will lose their pensions because of changes announced last night by the Treasurer? Senator RYAN —Yes, it is unfortunate that several newspapers, including the Australian and the Melbourne Age, have quite wrongly published material which says that war widows and disability pensions are to be cut. This is not correct. The Treasurer stressed in all news releases and public announcements that no existing war widows or disability pensions will be affected by the changes to the repatriation system. I can reassure those pensioners that this is still the case and that they should not be alarmed by misleading stories appearing in some media. Senator Sir JOHN CARRICK —My question is directed to the Leader of the Government in the Senate. I refer to media reports that the Government is making available to all Government senators and members comprehensive briefing kits on all aspects of the Treasurer's statement last night in order, so it said, that the Government's actions may be explained to the community. Will the Minister ensure that all material purporting to justify the Government's actions is made available also to all members of the Parliament? Senator BUTTON —I will make inquiries about that question and give the honourable senator an answer as soon as I can. I am not sure, if I may say so, that the expression 'comprehensive briefing kits', which was used by the honourable senator and which was probably based on a report, is correct. I will make some inquiries. The PRESIDENT —Order! Before I call the next questioner, I draw the attention of honourable senators to the presence in the gallery of a delegation from the Supreme Soviet of the Union of Soviet Socialist Republics. This is the third delegation from the Supreme Soviet to visit Australia, the first being in 1974 and the second in 1979. The delegation is led by a Deputy Chairman of the Supreme Soviet and Chairman of the Presidium of the Supreme Soviet of the Armenian Soviet Socialist Republic, Mr Sarkisov. The delegation arrived in Australia this morning and is to visit Sydney, Melbourne and Perth as well as Canberra. On behalf of all honourable senators, I extend to all members of the delegation a warm welcome to Australia, particularly to Canberra and to the Senate. Honourable senators-Hear, hear! Senator PRIMMER —Is the Minister for Finance aware that Opposition leaders, Messrs Peacock, Howard and Chaney, have been, with varying degrees of conviction, attacking the Government's economic statement of last night for not going far enough? Is he aware that simultaneously numerous other members of the Opposition front bench have been attacking the Government for making the cuts announced last night? The PRESIDENT —I would ask the Minister to relate his remarks to his ministerial responsibilities. Senator WALSH —Mr President, I am hurt by the implication that I ever do anything else. I am aware that various blabbermouths in the Opposition have been saying that this is a feeble statement and that we really ought to have cut off $6 billion or $7 billion or something like that. They did not identify from where it should be cut; nor, of course, do they like references to their really feeble effort four years ago when they produced ultimate-that is some time in the never never-savings on outlays of $560m, most of which never happened. I am also aware that a number of other even lesser people in the Opposition have put out Press releases saying that the cuts that have been made should not have been made. Indeed, I have a collection of pieces of litter-about 11 statements-put out in the names of various people such as Mr Blunt, Mr Hunt, Mr Lloyd and so on. I have a collection of about a dozen such pieces of litter which all say that we should not have made the cuts that we have made, whereas the more senior people in the Opposition say that we should have made a lot more cuts than we have made. I leave them to reconcile that inconsistency. However, it is the sort of inconsistency that, of course, we have come to expect from the Opposition. The essential message of the pieces of litter, some of which I referred to a while ago, is that now that these cuts have been made by this Government we can expect the end of Christian civilisation as we know it in this country, or words to that effect. In some respects the most spectacular of all the statements which were made is Senator Messner's, in which he criticised the freezing of the maximum level of nursing home benefits in two States and in the Northern Territory. Senator Grimes —He didn't, did he? Senator WALSH —He did. I would have thought that under most circumstances Senator Messner would have attributed the level of costs in the nursing homes in question to feather bedding and overstaffing, or both overstaffing and overpayment. That would be Senator Messner's normal reaction. But when it suits him to do a 180-degree turn, he does that as well. Apart from the carping criticism from most members of the Opposition of the cuts that have been made and the criticism of a few members of the Opposition that those cuts are not good enough and apart from the difficulties in reconciling that contradiction, I might also direct Senator Primmer's attention to the promises for increased outlays which the Opposition made only six months ago. This is by no means an exhaustive list, but it promised to abolish the assets test on pensions, which would add something over $150m to outlays; to build the Alice Springs railway, which would add $78m during the construction period; to pay all export inspection charges, which would add $40m; to underwrite sugar to a particular level, which would add $180m; to cut out threshold payments by the States for drought, which would add $15m; and to provide a 2 : 1 subsidy for normal agricultural research. I detect again, of course, the National Party of Australia lead in the saddle-bags when the Opposition committed itself to those undertakings. It also made promises in regard to other items such as closing the gap between the tertiary education assistance scheme and the unemployment benefit, which would add $57m; an open university, which would add $15m; the construction of a parallel runway at Sydney airport, which would add $157m a year during the construction period; and the provision of child care centres, which would add $28m. That whole list adds up to $1,180m of firm increases in expenditure in promises made by the same Opposition only six months ago. In addition, there are indicative expenditure commitments given by the Opposition, but in a slightly less certain way, to repeal the income test for pensioners over 70, which would cost $165m, to resurrect the bicentennial water resources program, which would cost $75m for a period of five years, and to construct Dr Wild's high-speed railway from Sydney to Melbourne at a cost of $720m in a six-year construction phase, and so on, and so on. That list adds up to some $900m. So there was a figure of more than $1,290m of firm promises to increase expenditure, and an additional rather squishier $900m indicative list of promises again to increase expenditure given by this Opposition only six months ago. In addition, there were Opposition promises in respect of some $2.5 billion of tax expenditure. I do not know what Senator Primmer expects me to do about this. I do not think I ought to be held responsible for the things the Opposition says, and much less should I be held responsible for attempting to reconcile the contradictions inherent in almost everything Opposition members say. Senator PRIMMER —If I may put a supplementary question to the Minister, is it also a fact that a member of the Opposition suggested that there would also be inserted, on top of the proposed tax cuts, a wine tax? Senator WALSH —The Opposition pre-election promise, as I remember it, was to abolish the wine tax, while simultaneously saying that it was in favour of broadly based consumption taxes which were ubiquitous in their application. That is another contradiction which the Opposition has yet to reconcile. Senator CHANEY —My question is addressed to the Minister for Finance-and I preface it by saying that we should offer him to the North Atlantic Treaty Organisation, because his answer drove out the Russians from the visitors gallery. I refer to the earlier answer given by Senator Walsh concerning the provision of grants for States in 1985-86 and the $1 billion provision to which he referred. Does the Minister accept that an increase in real terms of 2 per cent in payment to the State governments would amount to $800m? If so, and given the list of programs which are shown in the Forward Estimates as having a conservative bias which is required to be covered, can he give a binding assurance that the $1 billion allowance to which he referred will be sufficient to accommodate grants to the States and all the other items that were mentioned which it was supposed to cover? Senator WALSH —I thought that Senator Walters drove the Russians out, lest somebody took a photograph from this side of the chamber which would show Senator Walters being photographed with the Russians. It is the sort of trick to which other people on her side of politics have resorted to in the past. The PRESIDENT —Order! The Minister should answer Senator Chaney's question. Senator WALSH —I do not have in front of me now the figures of the total payments to the States last year. I think it is in the vicinity of $15 billion or $16 billion. But whether a 2 per cent real increase amounts to a $800m increase on whatever money amount will be paid this year would depend on whatever deflator one likes to choose. I do not know what deflator Senator Chaney has used in making that calculation. The deflator which will finally be accepted in the Budget has yet to be determined. The deflator implicit in the Forward Estimates published last week was, of course, arrived at towards the end of last year. If the same estimating exercise were done today, a different figure would probably be produced. It is not possible to give a precise definition at this stage. If Senator Chaney would state a particular assumed deflator, it would be quite easy to do the arithmetic exercise and add on to this year's money payments. I can do that for Senator Chaney if he likes to supply the figure of the deflator. As for the rest, if I understood Senator Chaney correctly, he asked whether I would guarantee that every item of expenditure, including whatever upward adjustments in the money payments to the States are finally arrived at at the Premiers Conference, will be accommodated within that $1,000m. No, I will not give any such guarantee. I ask Senator Chaney to remember in regard to expenditure, as the Prime Minister and the Treasurer have both made clear, that the Government has not yet concluded its scrutiny of the outlay side. I invite Senator Chaney, as I invited Senator Durack earlier, to be patient until August. They will be disappointed, but the rest of the nation will not be. Senator CHANEY —I thank the Minister for that answer, but I ask a supplementary question. The inference from his answer to Senator Tate was that the $1 billion was specifically there to accommodate any increase in payments to States. Does he now agree that it was there to accommodate possible increases in a range of programs, including payments to the States? Is he now conceding that he is in no position to guarantee that the $1 billion will cover the range of programs which might require change, many of which are set out in his own report on the Forward Estimates of Budget outlays? Senator WALSH —The billion dollars was described in the Forward Estimates, in the published document, as a conservative bias. The major component of that conservative bias was an allowance for whatever increase in money payments to the States is arrived at in the Premiers Conference. By its very nature, if one has a figure of $1,000m, it suggests that it is not a very precise or scientific calculation. It is a figure which entails judgmental elements written in, but most of it was attributable to-although never explicitly identified as such-money increases in payments to the States, and some much less important programs in which judgments were made about a requirement to continue some form of payment, even though there was no legislative obligation to do so beyond the end of June this year. Senator DEVLIN —I address my question to the Minister representing the Minister for Social Security. My question refers to a problem which I believe to be widespread. It is that employers are hiring people and paying them under-award wages and then making them stay on unemployment benefits to top up their pay. The workers are told that if they do not follow this course they will lose their jobs. Once the worker does this he is breaking the law-and that stops him from coming forward to the Department of Social Security and telling the Department what is going on because he might be prosecuted. Would the Government be prepared to offer to such people immunity from prosecution in order to encourage them to come forward? At the same time will the Government look at introducing tough penalties for employers who force their staff to follow this unlawful course of action, so that the Government can get at the real culprits? Senator GRIMES —I can understand Senator Devlin's interest in this matter, because all of us who come from Tasmania have heard stories and rumours about this practice occurring on the north-west coast of Tasmania in particular, an area where Senator Devlin lives. I understand that this sort of practice has been detected in other States. There is a problem, as Senator Devlin well realises. The people who are receiving unemployment benefits while working are in breach of the law, as are the employers who are paying below-award wages in these circumstances-and when they are paying them under duress to their employees, it causes a difficult situation indeed. I have had discussions with Mr Howe, the Minister for Social Security, about this matter, and in particular about the possibility in such cases of providing an immunity to those who give information that leads to the detection of major breaches of the legislation. I understand that that matter would have to be considered on a case by case basis. Mr Howe is receiving legal advice at the moment as to in what circumstances such immunity could be given. But, as Senator Devlin says, I think it is a most undesirable practice. Apart from being illegal and apart from the pressure that is put on employees in these circumstances to work for less than award wages and, therefore, also to rob the public purse, the situation about which I have heard, and which also arises when people who are injured at work in such circumstances are not covered by workers compensation, adds to the difficulty. When I get a full answer from Mr Howe I will let Senator Devlin and the Senate know the details. Senator GARETH EVANS —Yesterday Senator Sir John Carrick asked me a question about Soviet defensive actions. I have sought and received the following further answer from the Minister for Defence: The United States strategic defence initiative is a Department of Defense long term research program which intends to explore the technology options available for incorporation into a possible system of ballistic missile defence. The Soviets are conducting similar research programs. These include directed energy weapons developments and improvements to the anti-ballistic missile system. It is also correct that the Soviets are continuing a major upgrading of their ballistic missile defence capabilities around Moscow. I should add, however, that the ABM system around Moscow, including the new Pushkino phased array radar, is within the limits established by the 1972 anti-ballistic missile treaty. This Government views with concern any developments that could affect the present system of global deterrence and progress on arms control. While ethical arguments were first put forward to support the SDI concept it could well be argued that progress towards disarmament is even more ethical than a defensive system. Suffice to say that at present we see contradictions and problems inherent in the SDI concept. Australia has made clear that it does not endorse SDI or its Soviet counterpart. The PRESIDENT —I have received a letter from Senator Chaney proposing that a matter of public importance be submitted to the Senate for discussion, namely: The continuing doubts and uncertainties about key economic issues, particularly wages policy. I call upon those senators who approve of the proposed discussion to rise in their places. More than the number of senators required by the Standing Orders having risen in their places- Senator CHANEY(Western Australia-Leader of the Opposition)(3.03) —It is regrettable that on the day after the Government's mini-Budget the Opposition believes that there are such continuing doubts and uncertainties about key economic issues that it is necessary to have this debate. But on the face of the statement which was put down by the Government last night that is the position. I think it is important that those doubts and uncertainties should be aired and we should give the Government some chance to respond to them. Three main areas of doubt are of concern to the Opposition following the statement of the Treasurer, Mr Keating. For a start, we doubt the reality of the cuts which have been announced. We doubt that because of the content of the statement and because of the context of the Budget process in which this statement has been extracted, brought forward and highly publicised. We believe that, given the record of this Government, and indeed of any government, to extract this small part of the Budget process and to say that that proves where we are going economically is to fly in the face of experience. The second major doubt we have is that any consistency of approach on the part of the Government is reflected in this statement. That is evident from the lack of any sort of intellectual cohesion in the statement which was put down in this place by the Minister for Finance, Senator Walsh, on behalf of the Treasurer. The last area, the area which is referred to specifically in the matter of public importance, concerns the very great uncertainties which continue to exist in the vital area of wages policy. The Government brought that area into the statement which was made last night although it was supposed to be a statement about cuts. That, in itself, is an acknowledgement of the importance of this whole issue for the Government's economic policy. At the end of the statement we are left with the same unsatisfactory situation as applied before the statement was put down. In expressing some doubt about the reality of the cuts one does not have to go beyond the appearance of the statement itself to look for material. One is entitled to ask whether this is a genuine and meaningful program of expenditure reduction or just some form of routine pre-Budget housekeeping. Of course, it is a part of the standard procedure of preparing for a Budget that the Minister for Finance and the Government have to go through the Forward Estimates and the pruning process of which last night's document is some public evidence. It is not unusual for the Forward Estimates to be reduced by $1 billion or so. The present Government, the Hawke Government, which is, of course, the highest spending government in Australia's history, reduced the Estimates by $1,214m in 1983-84 and by $556m in 1984-85. The Government has set the precedent for conducting this sort of exercise as part of the normal preparation for a Budget. In doing that it is, of course, following the same sorts of procedures as those which were followed by the preceding Government. The only difference between last night's exercise and what has happened in the past is that now the cutting is being done in public. It is being done for the purpose of publicity and to reassure those people who are doubting the integrity of purpose of the Government in the economic area. We have had no assurance and the Minister has specifically refused to give us any assurance about what might happen come the Budget. We will not know now until August whether the cuts will still be maintained on Budget night. The fact of the matter is that today the Minister simply refused to commit himself on the extent to which there will be new expenditure commitments by this Government which will rule out or cancel out those parts of the announcement last night which involved cuts and, indeed, which might add to Government expenditure. We are entitled to ask a question on those lines because if we look at the record of this Government over the last two Budgets we find that it added $2 of new expenditure for every dollar it cut from the Forward Estimates. We find that in 1983-84, when the Government cut $1,214m from the Forward Estimates without the fuss and fanfare we have had in Canberra over the last 24 hours, it turned around and added $2,485m in new expenditure. Last year, when the Government cut over $500m from the Forward Estimates, it turned around and added $1,138m. Last night we received no indication of the likely extent of the cost of new policy initiatives. Today when the Minister was asked a question in Question Time he would not and, of course, could not commit himself to the extent of letting us know whether there will be similar increases in the future. The second aspect of our uncertainty about these cuts is the point which was much discussed at Question Time. The Minister started with a very bold statement, in response to an honourable senator from his own side of the chamber, and suggested that the Opposition was grievously in error in suggesting that later increases in expenditure and, in particular, in payments to the States, would invalidate the figures the Government has put out. But, as Senator Walsh showed in his response to the last question asked in Question Time, the $1,000m to which he referred is a very rubbery figure indeed. Senator Walsh made it quite clear that it was just some sort of broad estimate and that he could not promise or undertake to contain increases within that figure. As the Minister will be speaking again, I think he might confirm for us whether, if the Government does no more than increase payments to the States by 2 per cent in real terms this year, he will use up $800m of that $1 billion which he was so pleased to have in reserve. He might tell us whether the $300m to $400m in increased costs which will be incurred by the Department of Defence because of the devaluation have been picked up. He might tell us to what extent devaluation will increase the public debt interest bill. He might tell us whether that other great list of expenditures which are set out as being conservative in the document which he tabled so recently are likely to go beyond the $1 billion which he has held in reserve. The fact of the matter is that on the Opposition's assessment it will be very easy to exceed that $1 billion. It is very likely that that $1 billion will be exceeded and, therefore, that the figures put forward by the Government are, in a fundamental sense, invalid. The Government really needs to come clean on these areas if it is to succeed in its great public relations exercise of reassuring the business community, an attempt which I think the Government has dressed up by taking the odd crack at groups here and there and making a hundred cuts-most of them in small areas-which will give rise to predictable cries of pain and outrage. The fact is that the fundamental figuring is open to doubt. There is real doubt, too, when one looks at the face of the statement, about the reality of the specific cuts which have been made. With respect to some items the Government has simply deferred expenditure to future Budgets. For example, it has postponed to the following financial year half the expenditure for the participation and equity program in education-Senator Ryan's supposed major effort to help the disadvantaged in Australia. It has postponed construction of the Film and Television School's building. The Government has not said that it will not be built; it has just postponed that for a year. It has deferred maintenance on Commonwealth property to save $11m. One must ask, I think, to what extent that will result in a genuine saving to the Commonwealth, in the light of depreciation and lack of maintenance of its property. Of course, the Government has done something to slow down the building of the new Parliament House, reducing the funds allocated by something like 10 per cent of what had been included in the Forward Estimates. With respect to other items it has simply engaged in sleight of hand. I will be interested to see whether the Minister for Finance is prepared to defend the $35m Telecom saving as a genuine saving or reduction in expenditure. That is simply taking an item off Budget and producing an apparent saving. Perhaps most significant is the fact that some of these so-called reductions in expenditure are, of course, simply increased taxes and charges. The Senate might recall that, I think a week or so ago, Senator Walsh was asked whether the billion dollars would be a genuine billion dollars of reductions in expenditure or whether this would be a case of tax increases. He said no, these were genuine reductions in government expenditure. I think that those people who are paying that additional $1 patient contribution on a prescription, those people who are making additional payments to the Commonwealth as the holders of various concessions, those people who are paying additional freedom of information charges, those overseas students who are being caught up in the Government's increased charges and those people who privately insure and see a reduction of the assistance they got through the Hospital Benefits Reinsurance Trust Fund will all regard Senator Walsh and the Government as having increased the taxes or charges which they bear. There is, indeed, a whole series of items which I think are more properly regarded as additional imposts on the public than as reductions in government activity and government expenditure. In addition, many of the items are simply additions to revenue of a one-off nature from the sale of assets. This Government, which so roundly criticised the Fraser Government for wishing to sell some government assets, is saying that it will sell various migrant centres, that it will sell the Belconnen Mall, that it will put the Tuggeranong development into private hands and that it will sell surplus defence land. Indeed, something like $220m worth of items will be tax increases, charge increases or the one-off sale of assets. Senator Walsh —How much? Senator CHANEY —About $200m. The Government has inflated its figure by going against the undertaking given in Question Time by Senator Walsh and in fact increasing charges, and it has produced fictitious reductions in expenditure by simply selling off assets. We also need to note the context in which this statement was brought down. I have already touched on that and will speak on it but briefly. The fact is that, if one looks at the way in which this Government has gone about preparing its Budgets in recent years, one finds a standard pattern which would be the same as the pattern followed by any government in any year. Governments go through the exercise of reducing the Forward Estimates in what is undoubtedly a difficult and painful task of curbing spending programs which have been put forward on a preliminary basis by departments and Ministers. Senator Walsh this year, with all this fanfare, has managed to produce a reduction which is no greater than the reduction effected in the Government's first Budget and which is little more than twice the amount effected in the last Budget. But we have yet to see-and Senator Walsh cannot tell us today-how this will fit into the overall Budget strategy of the Government. He has been unable to give us any undertaking that the expenditure of the Government will not increase in a way which will totally cancel out any savings which have been made, and with this statement in May 1985 we are left quite uncertain until August 1985 of the value of the exercise which has been undertaken. I want to turn from the doubts that are evident on the face of the statement to the important question of the extent to which the Government has pursued a coherent line in the statement it has put before us-the extent to which it has followed a policy which gives us a clear indication of where the Government is trying to take the economy. I could find only one element of coherence in this document; that is, that the one part of Australia most open to attack was the Northern Territory. It really interested me that in respect of that one electorate, that very remote part of Australia where something over 100,000 people live, definite cuts are to be applied-to the tune of $73m! Had Senator Walsh been as brave in dealing with the other electorates in Australia as he was in dealing with the Northern Territory, this statement would have shown cuts of over $10 billion. That is the extent to which he has been prepared to attack that electorate. It shows that one element of coherence in the Government's thinking and in Senate thinking is that it is much easier to get stuck into people who do not have a Labor member. I think that there are even more important elements of confusion in what has been put down by Senator Walsh. Let me refer to the part of the statement which purported to say that this was an attempt to restrict expenditure but to protect those most in need. I think all honourable senators would say that if it is necessary to reduce government expenditure-and there now appears to be common ground in this place that it is necessary to reduce government expenditure-one should be most careful to protect those most in need. If one looks at this document put down by Senator Walsh one finds it very clearly stated that the Government set out to target assistance to areas of greatest need. That is on page 7 of the statement. On page 8 the Government says: In choosing where to make the necessary cuts, concern for the needy and the less well-off has continued to characterise our approach to public spending. One merely has to turn over three pages and go on to page 11, to the section on child care, to see the incoherence and, I suppose, lack of intellectual integrity really which are evidenced in this document. Under the heading 'Child Care'-an area which has been given great public attention by the Labor Party, in which it is extremely proud that it has set out to create an extra 20,000 places and in which it has played plenty of politics-we find that it has set out to reduce the expenditure. How has it done it? Has it done it by reducing assistance to those in less need in favour of those more in need? Of course it has not. It has carefully preserved the number of child care places but reduced the amount of money available. Quite simply, that means that the amount of subsidy available per child care place is less. That has to mean that there is less assistance for those in need and that the places will be more accessible to those more able to pay. I acknowledge that the Government created more child care places and is in the process of creating yet more. I point out that in changes it is making, in giving priority to protecting the number of places as against protecting those in need, it is flying in the face of its own statements about giving priority to those in need. I also ask the Government to clarify, since it is very unclear following this statement, where it stands on privatisation. The Labor Party used to attack the Liberal Party and the National Party for urging the sale of such things as the shopping centre which is now part of this Government program. Privatisation used to be regarded as some eccentricity on the part of the then Government parties, the now Opposition parties. Yet in this statement the Government is embracing privatisation in one or two narrow areas. It is going to hand over the important area of defence service homes to the private sector. Of course, the Opposition welcomes that. But we ask the Government what its attitude is to the privatisation of much more substantial corporations which affect life in Australia-corporations such as the Australian Telecommunications Commission, the Australian Postal Commission, the Australian National Line and various other bodies which play such an influential part in the Australian economy and the Australian community and to which the Government has been so committed. On the one hand it is privatising defence service homes and on the other hand it is trying to give another $70m to the Australian National Line. I ask the Government just what is its attitude to using the government sector for providing things such as defence service homes as against its attitude to providing other services in the community? I ask the Minister for Finance whether this means that the Government accepts the arguments which we have put in respect to privatisation and whether we can expect to see further and considerable reforms in this area? If we can, it is important to note that this Government is busy setting up new statutory corporations. It abolishs them on one hand, while at the same time it has in the Parliament Bills to establish national commissions on occupational health and safety and on sport. There is an absurdity, illogicality and inconsistency in what the Government is doing and what it is saying to the Australian people. In terms of coherent approach I hope that Senator Walsh also will explain why Mr Dolan, who spoke last night on the economic statement-without knowing what was in it because he was hundreds of miles away and could not be expected to understand that really the statement was consistent with government policy-seemed so happy in a subsequent question to embrace the views of Mr Bob White who, it seems to me, suffered from the same difficulties of being hundreds of miles away, presumably with no more access than Mr Dolan to the views put down by the Government in that statement. I have only a few minutes left and I want to touch very quickly on the vexed question of wages policy. The Government brought the issue of wages policy into this statement which was supposedly a statement on reductions in government expenditure. The Government has thereby acknowledged just how significant this is in terms of its ability to manage the economy. The Government has stepped back completely from any argument in the next national wage case that we should prevent the flow-on into wages of increases in the cost of living occasioned by the devaluation. This statement exposes the Government because, in it, the Government clearly acknowledges the risk to Australia in allowing those consumer price index increases to flow into the economy and into wages. However, the Government opts out of the option and is not prepared even to argue before the Conciliation and Arbitration Commission that an important consideration at the next wage case is the discounting of those CPI increases. That is an irresponsible stance in respect of this issue. I do not have time to explore it further but I know that my colleague Senator Dame Margaret Guilfoyle will be addressing that aspect of the matter. I say only that it is a final demonstration, when it comes to the crunch, that this Government will not deal with the trade union movement on other than a master-servant relationship, and we know who the master is. Senator WALSH(Western Australia-Minister for Finance)(3.23) —I thought Senator Chaney was going to speak about wages. Apparently, it was only in the last couple of minutes that he remembered he was supposed to be speaking about wages. In fact, he spent almost all of his time going through a re-run of Question Time. The line laid down by the Liberal Party leadership is that the expenditure cuts announced last night are illusory, puny and generally meaningless. Below the leadership level which is defined as the Leader and Deputy Leader in the House of Representatives and the Leader in the Senate, the assertion is that if all these dreadful things are done Christian civilisation as we know it will no longer exist. As I said at Question Time I wish the Opposition could make up its mind on its assessment of the statement. Senator Chaney attempted to berate me for misleading the Senate last week-I do not think he quite used those words although that was the clear implication of what he said-when I said that the statement on government expenditure savings would not include tax increases, with one possible exception. That was subsequently ruled out. I said that it would not include tax increases but would include reductions of the Forward Estimates of expenditure. Senator Chaney, or whoever it was in the Opposition who asked the question, has now amended his question. The question asked was whether the economic statement would include tax expenditures. I said, that with one possible exception, it would not. I said it would involve reductions in the Forward Estimates of expenditure. The question has now been amended to relate to taxes and charges. The original question related only to taxes but it has now retrospectively been amended to include taxes and charges. At no stage did I say there would be no increase in charges. We have strictly followed the accountancy rules throughout this exercise. Charges which are off-sets to services provided are, by the conventions adopted by this Government, by the previous Government and by most of the countries with which we normally compare ourselves regarded as off-sets to outlays, are off-sets to outlays and therefore, are regarded as reductions of outlays. There is a clear conceptual difference between a charge levied for a service and a tax. I am sure that that is a conceptual difference of which Senator Chaney is well aware. However, the implication of Senator Chaney's statement is that the Opposition believes that charges for services provided should never be increased. Certainly a significant additional amount of money, but insignificant in percentage terms, was included in the statement last night in cost recovery increases. From memory, I think the figure was $37m. Almost, if not entirely without exception, those cost increases are approximations of the consumer price index increases since those charges were last adjusted. Senator Chaney said that some $200m of the total amount of $1,259m represented the sale of assets and increased charges. I do not actually have the analysis of those figures with me but that figure sounds reasonably correct. Although I covered that matter in Question Time perhaps I need to repeat it. That is so. However, we stuck to the accountancy rules. Under the accountancy rules those items are included legitimately as reductions in the Forward Estimates of expenditure. Even if all of those were deducted the reductions would still be more than $1 billion. If someone wants to argue the conceptual validity of those international accountancy standards that is another matter. As I pointed out in Question Time, on the other side of the ledger we did not attempt to include in the statement the more than $110m of the $120m reduction in the actual expenditure on the community employment program next year as against this year. If Senator Chaney wants to deduct that $200m attributable to increased charges and the sale of assets-I certainly do not accept his assertion about the increased charges-he can do so. If there is a case to be put for the deduction of the sale of assets components of the statement the same sort of case can be put for the addition of the $110m from the community employment program. More importantly perhaps, we did not count the long term significance of a couple of fairly small outlay items which are reasonably small in the 1985-86 Budget but which will become extremely important in later years. I will cite two of those. Firstly, I mention the proposed changes to entitlements to benefits of dependants or relatives of deceased servicemen. The High Court of Australia in two judgments, the Nancy Law case and the O'Brien case, effectively ruled that the lung cancer from which an ex-serviceman had died, I think some time in his late sixties, was attributable to smoking. The High Court noted that the ex-serviceman had started smoking when he was in the war and concluded that the Government failed to prove beyond all possible doubt that he had not started smoking because he was a member of the Services. The High Court accepted without any difficulty at all the logical broad jump that because he was a smoker he died of lung cancer after his service and necessarily because of it. I though that was generally regarded as one of the fundamental logical fallacies which every first year student was told about. Leaving all that aside, what the High Court effectively said was that the dependant of a person who died of lung cancer-in this case, the bereaved spouse-was just as much a war widow as the widow of somebody who got shot in the head at Tobruk in 1942. I must say that I find the logic of the High Court difficult to accept. I am also concerned that the power of the Parliament is continually eroded by the judiciary which has no responsibility for the fiscal implications of the decisions it makes. Leaving all that aside, the Government decided that since the Court refused to take the matter into account, in interpreting the law in the absurd way that it did, something had to be done about it and we have proposed amendments to the veterans' affairs legislation. In the first year the savings of Forward Estimates are some $7m. In the next year the estimate is $33m. In the following year it is $78m. I am not sure what the nth figure is, but the nth figure is some hundreds of millions of dollars. That is the long term effect of a fairly small item which was included in last night's statement. Senator Chaney referred to child care and was critical of the decision to decrease expenditure by some $15m. He noted that the commitment to an additional 20,000 places had been reaffirmed and that, therefore, the $15m savings would have to come from other areas. That is true. The way in which the $15m will be achieved is through a reduction in the average subsidy paid. I am glad that Senator Chaney brought this up because I think it is a matter on which some more detail could be given. Child care costs are highly variable-that is, the real costs-depending on whether it is family day care based child care, which I think is the term used, or institutional child care. The social cost of providing those services varies between an average figure of something like $35 a week for the former and $100 a week for the latter. The amount of subsidy paid to the users of those services also varies and is related to both the actual cost of providing the service and the income of the user, with one significant exception. Regardless of the level of income, nobody in institutional care is charged more than $60 a week-I think that is the figure; it is certainly of that order-regardless of the cost of providing the service. I would have thought that Senator Messner could readily work out that when there is a ceiling on the charge to the user, regardless of the cost to the supplier-in this case, the taxpayer-the demand curve might be somewhat skewed and distorted towards demands for gold-plated child care. Senator Messner —You are using very rough figures. The figure is actually higher than $60 in most cases. Anyway, you go on and make your speech. Senator WALSH —The maximum fee which can be charged in institutional care is $60 or $65. These present arrangements are skewing the demand-this is, from users and potential users-towards the highest cost form of child care and to a form of child care which, with some modifications, is a very complicated area and which tends to favour the higher income groups. I had some projections done on the cost of an extension into the future of the present policy with its present average costs per child care place provided. The answer which came out was of this order: If all responsible parents-I think that it was the term used-presently in the work force and with pre-school aged children were provided with those child care facilities at the average cost now prevailing, the bill to the taxpayers would be $500m in recurring costs and an additional $500m in capital costs. If all of those parents with pre-school aged children-whether they are in the work force or not-were to have such a service provided those figures increase to $1.5 billion in recurrent costs and $1.5 billion in capital costs. Faced with that sort of exposure, a decision was made that the average cost, at least, to the taxpayer-if not the average cost to taxpayer plus user-of the services should be reduced. Hence the origin of that saving. Again, the long term implications for government outlays of that policy decision which appears in last night's statement as $15m probably amount to some hundreds of millions of dollars. I turn to a couple of the other points which Senator Chaney raised. I gather, from the remarks that he made about expenditure on new policies, that the Opposition believes there should be no expenditure on any new policies. That means-I am sure you, Mr Acting Deputy President, would be interested in this-that there must be no assistance whatsoever to the sugar industry. It appears to be Senator Chaney's policy-presumably it is the Liberal Party's policy-that there must be no new expenditure at all. When the Government is, as it probably will be, accosted by the Premier of Queensland with hysterical demands for the keys to the vault on an ad lib basis, it might be useful to be able to say to him: 'The Liberal Party said that we must not spend anything at all on new policies'. Senator Chaney drew attention to the position in regard to the Northern Territory and said that if we multiplied the Northern Territory savings by the number of electorates in Australia, or words to that effect, $10 billion would have been cut off the Forward Estimates. That arithmetic sounds about right to me. I am not sure that it would be $10 billion, but it would be a very large amount. The answer to that is that in other States one does not have the examples of fat and waste hanging around that there is in the Northern Territory. For example, I do not think there will be too much of a political squeal in the Northern Territory today because most of the Ministers in that Government are overseas. It is typical of the behaviour of governments that the less responsibility governments have for raising the revenue they spend, the more irresponsibly they spend it. Since the Northern Territory has, by a very wide margin, less responsibility for raising revenue-I think that some 90 per cent of its total funds come straight through the cash pipeline from here-it displays less responsibility in spending that money. A major element-in fact, about half-of the reductions in the Forward Estimates for the Northern Territory announced last night was a reduction of the electricity subsidy. It is a fact of life that electricity is an innately high cost item in the Northern Territory because it is produced by oil. Accordingly, Northern Territory consumers should adjust their consumption patterns through a charging system which recognises the innately high cost of providing the service. Until very recently the Northern Territory received an electricity subsidy in excess of $500 per capita. Simultaneously the Northern Territory levied charges lower than those which applied in the city of Perth which received no Commonwealth subsidy at all for its electricity charge. I am surprised, to say the least, that Senator Chaney chose fit to defend the pre-existing financial arrangements for the Northern Territory. I have already stated in the Senate that if one projects forward the averages for the last five years of growth in payments to the Northern Territory and growth in the Australian economy, in 138 years time the entire output of the Australian economy will be consumed by the Northern Territory. That is an arithmetic exercise and I assure honourable senators that it is correct. Obviously, of course, it will never happen but it illustrates the point that sooner or later some government would be forced to do something about it. This Government has decided-as it has in many other areas-that it will be the government which will take decisions which are in the long term national interest. Finally I refer to wages. Mr Howard has already acknowledged publicly that the effect of the Australian dollar devaluation in the March and June quarters on the consumer price index will be quite small. It is the March and June quarters which are relevant to the next national wage case. The Government has therefore decided, the Treasurer (Mr Keating) and, I think, the Minister for Employment and Industrial Relations (Mr Willis) announced it last night, that it would not argue for a discounting of the CPI figure because of the devaluation factor at the next-that is, the September-national wage case. This is because firstly, it will be quite a small amount at that time and, secondly, the value of the dollar has been going through a period of instability and it is not, I believe, at all clear at what level it might ultimately settle. If a government were to argue for a discounting of the CPI because of the effects of the Australian dollar being 68c as compared with the United States dollar, it would be logically obliged to argue for an add-on, negative discounting, at every subsequent national wage case hearing if the value of the Australian dollar moved upwards. It will not be a particularly important issue at that time. The corollary of that decision is that the Government will argue that the productivity case should be postponed for the time being. The likely effect of that is that the deferral of the productivity case-I know that all this is rather speculative-is likely to have more effect on the outcome of the September national wage hearing than the decision not to argue for discounting the CPI because of the devaluation effects. Senator JACK EVANS(Western Australia)(3.43) —In case anyone listening to this broadcast has lost sight of the matter of public importance which we are debating today, it is: The continuing doubts and uncertainties about key economic issues, particularly wages policy. I think a few questions need to be asked and perhaps during the next hour or so some of them may be answered. Why do the doubts about our economy continue? Why is there so much uncertainty? Who is talking down the economy? Why cannot we all behave as loyal Australians instead of trying to disrupt and destroy the economy? I think that the Opposition has certainly played its role over the last few months in talking down the Australian dollar by stating, despite the available evidence, that the Australian economy is performing badly in the short run. Such a statement is demonstrably false. Economic growth is healthy. The trading balance is showing signs of improvement. There are long term problems. There is a massive persistent unemployment problem, a possibility of a big consumer price index increase following devaluation of the Australian dollar and no clear perception of what will happen to wages. We also have a long term foreign debt problem. But most of these problems are either inherited from many years of coalition rule or, as in the case of wages, are likely to be exacerbated if we return to Fraser-style economics. Under Labor we have experienced economic growth. We have stabilised the rate of unemployment albeit at an unacceptably high figure; we have lower inflation, moderate wages growth and increases in profits. By talking down the economy the Opposition has exacerbated the current uncertainty, or the lack of confidence, in the Australian dollar and in the Australian economy. I am amazed because the very sectors that yesterday's mini-Budget was designed to impress in response to massive pressure from the Opposition parties and the external sector-the foreign traders, financiers and speculators-are those which have played havoc with our dollar. However, these are the people whose confidence in the Australian economy is being deliberately undermined by the Opposition. In order to restore the confidence of the overseas sector in the Australian economy the Government yesterday took a step; it introduced a mini-Budget. This mini-Budget was designed to impress right across the board with its emphasis on restraint. In short it is a rerun of the Fraser years. The Hawke Government is now embracing the restrictive economic policies for which the then Labor Opposition attacked the Fraser Government. In effect, the Australian Labor Party and the Liberal Party of Australia leave Australian voters with the choice of either conservative economic policies or neo-conservative economic policies. It seems that the Australian Democrats are the only political party concerned with the economic welfare of the average Australian and the disadvantaged Australians in our community. The ALP has shown by the expenditure cuts which it chose to implement that it is taking its old constituency for granted. Let me illustrate the point. In many respects the veterans are probably one of the most disadvantaged groups. This mini-Budget has attacked decisions of the High Court of Australia-we heard Senator Walsh attack them again today-which have upheld the rights of veterans under the Repatriation Act. In particular, the Government has misrepresented the judgment of the High Court on 27 February this year in the O'Brien case. This Government has announced in its mini-Budget that in a range of areas it will seek to alter the onus of proof which has been central to the repatriation system since its inception. This Government, through changes to eligibility for special rate disability pensions, has further disadvantaged veterans. Dependant allowances are being progressively eliminated. There is to be a major review of service pensions; a massive cutting back of transporting sick veterans to and from repatriation hospitals; the abolition of the defence re-establishment loans; the sale of defence services homes scheme to private enterprise. I remind honourable senators that these are the sorts of things which have been singled out as actions against the veterans of Australia. There will be a 25 per cent increase in a wide range of pharmaceutical costs and the elimination of these benefits for many service pension beneficiaries. Thus they will cop it either way. They will either be eliminated from the beneficiary list or they will be charged an additional 25 per cent for pharmaceuticals. There will be drastic cuts in the supply of spectacles and dental services to veterans and cutbacks in the care of veterans in psychiatric institutions. I am not convinced by Senator Walsh's plea that the veterans have not been singled out for attention in this mini-Budget in a more drastic manner than they have ever been selected before to take their share of a cost cutting burden. When one tots up those cuts that are going to affect veterans they come to $123.6m-the largest single amount for any group mentioned in the mini-Budget. I give that illustration because some people have been saying that this is a mini-Budget which is not going to have a serious impact on any particular group, that it is widespread, that it is across the board and that all of us will have to pull in our belts a half a notch. I think that the veterans are in for a lot more than a half a notch of belt tightening. I would like to speak briefly about the impact on local government, which also seems to have suffered most unfairly in this mini-Budget. The Government needs to recognise that it is going to have to bear a major responsibility for the cuts to local government. Local governments were prepared to accept the 2 per cent of personal income tax formula during the lean year of the early 1980s and following the surge in income tax revenue this financial year this Government has decided to change the formula and to cut local government grants. This is a real thimble and pea trick if ever I have seen one in budgeting. Many councils are already committed to expenditure in anticipation of increased revenue this year and they will be forced to increase their rates or to cut the provision of their community services to, again, the disadvantaged, the poor, the unemployed and the aged. They might have to do both-increase rates and reduce services-but whichever choice they make it is a horrific choice, particularly for those councils which cater for a large proportion of the unemployed or the poor or the aged. This Government in abandoning its commitment to 2 per cent of personal income tax for local government, has also instituted cuts and in a sense pre-empted the recommendations that were to be brought down later this year by Professor Selth. In relation to wages, I think the Opposition has quite rightly pointed out that the Government has a wages policy problem following the devaluation of the Australian dollar. The Government's statement on wages yesterday gives some clues as to how the Government may solve that problem, but there is no definitive solution in that statement. However, let us remember just whose wages policies resulted in the wages explosion which preceded Australia's economic collapse in 1982. That was, of course, a result of the Fraser Government's wages policies. Mr Fraser ultimately responded with a wages freeze. Then the accord was introduced and put into place by the Hawke Government and this has had a major impact on Australia's economy because it has helped to reduce strikes, it has moderated wage increases and now it gives the Government the ability to negotiate a deal with the Australian Council of Trade Unions on behalf of the unions and the employees so that the real benefits of the devaluation are not frittered away in wage increases. I would be very frightened if a return to the Fraser style of confrontation with the unions were reintroduced as it would not help us to deal with the wage effects of the devaluation. It would have the opposite impact. If we want any evidence of that, we are witnessing the devastating effects of this kind of approach in Queensland today. The one thing that is shown by today's matter of public importance debate is that this Government, like its predecessors, does lack any perceivable long term plan. The very need to deliver this mini-Budget is a dangerous sign of the lack of long term planning for Australia's economy. The prospect of six-monthly Budgets-and they are now a very real prospect-does not engender stability or confidence in the economy, which is looking for direction. The Government has not made a public long term plan on the Australian economy available, despite the ongoing deliberations of the Economic Planning Advisory Council. We still have Australian businesses functioning in a vacuum. We still have international interests uncertain about Australia's future because they also fear stop-go policies and changes of direction. As long as they feel that there is no long term plan, like their local counterparts in business in Australia, they will fear for the future. A long term plan for the Australian economy, as the Democrats have been endeavouring to persuade governments of all political persuasion to introduce, would co-ordinate and link up right the way through our education, our scientific and technological development, our export incentive programs and our industry restructuring. It would also provide a degree of stability in the wages area if people could see that there was a real opportunity for them to benefit from a national superannuation scheme, for instance, a guaranteed share of our economic wealth and a guaranteed minimum income. All of these benefits are possible if put into the context of a long term plan to give people, businesses and the international financiers, that degree of confidence. There is an alternative path to solving our current external economic problems such as the fact that we export too little, we import too much, we have accumulated a massive foreign debt which will be a burden to service, and we have become overly dependent on foreign capital-we have become hooked on foreign capital-to service those very debts and that excess of imports. As a result, capital inflow tends to be unreliable and in any case, of course, the more that we borrow, the more that we have to pay back and service. Instead of sacrificing some of the most underprivileged sectors of Australian society in order to impress foreign speculators, the Government could have acted to generate more exports and to reduce our dependence on imports. Instead of cutting assistance to our exports, it should have increased assistance, it should have added to the initiatives and incentives that are needed to get our foreign trade up and running. Instead of cutting assistance to rural areas and primary producers we should be devising ways of making our rural export products cheaper in overseas markets. Instead of reducing Government grants to scientific and technological development we should be encouraging the emergence of Australian industries which are able to compete with foreign products, both in Australia and on overseas markets. We are pointing in the wrong direction. We are pointing backwards. We are taking yesterday's policy decisions instead of looking ahead, planning ahead and providing the incentives for tomorrow's industries to give this country the economic boost which it needs. This mini-Budget is strictly for outside consumption. I do not think that even the Government denies that because inside Australia we know that the economy is on target. The Government does know that. This document fudges on monetary policy and lacks the justification for production of an immediate deficit reduction. The tragedy is that it will be the defenceless people of this country who will be sacrificed at the altar of international financial institutions. Senator Dame MARGARET GUILFOYLE(Victoria)(3.59) —This matter of public importance has been brought forward today by the Opposition as a result of the deception of the mini-Budget introduced by the Government last night. It is not doubted that the objective of that mini-Budget was to give a perception about the economic responsibility of the Hawke Government. Those who have had an opportunity to look at the reaction of financial writers in today's Press will recognise that the perception that the Government had hoped for has not been achieved. I want to deal with one or two things that were stated by Senator Jack Evans in the speech he has just concluded. He mistakes history if he likens yesterday's statement and the exercise that preceded it to anything that occurred in the period of the Fraser Government. The pruning of Forward Estimates is an exercise that is undertaken by governments as a part of the Budget preparation. It is normally a private exercise that is undertaken between Ministers and the Minister for Finance. Decisions are taken by the Cabinet. What has occurred over recent weeks has been a public exhibition of the normal processes of government budgetary procedure, a public exercise to raise expectations to give an impression of economic responsibility, something that is so sadly lacking in the present Government. The objective that undoubtedly was in the mind of the Government-to give some impression of financial responsibility-makes me think that Senator Evans, when he cited history, should perhaps have likened the situation to 1975 when, following two Whitlam Budgets, the Whitlam Government struggled desperately to give some impression of economic responsibility despite the level of expenditure that had occurred in those two Budgets. It will be recalled that the Budget prepared by Dr Cairns was revised by Mr Hayden to give some impression of economic restraint just as the Hawke Government has tried to do in this exercise preparatory to the Budget. The Hawke Government has produced two Budgets. It has now embarked on a public exhibition of trying to curb expenditure and the expectations of Ministers in the Forward Estimates. It is quite misleading to compare that in any way with the razor gang or review of government expenditure exercise of the Fraser Government after about five Budgets when it embarked upon a course of looking at government programs that could be removed from the Budget completely. This trimming of Forward Estimates is a normal government procedure. For it to be elevated, as it was last night, to being some restraint on government expenditure ignores completely the fact that it is a necessary procedure to arrive at the figures for the Budget. Senator Walsh mentioned a number of things in his response to Senator Chaney and I want to touch on three of them. The first thing I mention is the somewhat misleading answer that he gave to Senator Tate about the global figure of $1 billion that has been provided in the Forward Estimates. His answer gave the impression that that figure related entirely to matters concerning State governments to be raised at the forthcoming Premiers Conference, but when pressed further it was found that he could not give any assurances as to the adequacy of that $1 billion to cover new policies including the increases to be given to State governments. So we have in the Forward Estimates a global figure of $1 billion which does not represent increases in State government expenditure or what will be required by the Federal Government for its new Budget policies. It will be recalled that Senator Walsh would give no assurances with regard to new policies. In fact, he tried to turn the situation around by saying that the Opposition was urging that there be no new policies. That was never the question. The question concerned the new policies of the Hawke Government in the forthcoming Budget. The history of this Government on Forward Estimates or on scrambling into office is that it cuts $1 and then spends $2 on new programs. If we relate the $1,200m-odd that was taken from the Forward Estimates last night to the Government's history we see that we can expect the increase in Budget expenditure for new policies to amount to over $2 billion. It will be very interesting to see whether the Government departs from its recent history and restrains the actual expenditure that is brought forward as Budget items. There was some discussion between Senator Walsh and other senators with regard to the changes that have been made to entitlements from the Department of Veterans' Affairs. I wonder at the figure that has been given as representing savings in that area arising from the High Court decisions to which Senator Walsh referred and about which he made some rather scathing comments. It is acknowledged that the entitlements under the veterans' affairs legislation are more generous in some aspects than those under the social security legislation, but I think that Senator Walsh, in the examples that he gave, ignored completely the fact that different entitlements were very likely under social security legislation for those who would not be eligible under veterans' affairs legislation because of the changes that have now been made. Therefore, I think the savings figures that have been provided on the grounds that Senator Walsh gave are more than illusory. I think they are very misleading indeed. The only other item in relation to Senator Walsh's reponse to which I want to refer is the matter of child care. He gave examples of the levels of subsidy and the assistance that is given to parents who use child care centres or the child care program. He reaffirmed the policy promise that a further 20,000 places would be created and yet he said that the average subsidy would be reduced. That is a matter of real disappointment and, in many cases, I would think, real hardship to those single or invalid parents who use child care centres for the essential care of their pre-school age or very young children. The statement that costs are highly variable and that maintenance of the subsidy would require a reduction in standards-that is what he implied in his response on this subject-I think would come as a very great disappointment to those who have worked over the years for quality child care programs and an established long term service for those who require it. I just wonder how the policy advisers in the Office for the Status of Women would feel when they saw what had been done in this exercise to a program which is symbolic to them, a program that essentially affects women's opportunities. I wonder how they would feel about what Senator Walsh has stated as the Government's objective. Reducing the standard of child care while reducing the subsidy and at the same time providing more places can only mean, given the savings that have been claimed in this document before us, that a number of people who have been dependent upon the program will suffer very great hardship. The Office for the Status of Women, which has led with sex discrimination legislation, must also be disappointed at the participation and equity program in education. The pre-school education program, again a Whitlam program, was established to provide pre-school care for every child in Australia. I think the priority that has been displayed with regard to programs that affect women or the disadvantaged reveals the philosophy of a government. It is understood and accepted that there have to be priorities in expenditure, but the way in which priorities are expressed reveals the philosophy of the Government. I think that what has occurred in this statement shows very clearly that there is some desperation in the Government's mind at the moment about the perception that the people have of it and that it is prepared to reject and abandon the symbols that it had of caring for people and improving people's opportunities either to seek their own independence, or to have support when they are unable to do that for themselves. The Opposition brought forward this matter today because it believes that there are continuing doubts and uncertainties about key economic issues, particularly about wages policy, and because none of those doubts and uncertainties have been assisted by the statement that was made last night. If there is one thing that industry and the financial markets were looking for in this financial statement it was an assurance about the Government's ability to restore faith in the economy. I think it can be argued quite successfully that the Government has clearly not done that in the statement that was issued last night. One of the reasons why it has not been able to do that is that it chose to link its expenditure cuts with wages policy. Undoubtedly, wages policy is one of the essential elements that cannot be ignored in the context of the Australian economy. Mr Keating indicated in his statement that the Government has no intention in the short term of seeking to discount the consumer price index to take into account the cost increases resulting from depreciation of the Australian dollar. In other words, full wage indexation is a matter of holy writ. It is written in the prices and incomes accord, and that accord must prevail in spite of economic realities and however much it might hurt either the public's perception of the Australian economy or the capacity of the economy to provide employment for a greater number of people. The consequences for the Australian economy of this surrender to the prices and incomes accord and to Australian Council of Trade Unions' movements will be very serious. I think the Government will feel those consequences in the months that lie ahead of us. I would have thought that the Government would be prepared to argue in the national interest at the wage hearings that lie ahead of us. I would think that to bring forward a statement on expenditure cuts from the Forward Estimates is a very unconvincing way to show that there is any serious feeling of responsibility for the wages policy. The Government has given no wages policy to deal with the consequences of the greatest depreciation in the Australian dollar for 30 years. This traditionally big-spending Labor Government-and last night's cuts certainly did not assist in removing that quality of government-is spending at a real rate of increase that is still three times the average level for the Fraser years. No one would believe from last night's statement that it is concerned to bring about real reductions in government expenditure. There is no indication that the Government has learnt from its weakness in regard to money supply. In fact, the Treasurer has further delayed taking the necessary hard decisions on money supply that are required to satisfy the confidence of financial markets. The Government has not taken serious decisions with regard to the level of government spending, and in regard to wages it has certainly shown a weakness in the face of the pressure of the trade union movement. There were various headlines in the newspapers this morning. But the headline of an article by the business editor of the Age, Mr Terry McCrann, was: 'Document that fails to impress'. I think that that was a fair judgment of it. The article states that the Treasurer: . . . has fluffed his lines-badly. Last night's mini-budget was about as hard as warm butter and twice as slippery. The capital market will not be impressed. Therefore, this statement which has taken months of work to prepare, will not impress the audience to which it was addressed. It compounded the error by choosing last night explicitly to concede full wage indexation to the ACTU without any discounting of the inflationary impact of the devaluation. Mr McCrann's article continues: At best, the market might just give Mr Keating a second chance-hoping that he will recoup by hitting the States and delivering in the August budget. I think that when Mr McCrann reads what Senator Walsh has said today about $1,000m being available to cover the increased revenue that will be given to the States he will see that as a signal that there will not be financial responsibility in dealing with the States. We have been told that that money will be available and we cannot even obtain an assurance that that $1,000m will be enough to cover what goes to the States, plus the new programs. The Prime Minister (Mr Hawke), on radio programs this morning was asked about his wages policy. His answer was as follows: What has been made clear by the Treasurer is this. That the movements in real wages in the period ahead must be less than was otherwise expected as manageable and the clear position is that by the September hearing when you will only have the March and June quarters . . . Mr Hawke said: 'When this is taken into account, there will be very little impact of the depreciation'. It was a very convoluted sentence and I have tried to simplify it. The Prime Minister continued: What we have said is that the productivity case that is scheduled is certainly appropriate for their taking into account the depreciation effect. What we don't know at this stage no-one knows is what that effect will be. He was then asked: 'Have you given in to the ACTU?' He answered: We've certainly not given into the ACTU. Certainly what we haven't given into is the blind ideological stupidity of the Opposition. What he did not say is that the Government will not argue at the wage case for any discounting of the consumer price index. It has fudged the issue on productivity for its own reasons. Certainly, what was stated last night and today by members of the Government has given no assurance to the Australian people that they have sound economic policies in prospect for the difficulties that need to be overcome. Senator RICHARDSON(New South Wales)(4.14) —I begin my contribution to this matter of public importance by referring to Senator Jack Evans's speech which he made a few moments ago. His typically platitudinous contribution to the debate added nothing to it. Unfortunately, the Australian Democrats still suffer, I would have thought badly, from the habit of wanting to appeal to every single distinct interest group around the nation. While espousing the cause of cuts in government expenditure, they are still prepared to oppose each and every cut that is announced in an attempt to add to their shrinking and diminishing constituency. I would have thought that a bit of responsibility might have been shown on this occasion. The Democrats might at least have had the courage to announce that there was a cut that they supported. Even the Liberal Party must acknowledge that cuts in government expenditure are desirable. At least, from what I have gathered in the last 24 hours, the Deputy Leader of the Liberal Party, Mr Howard, acknowledges that cuts are desirable and thinks that we did not cut enough. The Leader of the Opposition, Mr Peacock, said that we cut too much. Perhaps over the next few weeks, months or years in opposition they will sort out those differences. Last night the Treasurer (Mr Keating) outlined cuts, as we all know, of $1,259m. They were real cuts in government expenditure. They went right across the whole range of government departments. It was a serious attack on reducing the deficit and the national debt. It was not done by increasing taxation. It was done by trimming some of the fat, and some of the excesses of expenditure. The measures announced last night were, of course, in line with the Government's commitment to the trilogy. I remind honourable senators what that commitment was. It was a commitment to reduce the Budget deficit. Obviously, last night's statement went a long way towards doing so. It was a commitment that there be no increase in the overall burden of taxation and that there would be no increases in government expenditure greater than growth in the gross domestic product. There has been expectation in the community that the Government will stick to those three promises. Last night the Government went a great deal of the way towards doing just that. That is what the Opposition is so upset about. When this Government makes up its mind to cut government expenditure, to do something we all acknowledge should be done, it is the first post-war government to have the courage to live up to its promise and keep a promise just for a change. In the previous seven years, we heard lots of talk about cutting expenditure, but saw no action whatsoever. We should look at the business response-what we would call the heartland of the Liberal Party and the National Party; the area from which they are supposed to draw all their support-and contrast that response with the response we have heard today from Senator Chaney and Senator Dame Margaret Guilfoyle. First, I refer to an article in the Age this morning by Mr Brian Powell, the Chief Executive of the Australian Chamber of Manufactures-not, one would imagine, an Australian Labor Party stooge or a rabid trade union socialist. He said that he was surprised by the breadth and depth of the $1,259m cuts in the Treasurer's statement. The article states: They have taken a harder look than any government in the last five to seven years. Other governments have found it harder to cope with the harder decisions. Mr Powell said the extensive savings had 'cut flesh as well as fat, which is a very brave thing. Sure, the Government is going to be under a lot of pressure to back down, but I believe Keating has the guts to stand by it. . . Mr Powell said the Treasurer's speech had 'provided a good opportunity for a meaningful tax summit'. From what has been said by a leading business figure, I would have thought it would have been very hard to claim, as is claimed in this matter of public importance, that there is any continuing doubt or uncertainty about key economic issues. But Mr Powell was not Robinson Crusoe in the business community in praising what the Treasurer announced last night. The President of the Australian Chamber of Commerce, Mr Ken Court, stated: The economic statement in many respects amounts to a concerted first attack on waste and inefficiency in federal public spending. This is to be . . . applauded. Also, when one listens to the dreary rhetoric of years coming from the Opposition, one knows that it always says: 'Look, the market can tell. It knows if things are good or bad, it knows if the actions of government are to be applauded or jeered'. In an article in this morning's Sydney Morning Herald, Stephen Hutcheon stated: Hours before the Federal Government's mini-budget, Australian share and money markets yesterday had one of their strongest trading days so far this year. Analysts and dealers said the mini-budget was an important factor behind the rises because it demonstrated the Government's concern to come to grips with the country's economic problems. That has, of course, been reflected today in the Australia dollar's performance all around the world. It is not just here in Australia that the business community and the markets are realising that this Government has the economy under control; it is all over the world-in New York, Paris, London, Hong Kong and Tokyo. The people of the world are now understanding that this Government knows what it is about. The editorial in this morning's Sydney Morning Herald states: . . . the Hawke Government has carved $1.26 billion out of its forward estimates to reduce its spending growth in 1985-86 to about 2 per cent in real terms.. . . . The cuts should ensure that the Government can meet its 'trilogy' of Budget promises-no increase in spending and taxation and a reduction in the deficit, all measured as a proportion of gross domestic product, during the Government's current term. That was the message that the Treasurer gave last night to the people and to the markets. It is a message that by and large has already been accepted. On the other hand, if one looks at the Opposition's response, I suppose that first one has to search for alternative proposals. It will not take me long to go through the Opposition's alternative proposals because it does not have any. It has been searching and scratching around in the dust for 2 1/2 years in opposition and has still failed to come up with any definite announcements as to where it, if it were in government, would make any cuts at all. John Howard, last night on the Australian Broadcasting Corporation, did not specifically object to any of the proposed cuts. All he could do was offer two suggestions. One was to scrap Medicare. That would be an excessively brilliant idea! I would have thought that all that could do would be to promote uncertainty and confusion in the minds of the people, just as happened when the present Opposition changed our basic health care schemes seven times in seven years-or was it eight-and completely destroyed the confidence of the people in any form of health care. I would have thought that that suggestion should be treated as the joke that it is. What is more, Mr Howard suggested that there should be a 5 per cent real cut to the States. I am sure that Premiers Bjelke-Petersen and Robin Gray would be delighted with that. I am sure that there was plenty of partying in Brisbane and Hobart last night at this news. All that that would mean, of course, is that savage cuts would be made in areas where people could be directly hurt and affected. That is what the Government avoided doing. It made cuts in areas of excess, not in areas of need. It is not as if the Opposition has not had time enough to come up with some alternative proposals. But as long as we have waited, the Opposition has not found any proposals. Look at the response that the Opposition made to the 1984-85 Budget when it had the big chance to show us the lead. An editorial in the Sydney Morning Herald of 24 August 1984, commenting upon Andrew Peacock's long awaited response to Paul Keating's Budget, stated: In places Mr Peacock's attack on the Government's economic policy is blatantly dishonest. It also stated: . . . nowhere in his notably vague reply to the Treasurer's Budget Speech is there any indication of what programs would be cut to reduce the deficit and accommodate his promises. I would have thought that the people of Australia have had plenty of opportunities to hear from the Opposition as to exactly what it will do. But they have not, and they will not. They will not because this Opposition does not have the guts to announce a cut anywhere. In fact, all it could do in the 1984 election campaign was announce promises that would have added somewhere between $4 billion and $7 billion to the deficit. That is all that the Opposition has to propose as a remedy for Australia's economic ills. I would have thought that we have listened to the Opposition for long enough. Let me refer to just a part of the coalition's record when it was in government and how it helped to undermine confidence and certainty, which are the words used in the matter of public importance. Who can forget the advertisement in the election campaign that the Liberal-National Party Government would give us that fantastic fistful of dollars? How did it finance those tax cuts? Did it do so by reducing expenditure? No. Did it do so by increasing growth? No. It did so by announcing a few months later, in May, that it was taking back all those cuts plus a little bit more. That was the sort of recipe that we got from the Fraser Government. Of course, we have only to hark back to the now infamous Lynch razor gang that was going to do so much. We were trumpeted up to the hilt that it proposed to make cuts of $500m not $1,300m as we saw last night. What happened to that $500m? The National Party-the tail that wags the Liberal dog-would not cop it. As usual, when the National Party will not cop what the Liberals want, the Liberals cave in like a pack of cards. All we saw in the end was a whimpish proposal for $200m in cuts which was worth nothing to anybody. The most scandalous exercise that the coalition engaged in while it was in government, while it had the chance and while the people had given it the opportunity, was the hiding until the Labor Party came to government of just what the coalition had done with the deficit. These people now talk about tough policies and how they will keep deficits down. It is only 2 1/2 years ago that we walked in to find that we had a deficit of not $6 billion, as the coalition had been promising, but $9.6 billion. This was something that would have ruined the economy for years to come. It is just as well that at that very moment in our history the reins of government were given over to Hawke and Keating to sort out the shocking mess in which the rabble on the other side of the chamber had left our nation. I turn also to wages policy because while the matter of public importance contains the words 'particularly wages policy', no one on the coalition side has said much about this subject. Senator Chaney remembered it 90 seconds before he sat down. I think we got two or three minutes of it from Senator Dame Margaret Guilfoyle. Mr Acting Deputy President, I would like to take your mind back to the record of the Opposition when it had the chance to do something when it came to wages policy. John Howard has stated publicly that the real failure of the Fraser Government was that it never had a wages policy. In opposition the coalition still does not have any sort of wages policy. It is not a policy to announce that one simply wants to have a free market situation for wages. If we cast our minds back, it is not too long to the time when the coalition Government attempted deregulation of wages. They said: 'Look, we are not going to have any more of these Conciliation and Arbitration Commission decisions. We will let everyone sort it out for themselves'. What happened was that in 1981 we had a 17 per cent rise in wages. This was catastrophic to the economy. Indeed, the economy ran out of control not because the coalition Government at that time had a policy but because it opted out of its responsibility, as it will always do when given the opportunity. I would also like to make a point about the effect of last night's statement on the dollar. We really cannot come to decisions too early about discounting or anything else in terms of the effect of the recent devaluation. The value of the dollar is, of course, shooting up and we do not know precisely what the improvement will be. Obviously, this argument has been greatly exaggerated by those opposite anyhow. When one talks about the excessive wages policy, one also has to look at its effects and how it flows on. With the notable exception of Queensland, where rotten legislation has been introduced to try to trample upon people's rights, we have had the lowest level of industrial disputes in years. The reason for this is that even though we have slowed down wages growth workers and employers accept that the Government has got the economy by the reins and that it is doing the right thing. Let us look at what the Treasurer said last night about wages policy. He said that the productivity case scheduled for the September quarter should be deferred until the size and price effects of the depreciation are clear. As I said, we should not jump too early. He said that the September quarter wage case should proceed under the principles, that the case relates to the March and June consumer price index, that March had little depreciation effect and that June was not expected to have much either. He also said that principles do not rule out discounting; nor has the Government, but it will look at it if and when it needs to. That was all that was said last night. It is quite possible, given the way that the Australian dollar is going, that when the crunch comes we will be able to handle this matter through the productivity case. This Government is trying to create an environment in which business can recover its confidence, where investment can rise and where inflation will fall. The Government's record and its runs on the board are there. Last night was one more step in the actions that this Government is taking to turn this economy around. I have no doubt that, given the next two years, the result will be a greater majority for the Hawke Government when it is elected for its third term. Senator MESSNER(South Australia)(4.30) —I will read the terms of this matter of public importance for those who may be interested at this late stage of the debate. The continuing doubts and uncertainties about key economic issues, particularly wages policy. I suppose we should give some credit to Senator Richardson, who at least came into the chamber and adopted his best form of defence-and that is attack. The key issue on which he attacked the Opposition was to ask us where we would undertake the cuts if we say that the cuts in the mini-Budget handed down last night have not been large enough. There are a few areas that we should redraw to the consciousness of Senator Richardson and the Government. They may remember that at Question Time today Senator Walsh, the Minister for Finance, said quite clearly that he could give no guarantees as to whether or not these Budget cuts outlined last night will survive the coming Budget. The scene is set for a situation that would repeat the performance of 1983-84 when the Government announced cuts in the Forward Estimates, but then immediately proceeded to boost spending with new programs worth $2.5 billion. That is the sleight of hand trick this Government is on about. It will not guarantee that there will not be new programs in the forthcoming Budget. That is why these expenditure cuts are illusory, superficial and cannot be relied upon. Senator Cook —What are you complaining about them for, then? Senator MESSNER —Senator Cook, that great supporter of the Western Australian wine industry, interjects with his usual ill informed comments. We know that he is a great supporter of the establishment of the National Occupational Health and Safety Commission. A new Commission is being set up by legislation today in this place at a cost of over $34m, with at least 140 new employees and a budgeted rise to 300 or a figure of that order. These represent three new statutory authorities, yet I believe that already 25 new statutory authorities have been created since this Government came to power in March 1983. What has this Government done to look at those sorts of issues? It has gone ahead and implemented its own programs while it puts the screws on the people who really need the help. Let us come to those points. What last night's economic statement means to the people of Australia is that it screws down on those who need help most. One does not have to look too far. I looked at a report on the Forward Estimates that was brought down the other day by the Minister for Finance, particularly page 36 where the expenditure items are summarised. Under the heading of 'Assistance to Families', the key unit in our society, we find that there is to be a reduction in expenditure of 0.2 per cent. That is the scale of the Government's thinking. Let us examine another area which offsets that kind of thinking-and this is how this Government goes about cutting expenditures. It is so conscious of the taxpayers' welfare that it goes about looking after expenditure wherever it can in the area of the invalid pension. The amount allocated has increased by $119m. Under questioning in the Estimates committees and in debates in this place last year, it was revealed that the Minister responsible at that stage, Senator Grimes, gave instructions to medical officers administering the program to be more lenient in giving out invalid pensions. He is on the record for that. Does that show a real concern about government expenditure? These are the facts. The document that was before the House last night is cosmetic and without any real effect in changing the direction of government expenditures. Senator Kilgariff —You have driven him outside. Senator MESSNER —Senator Cook is easily driven outside. The document is an exercise in creative accounting. It fails in the area of leadership. Obviously it was designed to create an impression in the community that the Government knew what it was doing, that it was determined to change the direction of the Australian economy, or at least the perceptions of it, and in that way to try to stop the fall in the Australian dollar. What people in the community, the financial community, the businessmen were looking for was some definite statement as to what this Government intended on wage policy. That is where this document fails again. Not only did it pile hardship on the most needy, but it failed to discuss this vital element of policy which is facing us right now, in the light of the devaluation of the dollar. The newspapers recognise that. The editorial in the Melbourne Age on 15 April 1985 recognised the need for that and encouraged the Government to do something about it-and it has not done so. The Australian Financial Review on 12 April 1985 drew attention to this very important need as follows: Mr Hawke's basic credibility problem with all this is that he is negotiating about wage rises that are in addition to full indexation. I will come back to that point. The editorial continued: Mr Hawke is at sea because even a serious argument about possible additions to full indexation is rightly inimical to financial markets. The balance is so fine between full indexation of wages and inflation that confusion about where the Government stands must inevitably lead to fears in the markets, as Mr Hawke is finding. That key issue is summed up very well in that article-namely, that the perception about leadership in wage policy is the key to financial market stability. Let us see what the Government says about that. In its financial statement yesterday, instead of showing a determined attempt to say what the Government's policy will be-that it will not support productivity wage increases, that it will not seek to defeat indexation, and will not go to the wages tribunals to seek that kind of approach-it argued weakly that it will be discussing with the Australian Council of Trade Unions how to trade off productivity increases later in the year as against a discounting in wages which would perhaps be desirable as a result of the devaluations of the Australian dollar. That is the weak argument that this Government is seeking to sell-some kind of backdoor deal with the trade union movement. It cannot come out and deal directly in the open and lay down its position, because it knows that it is in the thrall of the trade union movement. Many honourable senators on the Government benches owe their pre-selection to the trade union movement and are beholden to it. How can they stand up in this place and argue appropriate wage policy for all Australia when they are so beholden to a section of it, the trade union movement? They cannot and they will not, and certainly the Treasurer Mr Keating, last night did not. This document is a disaster in that respect. The comment one reads in the newspapers today shows clearly that that is so. The editorial in the Australian Financial Review today said that Mr Keating: . . . wriggled out of any firm commitment on wages policy by arguing that the impact of devaluation on the CPI is gradual and uncertain. The editorial continued: This is quite true but it hardly excuses a simple declaration that therefore full indexation can safely proceed in September. I believe that editorial says it all. I return to the point about the productivity case that is coming up next year, and the attempt by the Government to trade it off against discounting. I do not know how many honourable senators on the Government side saw on television this morning Mr Geoff Allen from the Business Council of Australia. He said: In our view there really ought not to be a distribution to labor-- he means to wages- through the productivity hearing in any case . . . He was thinking of the unemployed in the community rather than the employed. That is the vital element that is missing from this Government's thinking. All it is concerned about is looking after those who are in jobs now. It is not interested in taking on the trade union movement and seeking to increase the number of jobs for the unemployed in the Australian community. Senator Kilgariff —The club. Senator MESSNER —That is the club, as Senator Kilgariff so rightly points out. Mr Allen's remarks are particularly pertinent because they indicate that productivity increases should go into the area of private investment where jobs can be created. Did not Mr Hawke, the Prime Minister, say this morning on AM that, indeed, the public sector had to get out of the financial markets now and make room for the private sector to expand its investment and so create more jobs for the unemployed? Yet the Government does the opposite. It says that that is what it wants to do but it does not do it. Why? Because it is in the hands of the trade union movement and it cannot move without losing its solid political base in that area. The Government knows that. I just want to repeat that point: Mr Allen says it all, that the way in which we can create jobs for the unemployed is by saving our productivity gains in such a way that we can stimulate private investment in this country. That is a vital element in this thinking. This Government has failed to address that matter in its wages policy. That point having been stressed, I want to refer quickly to just one or two other matters, in particular to the freezing of nursing home fees. Senator Walsh sought to make fun of this matter in Question Time today. In South Australia, Victoria and the Northern Territory nursing home fees will now be frozen. As a result, there is a chance that a number of people will be forced out of nursing home beds in those States and the Northern Territory. I want to make this point to the Government, which should appreciate it and I am sure that in its saner moments it does: The increased costs which appertain in those States result from State government regulations, from the imposition of certain ratios of staff to patients. This has the effect of driving costs higher in those States. The Commonwealth must bear the cost. The appropriate response from the Commonwealth would be to go to its colleagues, the Premiers of those States, negotiate with them and seek to have those charges reduced. Perhaps that is what the Government intends doing in the Premiers Conference. Maybe that is what it intends to say-I do not know-but the Government should at least acknowledge the truth of that position at this moment. The second area was referred to by Senator Dame Margaret Guilfoyle, and that is child care places. The Government is cutting current support levels for the people most in need of child care but maintaining the sacred cow of its program announced two years ago to increase the number of places by 20,000. Where is the logic of that? If the Government is seeking to cut from the Budget expenditure in the area of child care it should be attacking the new places because they are the ones which will cause the increase in the future. They will be an ongoing increase to expenditures. This is what this Government does not do; it does not face up to the real issues at all. All it does is fool around at the edges and it never gets things right. Unfortunately, that is the situation with child care and with numerous other measures which have been mentioned by my colleagues this afternoon. I conclude by reiterating that not only in the Opposition but also in the business community, certainly in the welfare community and in the wider Australian community, there are continuing doubts and uncertainties about this Government's policies and particularly about its key economic policies and its lack of any coherent wages policy. Senator COOK(Western Australia)(4.45) —This matter of public importance signals a new strategy-the poetic might even say a lunatic, mock heroic strategy-from the Opposition. Instead of attacking us at our weakest point the Opposition has launched a human wave assault from its front bench at our strongest point-the fortress of the Australian Labor Party-led economy. It could be that the ideologues of the Opposition believe their rhetoric and perhaps that is why they are doing that. It could be that the new approach is born out of desperation and frustration because, as the economic progress inexorably continues, the chances of a Peacock-led government recede. Perhaps that is why the Opposition is doing that. It could be that the Opposition is gripped by childhood images of the Boys' Own Annual-or girls'-and the Opposition hopes that it will be eulogised in verse like the Charge of the Light Brigade. Perhaps that is why it is doing that. The realists among us know that the situation is different. The last assault upon the fortress of the economy-an attack upon the Government a month ago about the waning fortunes of the Australian dollar-resulted in confidence in both the dollar and the Government rising. The Opposition is not so much poetic as foolish. It is as irrelevant as its arguments, which are irrelevant indeed. The facts about the Australian economy are that since 1983 when we came to power we have strongly signalled our intentions and acted firmly on them. All of the macroeconomic measures we have proposed have been taken up. There is no mystery about where the Hawke-led Government stands on the economy. We have been bold, moved confidently and delivered upon our promises. Even the audience to which the Opposition is appealing now with this matter of public importance is not listening. Last night on a special edition of the National the Business Council of Australia indicated through its President, Mr Bob White, strong support for the Government's position. I want to quote a few excerpts from the question and answer routine on that program. The transcript states: JOURNALIST: If you are a little more confident now, how can we expect your confidence to manifest itself? How will the Government be able to measure this confidence? The President of the Business Council of Australia, Bob White, referring to the May economic statement delivered by the Treasurer (Mr Keating) last night, replied: I think there will be widespread support. It will be very difficult for any single area of the community to criticise the Treasurer's policies or Treasurer's announcement tonight because virtually no area of activity has been exempted from the Government's attempt . . . The transcript continues: JOURNALIST: Mr White are we now likely to see more investment, more sales, more jobs, that sort of thing, as a result-now that you're getting what you want? WHITE: I think this will restore a lot of confidence in the investment community. That is the Business Council commenting upon the Treasurer's May economic statement. To traverse the reviews that statement has received, let me go to another speaker, Mr Ken Court, the son of the conservative former Premier of Western Australia, Sir Charles Court. Mr Ken Court is now President of the Australian Chamber of Commerce. He said: . . . the statement should be warmly applauded as a first attack on waste and inefficiency in Federal public spending. The spending reform should be extended by a tripartite review of waste and inefficiency . . . They were warm words indeed from conservative spokesmen. They were not, of course, the only ones. In the corporate sector, one sees comments by Sir Arvi Parbo, the chief executive of Western Mining Corporation Ltd, who applauded the Government. Andrew Robb of the National Farmers Federation gave very strong support in comments he made. Editorials and comments by feature writers in the Age, the Canberra Times and the Sydney Morning Herald all have warmly and glowingly acknowledged that what the Government has done in announcing its May economic statement last night is cut $1.2 billion-odd from expenditure to get the full-year effects of the savings of that money and, therefore, to be in a position to lower the deficit and deliver the trilogy. That has been recognised as the effect of last night's announcement. That is yet another of the bold and firmly delivered initiatives of the Government. It has given confidence to both the money market and the stock market, as has been remarked upon today. The Australian dollar, in anticipation of the economic statement, rose to its highest level since it began to fall. Of course, the stock market is now booming. The market is signalling approval to this Parliament and the community at large that the track, the economic direction of this Government, is proper. Let us remember that this matter of public importance was launched by the Opposition parties. It is important when considering their allegations, promises and performance to look back to the Fraser years to see how they managed the economy when they were in charge. There is a residual hanging-over of the conservative ethic in Australian politics because there is still an opportunity to compare the two different approaches. We can compare the Bjelke-Petersen regime in Queensland and the wallowing economic fortunes of that accursed State because of the leadership of the Premier and his conservative policies with the rising, strong and firmly improving fortunes of the Australian economy. However, let us look at what the Opposition parties achieved when they were in power. In 1982, their last year of office, non-farm economic growth was 0.9 per cent. In 1983, the first year of our period of office, non-farm economic growth rose by 2.6 per cent and last year by 5.1 per cent. The years 1983 and 1984 showed in Australia the strongest economic growth of any country in the industrialised world. We can contrast that with 1982-83, under the former Government, when there was negative economic growth of 1.1 per cent. Those opposite cannot blame the drought as they have been doing because Fraser's record in the seven years of his period in office shows an average growth in the economy of less than 2 per cent. Our record, I reiterate, was growth last year of 5.1 per cent, and that growth means jobs, profits, new investment and expansion. The Government's economic policies are grounded in giving clear signals and following through. Last night's mini-Budget, as it has been called, or economic statement, as it really was, declared cuts of $1.259 billion. We clearly signalled that we intended to provide cuts of that magnitude. The cuts delivered cut expenditure programs that required some paring back in order to get the full year savings on those expenditures, to lower the deficit and to keep the promise of trilogy. As well, we floated the Australian dollar in 1984, something that the Fraser Government talked about but never had the courage to do. When its fortunes waned we had the courage to stick with our undertakings confidently to make sure that we took positive advantages from the devaluation while countering the negative effects of the devaluation. We moved confidently to allow for a freeing up of the banking system in Australia and agreed to introduce new foreign banks, sixteen of which are coming in. As a general strategy, we have provided the approach of giving government stimulus to the economy when it was flagging and needed lifting and, as it has lifted, we have gradually withdrawn from the economy and provided room for expanding private investment to come in-not crowding that out-to allow for growth without overheating interest rates. This was our main strategy. It is showing signs of working, and the working of that strategy was the basis for the Australian people returning this Party to government at the election at the end of last year. We have taken the uncertainty out of wage fixation by adhering to the accord. As a consequence, industrial disputes are at a 17-year low. The clear inference is that if workers do not know how their fortunes will be affected they will take industrial action. Now they know confidently that their wages will be indexed according to movements in the consumer price index every six months, and that takes the uncertainty out of it. They have security. They have reacted accordingly. Disputes are at a 17-year low. There have been three increases in wages in the last 26 months and the next wage increase is not due for another four months. Through the accord, tax cuts and Medicare we have been able to keep inflation down. The Government will pull off a major tax review in July and in August bring in a sound Budget enshrining the trilogy-tax, expenditure and deficit-which will guarantee that the private sector will be able to continue to share in the economy, that productive investment will be up and that job creation will grow, as will private sector growth. They are some of the things that we have done. They ought to be clearly on the record. What also ought to be on the record, given the nature of the debate that has flowed from the Opposition in this chamber, is that, had the promises of Mr Howard at the last election been believed, there would be a still-blowing-out Budget. The promises of Mr Howard, in real hard terms, have been costed to show that there would have been expenditure of $1.08 billion more than was expended when we were returned to office. They were the hard promises, the so-called inducements to vote Liberal, in the last election which would have had irrational effects on the economy, would have blown out the deficit further and would have pushed up interest rates accordingly. In fact when one looks down the list of those promises one can see that they are nothing more than an attempt to pork barrel the electorates which the Opposition earmarked as target areas for itself. It is testimony to the good sense of the Australian people that they just did not believe Howard, based on his performance as Treasurer during the Fraser years and on his presiding over huge and growing unemployment, ballooning inflation and massive deficit problems. That is his record and that is what we remember him for. Every time he puts his head up to talk about fiscal responsibility and economic restraint we ought to remind him of his record. This matter of public importance, however, is supposed to deal in part with wages policy. In the few minutes left to me I want to turn to that matter because it is of prime importance when one considers how one should try to manage an economy as diverse and as subject to different pressures as the Australian economy. First, let me deal with some of the matters that Senator Dame Margaret Guilfoyle and Senator Chaney spoke about because they really took upon themselves the soft option. Senator Jack Evans of the Australian Democrats, unfortunately for him and for his benighted Party, also fell foul of that approach and attacked particular cuts. The truth is that we made cuts that were necessary. Had we not made cuts and not brought in a May economic statement announcing those cuts, we would have been attacked today by the Opposition for being fiscally irresponsible. That would have been the main thrust of the attack of those opposite. They would have tried to stampede business confidence, attack the Australian economy and lower general confidence in our handling of it. That would have been their case. Everyone knows that that would have been their case. Left, therefore, to argue that we were right in the macro settings that we adopted, they have done the soft thing. They have said: 'Okay, the cuts have been made. Let us select some of the juicier ones, misrepresent them, try to get people confused about them, scare them and attack particular cuts'. Senator Messner —We would not do that. Senator COOK —The lie was proved by Senator Messner himself because while Senator Dame Margaret Guilfoyle and Senator Chaney were pumping themselves up and stirring up their emotions in an attack upon particular cuts, he followed them by saying that all the cuts were illusory and cosmetic. When he gets into the party room he had better sort out with his Leader and his senior finance spokesperson who is telling the truth-he or they. The facts are that the cuts were across the board. There was a bit in each area. They were fair and in accordance with the accord. They cut $1.2 billion off our expenditure. They have helped turn the deficit down. They are an incentive and a signal to the private sector to take up the expansion. What those opposite failed to do when attacking particular cuts, and what they ought to have had the courage to do if they wanted to be seen as a responsible alternative government, was to indicate which areas they would have cut. They declined to do that. They have not had the guts to say where they would have pared back. But had we not made those cuts, they would have been criticising us for being too weak to make them. If those opposite are to be credible and are to try somehow to argue that Howard was right to propose in the election campaign expenditure of an extra $1.08 billion, they ought to be honest and say what they would have cut. They do not have the guts or the courage to say that. This debate is also supposed to be about wages policy. I was mystified at first why that was the case, but now I see that those opposite are trying to use this occasion to argue that wages should be reduced. There has been a reduction in real wages. Wages have been reduced as a proportion of the gross domestic product and profits have risen over the last two years of this Government. We are now experiencing 1960s levels of wage and profit share of GDP. That has been done painlessly with the consent of the trade union movement and has helped enable the economy to expand. No back door deal is involved because what has happened between the Government and the ACTU is nothing more than what happened between the ACTU and the Fraser Government. As a Vice-President of the ACTU I well remember sitting in the Cabinet room at a meeting chaired by Malcolm Fraser when he tried to do a deal in 1982 to get the union movement in this country to accept his 1982 Budget cuts so he could sail into the 1983 election. Honourable senators opposite sought an accord then but now condemn the Government for having one. We have achieved what honourable senators opposite tried to do. Honourable senators opposite are now saying: 'Don't do as we did, do as we say'. That is the height of hypocrisy and they know it. I move: That the business of the day be called on. Question resolved in the affirmative. Senator MASON(New South Wales) —I seek leave to make a personal explanation. Leave granted. Senator MASON —I thank the Senate for its indulgence. I rise to answer misrepresentations in two documents which have come to my notice. The first document is the so-called 'Defence and Foreign Policy Survey' authorised by Mr Stephen Litchfield, who I understand is the Secretary of the New South Wales Liberal Party. This document is circulating among the public in New South Wales. In that document it is claimed that it is sponsored for the Leader of the Opposition (Mr Peacock). The document also has attracted some media comment which brings me to the second document to which I draw attention. I refer to the 3 May issue of Inside Canberra in which the Australian Democrats are stated to be: 'the prime advocates of unilateral nuclear disarmament'. It is reasonable to assume that that argument in Inside Canberra in fact is derived directly from the Liberal Party survey since that article earlier discusses the Liberal Party's defence and foreign affairs policy survey. In fact, that is the main substance of the article. That is supported by the wording of the Liberal Party survey itself. Although there are questions in the survey there are also statements. Question 11 of the survey states baldly: The Nuclear Disarmament Party, the Democrats and the left wing of the Labor Party support unilateral disarmament. This means the western allies would be obliged to reduce their defensive arms while the Soviets are free to maintain their present levels of armaments or continue modernising and refining their nuclear weapons. Do you consider unilateral disarmament would guarantee continued peace? The statement that the Australian Democrats support unilateral disarmament is plainly untrue and, if left unanswered, would be damaging to me as the only New South Wales Democrat member of this Parliament. Indeed, it is relevant that the Inside Canberra article made the further point: . . . that the Democrats have had very much the worst of the unilateral disarmament argument. To redress that balance I say that the Democrats are flatly opposed to unilateral disarmament proposals which seek to force disarmament on a single power. The Democrats see all five nuclear powers as equally culpable and responsible to the world for the appalling predicament we all face because of the horrifying consequences of even a limited nuclear war. The DEPUTY PRESIDENT —Order! Senator Mason, in a personal explanation you have to explain something of a personal nature. I understand your connection with New South Wales but you must not use this as an occasion to defend attacks upon the Democrats as a party. It must be something that affects you personally. You have to make a personal explanation. Senator MASON —Mr Deputy President, if I may speak to your point- The DEPUTY PRESIDENT —Senator Mason, I have ruled on what you must do. You must confine yourself to a personal explanation. Senator MASON —Mr Deputy President, I have seen no fewer than five Liberal Party senators rise in succession to make similar personal explanations. They were allowed by the Chair to do so. The Australian Labor Party has done this frequently. Mr Deputy President, I seek your indulgence on this matter. The DEPUTY PRESIDENT —Senator Mason, you are entitled to make a personal explantion. You have leave to do so. You may continue your personal explanation but I want you to relate it to something personal and not a general defence of your party's policies. Senator MASON —Mr Deputy President, I merely assert that that statement plainly is untrue and damaging to me, as the only New South Wales Democrat member of this Parliament. Mr Deputy President, to support that point I refer you to the last statement in the Liberal Party's document which states: To Andrew Peacock, Yes! This is an appeal for funds- Because I feel strongly about preserving peace through strength- I like that, Mr Deputy President- I want to do everything I can before these dangerous lobby groups place our security at risk. I am the only representative of what is called that dangerous lobby group in the State of origin of this document. The document continues: Please use my donation as ticked below to process and analyse the survey . . . The clear accusation is that I am a member of a dangerous lobby group placing Australia at risk. It is scurrilous and untrue. Security already is at risk now because we are a nuclear target. The DEPUTY PRESIDENT —Order! Senator Mason, you are getting very far away from a personal explanation. If you cannot confine your remarks to a personal explanation I will have to ask you to cease. Senator MASON —Mr Deputy President, the only other point I want to make in support of this argument is that an overwhelming majority of our members have voted to accept two cardinal policy considerations: Firstly, that Australia will ratify all existing multilateral arms control and disarmament treaties-- The DEPUTY PRESIDENT —Order! Senator Mason, you have gone far beyond the realm of a personal explanation. I think you are trespassing on the indulgence of the Senate. The explanation really must be something that affects you personally and not a general defence of the policies of your Party. Senator MASON —Mr Deputy President, I take your point. Finally, I make the point that I renounce and deny the scurrilous statements made in the Liberal Party document. I think it is relevant to this personal explanation that the document originated from a political party in this Parliament and in this Senate. I bring to your attention the fact that that is so. Senator Chipp —The Leader of the Opposition is named in it. Senator MASON —The Leader of the Opposition is named in it. I reiterate that what has been said is against not only my own convictions and what I have said in this place again and again but also that which is stated in our policy. In conclusion, having renounced and denied those statements, I call on all Australians who may get a copy of the survey to recognise it for the dangerous rubbish it is. Senator COLSTON(Queensland) —On behalf of the Senate Standing Committee on Education and the Arts, I present the Committee's first report on the examination of annual reports. Ordered that the report be printed. Senator COLSTON —by leave-As honourable senators know, under Senate sessional order 7, annual reports tabled in the Senate are referred by the President to the legislative and general purpose standing committee which he deems appropriate. Forty-one annual reports of government departments, statutory corporations, non-statutory bodies and the operations of certain Acts of Parliament are referred to the Senate Standing Committee on Education and the Arts. These are listed in appendix 1 to the report. The Senate Standing Committee on Education and the Arts intends to produce a series of short reports on matters arising from its continuing examination of annual reports. The report I table today is concerned with the timeliness of reporting. Other reports will deal with particular annual reports and with topical issues raised in reports. In the course of its examination of annual reports the Committee will conduct hearings with representatives of some of the agencies whose reports are referred to it. In this regard I mention that last Monday, 13 May 1985, the Committee took evidence from representatives of the Australian Capital Territory Schools Authority about certification and assessment in secondary education in the Australian Capital Territory. These issues were referred to in the Authority's 1983-84 annual report. As I have mentioned, the Committee's first report addresses the question of when the annual reports of departments and authorities became available to the responsible Ministers and to the Parliament. In the Committee's view, timeliness in reporting is of paramount importance for effective parliamentary scrutiny of the activities of the Executive Government. In this first report on the examination of annual reports, the Committee has found that, with two possible exceptions, all bodies whose reports it has scrutinised are aware of the statutory requirements and government policies relating to the presentation of annual reports. It is concerned, however, that a significant minority of the annual reports it has examined were not presented to the responsible Minister within six months of the end of the year, as is required by statute or government policy. For an annual report to be of any use to the Parliament and to the public, it should be presented as soon as possible after the end of the year and certainly within six months. The Committee considers it unsatisfactory that about 30 per cent of statutory corporations found it necessary to seek extensions of time to present their reports. Although there were generally good reasons for delay, the Committee considers that obstructions preventing the timely submission of annual reports must be overcome if Parliament is to exercise effective scrutiny of the agencies of government. Due to the early rising of Parliament in 1984, most annual reports were not tabled until late February 1985. This was unavoidable. Nevertheless, where it is obvious that a long delay will occur between the presentation of a report to a Minister and its tabling in Parliament, reporting bodies should take advantage of the existing arrangements for the distribution of reports to senators and members out of session. In conclusion, I congratulate the majority of government agencies on their efforts to produce timely annual reports. I exhort the others to follow the example of those agencies which made the necessary effort and produced their reports on time. I commend the report to the Senate. Senator TATE(Tasmania) —I present the sixth report of 1985 of the Standing Committee for the Scrutiny of Bills concerning the Ashmore and Cartier Islands Acceptance Amendment Bill 1985; the Banks (Shareholdings) Amendment Bill 1985; the Customs and Excise Legislation Amendment Bill 1985; the Customs Tariff Amendment Bill 1985; the Fishing Legislation Amendment Bill 1985; the Human Embryo Experimentation Bill 1985; the National Occupational Health and Safety Commission Bill 1985; and the Petroleum (Submerged Lands) (Cash Bidding) Amendment Bill 1985. I also lay on the table Scrutiny of Bills Alert Digest No. 5 dated 15 May 1985. I move: That the report be printed. Senator HARRADINE(Tasmania)(5.12) —I have spoken to the Chairman of the Standing Committee for the Scrutiny of Bills. I am not in possession of the report as yet because of distribution problems and the fact that the meeting took place only today. Having spoken to the Chairman, I seek leave to table the response of the consulting draftsman and my preliminary comments on the Human Embryo Experimentation Bill. Leave granted. Question resolved in the affirmative. Senator COONEY(Victoria) —I present report 230 of the Joint Parliamentary Committee of Public Accounts-Auditor-General's report 1980-81-Response. Ordered that the report be printed. Senator COONEY —by leave-Report 230 contains the response to the Committee's 209th report, in the form of a Department of Finance minute sent to the Committee by the Minister for Finance. Honourable senators will recall that the Committee's 209th report, which examined reports of the Auditor-General 1980-81, was tabled on 8 November 1983. The Committee's conclusions and recommendations concerned the Audit Act requirements regarding Governor-General's warrants; and the administration by the Department of Social Security of the national benefits system and the homeless persons assistance program. The Committee is satisfied with the responses provided by the departments concerned. As a result of the Committee's recommendations, the departments of Social Security and Housing and Construction have: Developed a new formula for assessing subsidy levels for proposed facilities; replaced the homeless persons assistance program with the supported accommodation assistance program, SAAP; completed and printed the homeless persons assistance program guidelines; provided, under the new crisis accommodation program, CAP, housing capital funds for the supported accommodation assistance program, SAAP, services; stated their willingness to undertake regular evaluation studies on existing homeless persons, facilities to assess past design decisions. The Department of Social Security responded to the Committee's recommendations regarding the national benefits system by instituting a project control system, MAPPS, and investigating its use to ensure proper recording of resources utilisation. In addition, a national back-up computer strategy has been implemented. The Department of Finance, in consultation with the Auditor-General, is considering simplification of the warrant procedures to be introduced during 1985. I commend this report to honourable senators. Assent reported. Bill received from the House of Representatives. Ordered that the Bill may be taken through all its stages without delay. Bill (on motion by Senator Grimes) read a first time. Senator GRIMES(Tasmania-Minister for Community Services)(5.17) —I move: That the Bill be now read a second time. I seek leave to have the second reading speech incorporated in Hansard. Leave granted. The speech read as follows- This Bill will amend the taxation law in a number of ways. It will abolish the rule, known as the 30/20 rule, that requires life assurance companies and certain superannuation funds to hold specified proportions of their assets in public and Commonwealth securities. It will amend the law to extend existing anti-tax avoidance provisions to counter further variants of avoidance schemes of the expenditure recoupment type. It also contains the measures necessary for the phased introduction of personal income tax on Christmas Island and the introduction there of full company tax and medicare levy in accordance with our decision to fully integrate the island with mainland Australia. The secrecy provisions of the income tax law are to be amended to enable the Commissioner of Taxation to supply further information for statistical purposes to the Australian Statistician. The Bill also proposes amendments of the dependant rebate provisions of the law to ensure that the social security family income supplement will not be treated as separate net income of a dependant. Amendments of the pay as you earn provisions of the law will give employers rights of objection and appeal in respect of certain penalties imposed for non-compliance with those provisions. Yet further amendments will provide for interest to be paid by the Commissioner of Taxation on amounts refunded as a result of a successful objection or appeal in respect of penalties imposed for non-compliance with the pay as you earn and prescribed payments provisions. And finally some formal amendments of the Income Tax Assessment Act and the correction of a drafting error are to be effected by the Bill. Mr President, I will now briefly outline each of the more significant measures contained in the Bill. Abolition of 30/20 Rule This Bill will give effect to the Government's decision, announced on 10 September 1984, to abolish the 30/20 rule-a further step in deregulating Australia's financial system. Compliance with the 30/20 rule is a condition placed on life assurance companies and certain superannuation funds before they qualify for special tax concessions, including in some cases complete freedom from tax. The rule requires such companies and funds to hold at least 30 per cent of their assets in public securities, including at least 20 per cent in Commonwealth securities. In relation to life assurance companies, abolition of the 30/20 rule will mean- that tax exemption in respect of investment income attributable to superannuation and other eligible policies will no longer be conditional upon observance of the rule; that there will be no restriction on the rebate of tax allowable in respect of assessable dividends; and that the special deduction allowable in respect of calculated liabilities will be a flat one per cent irrespective of the level of investment in public or Commonwealth securities. Two transitional rules will apply for the year of income of a life assurance company in which 11 September 1984 occurred. Under one of those rules the calculated liabilities deduction for the year of income in which 11 September 1984 occurred will be a composite of a partial deduction under the formula in the law being repealed by this Bill and a partial deduction at the flat rate of one per cent. The granting of a composite deduction for calculated liabilities will mean that a life assurance company which at 10 September 1984-the proposed date of abolition of the 30/20 rule-had public and Commonwealth securities in excess of the amount necessary to satisfy the 30/20 rule will not lose the benefit afforded by that excess. The other transitional rule concerns the rebate of tax on dividends that is to be allowed in the year of income in which 11 September 1984 occurred. Mr President, at this point I mention that the Government received a submission from the Life Insurance Federation of Australia on the question of appropriate transitional rules. While it has not been possible to adopt all the suggestions put forward, the rules contained in this Bill have been developed with the practical difficulties mentioned by LIFA in mind. In relation to superannuation funds, abolition of the 30/20 rule will mean that funds presently subject to the rule will no longer have to comply with it to qualify for exemption from tax on investment income. The other concessions presently available to superannuation funds and life assurance companies observing the 30/20 rule will, subject to their meeting other existing conditions not related to that rule, be available for the whole of the income year in which 11 September 1984 occurred, notwithstanding that the 30/20 rule may not have been complied with during the first part of the year. The abolition of the 30/20 rule is not expected to have any discernible effect on revenue. Expenditure Recoupment Schemes By this Bill the specific anti-tax avoidance provisions of the income tax law applicable to what are termed 'expenditure recoupment' schemes will be further extended yet again. Briefly, those provisions are designed to deny tax deductions or rebates for certain expenditure incurred after 24 September 1978 under a tax avoidance scheme entered into after that date. Under these particular schemes the taxpayer or an associate of the taxpayer obtains a benefit, the value of which, when combined with the sought for tax saving, effectively recoups the claimed expenditure. Hence the description 'expenditure recoupment' scheme. The existing provisions apply to no less than 19 variants of the basic expenditure recoupment scheme inserted on four separate occasions by amendments of the law. Measures proposed by this bill will extend the provisions to two further variants, details of which recently became known. The latest variants of the basic scheme seek to exploit the special income tax deduction allowable for capital expenditure incurred in respect of a unit of industrial property, and the deduction allowable for losses and outgoings incurred in gaining or producing assessable income or in carrying on a business for the purpose of producing such income. Consistent with the statement by the former Treasurer when legislation action against expenditure recoupment schemes was first announced on 24 September 1978, the amendments proposed by this Bill will apply from that date. Specifically, the amendments will apply to expenditure incurred after 24 September 1978 under schemes entered into after that date and before 28 May 1981. That latter date was the date of effect of the general anti-tax avoidance provisions of the income tax law-part IVA. In conformity with the existing law, the amendments will also ensure that there will be no carry-forward to the 1978-79 and subsequent income years of prior year losses arising under any such schemes entered into on or before 24 September 1978. Mr President, it is estimated that $25m in revenue is at risk in relation to schemes of this kind entered into after 24 September 1978 and before 28 May 1981. In proceeding with these amendments, the Government is conscious of the decision by the Federal Court late last year in the case of the Federal Commissioner of Taxation V. LAU, which concerned the application of the existing expenditure recoupment provisions of the income tax law. On the facts of that particular case, the Federal Court confirmed the Supreme Court finding that the expenditure recoupment provisions of the law did not apply to deny the deductions sought by the taxpayer. The implications of that decision are presently being considered by the Commissioner of Taxation. The Government will, of course, consider any advice he may tender to us in relation to the implications of that decision on the expenditure recoupment provisions. Christmas Island The Bill will give effect to the decision, announced by the Minister for Territories and the Acting Treasurer on 10 April 1985, to phase in personal income tax on Christmas Island from the commencement of the 1985-86 year of income and to also introduce full company tax and the medicare levy from that time. Extension to Christmas Island of taxation and medicare levy obligations is an important element in the package of measures necessary for the integration of the island with mainland Australia. The amendments will remove existing income tax exemptions for income derived by Christmas Island residents from sources in Christmas Island, Norfolk Island, Cocos (Keeling) Islands and other ex-Australian sources. That income will be equated with income from mainland Australia, in relation to which the existing income tax exemptions do not apply. The amendments will also include Christmas Island in income tax zone A with effect from 1 July 1985, and individuals resident there will be eligible for the special zone rebate from that date. Christmas Island resident individuals will, for the 1985-86 year of income, be liable for 25 per cent of the full mainland tax applicable to the previously exempt income. For 1986-87 and 1987-88, the phasing will be on the basis of 50 per cent and 75 per cent respectively of mainland tax applicable to such income with full personal tax first applying in the 1988-89 income year. As indicated in the announcement of 10 April 1985, these phasing arrangements will operate by first determining the amount of tax payable on a Christmas Island resident's total taxable income, after allowance of the special zone rebate and other concessional rebates to which the taxpayer is entitled. The tax liability so determined, to the extent it relates to relevant income presently exempt from tax, will then be reduced-by the allowance of a special rebate proposed in this Bill-to the appropriate percentage for the particular phasing year. The benefits of phasing will be maximised by the presently exempt income being treated as the final component of taxable income attracting tax at higher marginal rates. Payments made to Christmas Island residents on and after 1 July 1985 in respect of unused annual leave will be taxed on the same basis as such payments are taxed on the mainland. Other payments received by Christmas Island residents on or after 1 July 1985 on retirement from or on termination of employment will be subject, broadly, to the same rules that presently apply on the mainland in relation to payments of that type. However, relevant payments that relate to service prior to 1 July 1985 will remain exempt from tax. The amendments will extend full company tax and the full Medicare levy to the island from the commencement of the 1985-86 year. The integration of Christmas Island with mainland Australia necessarily involves it being treated as part of the mainland for income tax purposes. This has consequential effects also for residents of Norfolk Island and Cocos (Keeling) Islands because the relevant exempting provisions of the existing law apply as though those territories and Christmas Island were the one territory. As a consequence of this, and subject to the phasing arrangements mentioned earlier, residents of Norfolk Island and Cocos (Keeling) Islands will in future be liable to Australian tax on income derived from sources in Christmas Island, in the same way as they are now liable to tax on income from mainland Australia. The amendments will not, however, affect the exemptions presently available to genuine residents of Norfolk Island and Cocos (Keeling) Islands in respect of income from sources in either of those territories or from other sources outside mainland Australia. Revenue from these measures is estimated to rise from $1m in 1985-86 to $6m in 1988-89, but will be offset by the cost of other aspects of the Christmas Island integration package. Disclosure of Additional Taxation Information to the Australian Statistician Under the secrecy provisions of the income tax law, information as to the name, address and industry classification of an employer, as well as the number of male and female employees of an employer, can be provided to the Australian Statistician for the purposes of the Census and Statistics Act. Mr President, the Government has decided that some further taxation information should be made available to the Statistician for the purposes of that Act. To that end, the Bill will amend the secrecy provisions so that some of the information presently provided in respect of employers can be made available in respect of business taxpayers generally-that is, information as to the name, address and industry classification of a person carrying on business. The amendment will also enable certain other business taxpayer information to be provided; in particular information that the statistician requires for or in connection with the conduct of periodic industry surveys and with the compilation of the Australian national accounts. This measure is of an administrative nature and will have no direct effect on revenue. The benefits to be derived by way of improvement to statistical information are expected to be at least commensurate with administrative costs to the Australian Taxation Office in providing, and the Australian Bureau of Statistics in receiving, this information. Rebates for Dependants The Bill will also make two amendments of the dependant rebate provisions of the income tax law. The first of these changes will benefit families in receipt of social security family income supplement. This supplement is an income tested payment made to low income families with children and is exempt from income tax in the hands of the recipient. Prior to May 1984, the supplement was paid to the primary breadwinner, but since then it has been paid to the recipient of family allowances, generally the mother. To ensure that receipt of family income supplement by a person will not affect the concessional rebate entitlement of a taxpayer who is contributing to the maintenance of that person, the bill proposes that the supplement will not be taken into account in determining the separate net income of a dependant. This amendment will be effective from 1 May 1984, the date from which family income supplement became payable to the recipient of family allowances. I note that this change will not affect revenue collections in the current year. It will result in the government forgoing estimated revenue of $6.5m in 1985-86 and $7m in a full year which would otherwise have been collected in the form of an unintended clawback through the income tax system arising from the change in the method of paying family income supplement. The other amendment to be made in this area will correct a drafting error in the provisions enacted last year to extend eligibility for the dependent spouse rebate to de facto couples. One of the amendments made at that time was designed to deny a taxpayer entitlement to a daughter-housekeeper rebate for any period of an income year that he or she contributed to the maintenance of a de facto spouse. However, the provision was drafted in such a way that it effectively precludes a partial daughter-housekeeper rebate in any year of income where a taxpayer contributes to the maintenance of a spouse-legal or de facto-during any part of that year. The measure to rectify this situation will apply with effect from 1 July 1984-that being the operative date of the provision it amends-and will have no measurable effect on revenue. Objection and Appeal Rights against Certain Penalties The Taxation Laws Amendment Act 1984 brought the penalties applicable to breaches of the pay as you earn provisions into line with those applicable to breaches of the prescribed payments provisions of the income tax law. However, by oversight that act did not extend objection and appeal rights to certain pay as you earn penalties that correspond with prescribed payments penalties in respect of which there are such rights. This Bill will correct that oversight. At the same time, the Bill will ensure that objection and appeal rights are not available in respect of penalties for late payment that are calculated at 20 per cent per annum. These amendments are not expected to have any discernible effect on revenue. Interest on Refunds of Disputed Penalties It is now the established policy of the taxation law that amounts of tax that, on the one hand, attract penalties for late payment should, on the other hand, attract interest where they are refunded on resolution of an objection or appeal against their imposition. This Bill will amend the Taxation (Interest On Overpayments) Act 1983 so that the Commissioner of Taxation will pay interest on refunds of penalties that are imposed for breaches of the pay as you earn and prescribed payments provisions of the income tax law, but which are reduced as a result of a successful objection or appeal against their imposition. The revenue cost of these amendments cannot be readily estimated, but is likely to be minimal. Other Amendments The opportunity is being taken in this Bill to make several formal amendments of the income tax law. Most of these alter references to ministerial or departmental titles following changes in the machinery of government. One of the amendments will repeal a redundant provision relating to the rights of Commonwealth and State Public Servants appointed to Taxation Boards of Review. These formal amendments will have no effect on revenue. Mr President, a detailed technical explanation of the provisions of the Bill is contained in the usual comprehensive explanatory memorandum circulated to honourable senators on Taxation Bills. I commend the Bill to the Senate. Debate (on the motion by Senator Reid) adjourned. Senator COATES(Tasmania) —Pursuant to order, I present the report of the Standing Committee on Finance and Government Operations on the Superannuation Legislation Amendment Bill 1985. Ordered that the report be printed. Senator COATES(Tasmania)(5.20) —by leave-I move: That the Senate take note of the report. This Bill was referred to the Committee a week ago and the Committee has considered it in that time. As the Committee says in its report, it welcomes the Government's prompt action in introducing the Bill which incorporates the much needed changes to the administration of the Superannuation Fund Investment Trust. The Committee approves of the provisions of the Bill except in regard to four matters which it discusses in the report. We agree with the restructuring of the Trust with its objectives and duties being more clearly defined; a greater degree of independence being given to the Trust, and the increase in accountability to the contributors and the Parliament. The four ways in which the Committee believes the Bill can be improved involve the prescription of matters which would undoubtedly happen in practice anyway. The first is to require the Trust to give an account in its next annual report of what consideration was given to any ministerial statement of government policy and what action was taken. The second is to ensure that the Australian Council of Trade Unions cannot nominate a person to the Trust unless that person's name was one of those suggested by a Public Service union. This proposal still allows full flexibility. I can assure the Senate that Mr Bob Gradwell of the ACTU, who has been consulted about this, is quite happy with the change. The third is to ensure that at least one of the government appointees is a financial or investment expert. The fourth is to ensure that any interim financial statement is tabled in the Parliament. We recommend fifthly that the definition of the liability of members and officers of the Trust be attended to urgently by the Government. Our recommendations are explained in the report, which I commend to the Minister for Finance (Senator Walsh) and the Senate. I suggest that the report be debated cognately with the Superannuation Legislation Amendment Bill 1985 when it is relisted for debate. I trust that that debate will be made easier and briefer because of the examination of the Bill by the Finance and Government Operations Committee. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator REYNOLDS(Queensland) —I table the report of Estimates Committee D on the particulars of proposed additional expenditure for the service of the year ending 30 June 1985 and particulars of certain proposed additional expenditure in respect of the year ending 30 June 1985, together with the Hansard record of the Committee's proceedings. Ordered that the report be printed. Senator REYNOLDS —I also table additional information received by Estimates Committee D and seek leave for it to be incorporated in the Hansard record of the Committee's proceedings. Leave granted. Senator REYNOLDS(Queensland)(5.22) —by leave-I move: That the following matter be referred to Estimates Committee D for report on or before Tuesday 28 May 1985: The processes involved in the appearance of witnesses before, and the presentation of information to, Estimates Committee D by the Department of Aboriginal Affairs and the National Aboriginal Conference during its consideration of the proposed additional expenditure for 1984-85. In moving this motion I wish to draw the Senate's attention to a number of aspects raised in the report of Estimates Committee D. During its examination of the Additional Estimates of the Department of Aboriginal Affairs on 23 April, the Committee considered the Auditor-General's report of the National Aboriginal Conference. However, unlike previous Committee hearings, the Conference was not represented, and questions relating to it were handled by the Department. In its written replies to the Committee, the Department indicated that certain questions taken on notice at the hearings had been referred to the National Aboriginal Conference for reply and noted that as from 29 April its officers working in the NAC had been locked out. The Committee then approached the Conference directly and was informed that it was preparing replies to outstanding questions and would welcome an opportunity to appear before the Committee. The Committee sought, and was granted by the Senate, an extension of time to report. The NAC subsequently appeared before the Committee on 14 May. On the information available to the Committee it is concerned that the Department of Aboriginal Affairs apparently decided not to inform the National Aboriginal Conference of the impending Estimates hearings, thereby preventing the Committee from having access to relevant and informed witnesses. The Committee also finds it difficult, on the evidence before it, to accept the Department's implication that the lockout of its officers by the NAC prevented information from being provided to the Committee. This lockout occurred six days after the Committee's hearings and the National Aboriginal Conference has since asserted, before the Committee, that access to its relevant files would have been given to Department officers. The Committee is of the opinion that the actions of the Department raise an important principle concerning the processes involved with the attendance of witnesses before Estimates committees and the presentation of information to committees. The Committee believes that with such an important principle having been raised and not satisfactorily resolved, the further examination of the Department of Aboriginal Affairs is required. The motion I have just moved has the full support of the Committee. I commend the motion to the Senate. Question resolved in the affirmative. Debate resumed from 13 May, on motion by Senator Ryan: That the Bill be now read a second time. Senator MESSNER(South Australia)(5.25) —The National Occupational Health and Safety Commission Bill 1985 seeks to establish a National Occupational Health and Safety Commission whose objectives as stated in the legislation are: (a) the development among the members of the community of an awareness of issues relevant to occupational health and safety matters and the facilitation of public debate and discussion on such issues; (b) the provision, in the public interest, of a forum by which representatives of the Government of the Commonwealth, the Governments of the States and of employers and employees may consult together in, and participate in the development and formulation of policies and strategies relating to, occupational health and safety matters; and (c) the provision of a national focus for activities relating to occupational health and safety matters. The Liberal and National parties agree that occupational health and safety is a great national issue. We agree with the Minister for Education (Senator Ryan) who, in her second reading speech, stated: The community's goal-and consequently that of the Government-must be to reduce the unacceptably high national level of occupational death, injury and illness. We agree that not only is this goal socially desirable but, as the Minister stated, it is a soundly based economic objective as well. The Liberal and National parties also agree with the Interim National Occupational Health and Safety Commission on the desirability of developing consultative machinery at the Federal level and the need for the further examination of Commonwealth-State responsibilities and mechanisms for co-ordination in the implementation of occupational health and safety legislative requirements. However, the Opposition does not agree that the solution in this area lies in the establishment of a statutory commission. The establishment of the Commission is typical of a Labor's government's approach to genuine concerns and problems, that is, when it identifies a problem or concern it sets up a statutory commission-a quango-and pours money into it. The end result of such action is typically to intrude into areas of responsibility not previously the province of the body; to add to the size and cost of government to the taxpayer; to place yet another burden upon those who are already trying to tackle the problem and to achieve very little beyond what can be achieved already. So it is with the establishment of this Commission. Let us examine a few of those points; firstly, the intrusion into those areas of responsibility. The Opposition has concerns that the Commission sought by this Bill goes beyond legitimate areas of Commonwealth jurisdiction or overlaps into the existing jurisdiction of other bodies. Clause 8 (1) (d) of the Bill blithely gives the Commission the power 'to review laws and awards relating to occupational health and safety matters'. The Opposition sees two particular difficulties in those matters. Firstly, the Bill gives the Commonwealth body the power to review State laws-this is undesirable-and, secondly, it gives power to the Commission to review awards, presumably both State and Federal. Currently we already have the Australian Conciliation and Arbitration Commission, a battery of State industrial tribunals and special industrial tribunals which are engaged on this work. It is unnecessary and costly duplication to give this new power to a new commission. Whilst it can be argued that the laws and awards that may be reviewed by the new Commission are only those relating to occupational health and safety matters, if one applied a broad interpretation this could apply to almost anything. For instance, it could apply to the hours of work, shifts and the types of work performed. The power granted to the Commission in this respect then is too wide. An identical criticism can be made of clause 8 (1) (e) of the Bill which gives the Commission power, and I quote: to consider, and to make recommendations in relation to, proposals for the making of laws and awards relating to occupational health and safety matters; The ambit of that power, again if interpreted liberally, is extraordinarily wide. The Liberal and National parties are concerned that the whole thrust of the functions to be granted to the Commission as set out in clause 8 of the Bill gives it wide power over an enormous area of law making. Such a practice is quite contrary to our established system of having laws made by parliaments and awards made by industrial tribunals. In addition, the provisions of clause 38 relating to national standards and codes of practice have a particularly grave potential for overriding the jurisdiction of the States in occupational health and safety matters. It is true that they are advisory, but only to the extent that they are not provided for by an existing law or award. A national code of practice on occupational health and safety could be promulgated by the Commission and written into a Commonwealth award, which would then negate any State Act on the same subject if they covered the same field. The Commonwealth award would then take precedence over State legislation for all employees covered by the Federal award. This has the potential to create Commonwealth jurisdiction over all employees covered by Federal awards, regardless of which state they reside in. As defined by clause 3 of the Bill, the area of occupational health and safety matters is extremely wide and there is almost nothing that it does not concern. It concerns such matters as the physiological and psychological needs and well-being of persons engaged in occupations. Thus, if taken to the limit, a national code could be drawn up by the Commission covering an extremely wide range of matters which would simply override State legislation. The Opposition rejects such an approach and therefore cannot support this Bill. Several State Labor Governments are currently reviewing their existing occupational health and safety legislation-Victoria, New South Wales, Western Australia and South Australia. The State experiences provide an insight into Labor thinking in this area and a possible blueprint for action by the proposed Commission. The attempted reforms in Victoria are the most notorious example of excessive and punitive occupational health and safety legislation. Under proposed legislation put forward by the Cain Government prior to the Victorian election in March, union appointed safety representatives would have the power to shut down any business without warning if a representative considered a situation to be potentially unsafe. In that context, I stress the word 'potentially'. That action would result from the opinion of one representative. Employers would face a fine of up to $10,500 and/or five years imprisonment for failing to obey a safety representative's direction. That is the type of legislation that the Victorian employers fear will be made law if the Australian Labor Party finally ends up gaining control of the Legislative Council in Victoria. The Cain Government has further proposed legislation which would give it monopoly control of workers compensation in that State. It would completely exclude private insurers from workers compensation and it is a totally unjust and unwarranted infringement of the right to trade freely in goods and services. Senator Crowley —What would it do to costs? Senator MESSNER —Obviously monopolies lead to increased costs. Whilst the Cain Government argues that such a course of action will lead to lower workers compensation premiums-that is its argument-that cannot be argued in the short run, or demonstrated to be so in the longer run. Senator Crowley —That is nonsense. There are examples that I can quote. Senator MESSNER —Senator Crowley will have a chance later to put her points on that issue. That is the sort of wide-ranging and damaging legislation that Labor is putting up in Victoria and, as I understand, in South Australia and Western Australia. The fact that this is being done by Labor governments is no accident. The Labor Party is beholden to the trade unions-it is a trade union party-and it is directly implementing union policy on occupational health and safety. The Federal Government has only one constituency to satisfy, and that is the trade union movement. Employers can expect little sympathy from either the Commonwealth or the State Labor Governments in that area. I note that the Confederation of Australian Industry has supported the establishment of the proposed Commission. Senator Crowley —You do not like that. The ACTING DEPUTY PRESIDENT(Senator MacGibbon) —Senator Crowley, confine your interjections. Senator Crowley —I beg your pardon, Mr Acting Deputy President? The ACTING DEPUTY PRESIDENT —Restrict your interjections. Senator Crowley —To what? The ACTING DEPUTY PRESIDENT —Senator Messner is speaking. Senator MESSNER —Are you querying the Acting Deputy President's ruling? Senator Crowley —I am just seeking guidance. Senator MESSNER —The Opposition believes that the Confederation has supported this legislation in the hope that the Commission might be used to restrain State governments from the regulatory excesses to which they tended in the past and which they show signs of increasing. The Liberal and National parties judge that theirs is a faint and a forlorn hope. The fact is that under this proposal, given the Commission's wide powers, the Commonwealth may add to the regulatory excesses faced by employers. If the Commonwealth overrides State laws-- Senator Zakharov —Yes, and it is about time too. Senator MESSNER —Perhaps if Senator Zakharov had come in a little earlier she would have heard some remarks about that. If the Commonwealth overrides State laws and awards in this area or moves into areas not covered by State laws and awards, it can impose unnecessary and costly laws and awards resulting in duplication. A further point, and a most interesting question to be asked of the Federal Government, is what are the financial impacts relating to this establishment of the new Commission? Where, in fact, can we find a financial impact statement? We are told that it is going to cost some $33m to set this up, but what is the impact on the rest of the community? We were promised these kinds of statements by this Government if it took action in this area, but there is no such statement set down for our benefit that relates to the costs to taxpayers of directly establishing the Commission. The business community, the Confederation of Australian Industry, the Opposition and the Democrats did not receive any statement at all or any assessment of what the costs to the community of this new Commission will be. I believe that at the very least Senator Walsh, with all his credentials as being financially upright, should be able to bring to our benefit some statement as to what he expects the cost of the new Commission to be on the community so that it can be properly assessed. Senator Crowley —By whom? Senator MESSNER —Senator Crowley might be able to put some pressure on through the Caucus to obtain that information. Let us examine the size and cost of the effects of this legislation. The Bill seeks to establish a 17-member Commission, whose Chairman will get by-only just, I trust!-on $63,000 a year, and whose projected staff will number 140 by the end of this financial year. It proposes to create a three-headed structure. Under clause 5 of the Bill, the staff of the Commission is organised into two bodies-the National Occupational Health and Safety Office and the National Institute of Occupational Health and Safety. These two bodies will have a tendency to expand themselves and inevitably will ensure that a further two bureaucracies are established along with that of the Commission itself. So, the Government proposes establishing three new bureaucracies. Evidence of this is given in the report of the Interim National Occupational Health and Safety Commission which recommended the course of action that the Government is now taking. That report projected that the Commission's staff level would have more than doubled to 350 by the end of its second year and that the anticipated budget in that year would amount to $42.1m. Presumably, that report is accurate. Further, the budgetary consequences of the Commission carrying out to the full the objects, functions and powers set out in clauses 7, 8 and 9-which would allow it to range far and wide-could be extremely large. Where is a statement as to the Government's intentions in that respect? We have no financial impact statement upon which we can assess the Government's thinking in this regard. Business cannot assess what the final impact of this legislation might be, because the Government will not reveal the information. One is inclined to interpolate at this point to say how significant it would have been to take action in the mini-Budget last night to reveal the true extra costs of these new Government programs. How much more significant it would have been for the Government to make that kind of statement rather than the very cosmetic statement it made. The Hawke Government, in this new initiative, is continuing with its predilection for establishing statutory authorities or quangos. This Labor Government, in its first nine months in office, created 25 new national government authorities-more than one very fortnight. With the National Occupational Health and Safety Commission, the Government is continuing down that path. Another point relates to the further burden on existing arrangements. This area of concern relates to the fact that the legislation overlays yet another burden upon those who already are tackling the problems. Those who have organised labour into productive units have seen the logic and the practicality of ensuring safe work practices. We no longer live in the days of child labour in the mines. Australian workers enjoy working conditions equal, if not superior, to those of any other country in the world. Senator Zakharov —Have you been in a clothing factory lately? Senator MESSNER —The honourable senator will have an opportunity to put those views. It is often argued by those on the left of the political spectrum that employers by definition are exploitive and have no interest in the health and welfare of their employees, who are regarded as inanimate, expendable and easily replaced factors of production. Such a hypothesis-the Opposition totally opposes any hypothesis of that kind-ignores the development in Australia over many years of the substantial body of common and statute law designed to ensure the fulfilment of our moral and social obligations to each other. It also ignores the workplace consultative arrangements, involving both employees and employers or their representatives, which are currently in operation in so many workplaces throughout Australia. As the Interim Commission has noted: Many workplaces in Australia have joint health and safety committees sorting out problems and constructing preventative measures on a daily basis. The National Labour Consultative Committee recently endorsed these arrangements. Indeed, as we know, it is a continuing process throughout the business and manufacturing community. On top of this layer of activity we have the State judiciaries, the State governments and their bureaucracies all busy constructing health and safety guidelines of both a voluntary and a compulsory nature. The Commonwealth, too, has a judiciary, a government and a bureaucracy doing likewise for the benefit of employers and employees within the Territories. Yet the Hawke Labor Government, through this Bill, seeks to add yet another layer to the existing system and to create new bureaucracies. Already there is a National Consultative Committee on Occupational Health and Safety with a very wide membership. If such a body cannot achieve agreement on what should be done, a new Commonwealth commission, with draconian powers, is not going to achieve it. The establishment of the Commission displays a heavy-handed approach by this Government in this most important and very sensitive area. It displays an insensitivity on the Government's part to the achievement of positive and productive processes at the grass roots level in the Australian workplace, where it counts most. The powers contained in the Bill give the Commission the power to blunder into the workplace, to order the production of documents, to summon witnesses under threats of a $1,000 fine or six months imprisonment, and to compel people to give evidence under oath at its inquiries. It can only be said that those powers are draconian and unwarranted. I make one point in relation to the report of the Standing Committee for the Scrutiny of Bills, which has just been tabled in the Senate. It refers to the Committee's scrutiny of this Bill and draws particular attention to clause 52 of the Bill regarding the reversal of the onus of proof in regard to evidence produced against employers. It makes the point that that is unfair and prejudicial to the best interests of employers and individuals in the community and asks the Senate to consider that as part of its deliberations in relation to this Bill. So, a bipartisan committee of the Senate claims that the onerous provisions of this Bill are too much, even by the standards of some of its Labor members. I refer briefly to a speech made in the House of Representatives by the shadow Minister for Employment and Industrial Relations, Mr Shack, who summarised the Opposition's position on occupational health and safety. I quote it because it is such a valuable statement. He stated: The issue is national. The Commonwealth has a definite role to play. That role is properly one of direct partnership with the States. The Commonwealth can contribute by co-ordinating the various approaches of the States to the problems in this area. The Commonwealth can contribute by helping to propagate positive attitudes in relation to occupational health and safety amongst both employers and employees. I believe that to be a very useful and firm summary of our position. It states most clearly why we are opposed to this legislation. We are anxious to encourage better occupational health and safety, but we believe that the establishment of a new commission such as the one proposed by this legislation is not only unnecessary but also undesirable and likely to be counter-productive. The Liberal and National parties have rejected the notion of making amendments to this Bill because in our view it is so full of matters requiring change that it would collapse if we did so. It would certainly create a totally different Bill. For those reasons, the Opposition opposes this legislation. Senator CROWLEY(South Australia)(5.49) —Once again, Senator Messner has come into this place with a defence which says no more than that things are going to cost a lot. He proceeded to say that what we need is co-operation between the States and the Federal Government, that this Commission will not do this, but that, in the end, that is the Opposition's position and it wants that co-operation. I do not find any of his arguments persuasive-in fact, I think they are puerile-but I will address them in more detail and point out the discrepancies between what he has advanced and what some of his colleagues in the House of Representatives have advanced in contradiction of his remarks. We are addressing the National Occupational Health and Safety Commission Bill 1985. It is important to note-this is particularly important in light of some of Senator Messner's objections-that this Bill is the first of three which it is proposed to be introduced by the Government as part of a concerted national effort to come to grips with the problem of occupational health and safety. The Government will, in the Budget session, hopefully, introduce legislation in respect of the Australian Capital Territory or areas in which the Commonwealth has jurisdiction. Further, it will legislate to establish a mandatory notification and assessment scheme for industrial chemicals. Neither of those areas is covered by this legislation. In fact the use of the term 'draconian' in relation to this legislation is quite remiss and wide of the mark. It also indicates that Senator Messner has failed to understand the content of this legislation. The term 'draconian' may apply to legislation requiring specific and particular actions. It is not draconian for legislation to suggest reviews, in other words, to point out what sorts of areas people might look at. I hardly think that a request, a recommendation or legislation in relation to the allowing of reviews is worthy of the title 'draconian'. Senator Messner pointed out the aims and objectives of this legislation. I think it does no harm to spell them out again. Principally, the legislation is to establish the Commission with objects of developing community awareness about occupational health and safety. It is quite clear that our community awareness is still very low on this issue. While there are increasing examples of understanding, particularly in the work force by both management and workers and within the union movement, it is quite clear to any of us who talk about it in the community that the wider community awareness about occupational health and safety still falls far short of what would be satisfactory. One of the objectives of this legislation is to extend the understanding and awareness of occupational health and safety in the community. It will provide a forum for consultation among the Commonwealth, State and Territory governments and peak councils of employees and employers. That is precisely what Senator Messner suggested the Opposition, particularly the Liberal Party, supported but then he proceeded to point out that this legislation would not make such provision. The legislation provides a national focus for occupational health and safety activities. That point is also very important. As Senator Messner said, there are many projects, pieces of legislation and activities in certain industries and areas of employment in this country, but they are not coherent. They are not necessarily in line with one another and they do not necessarily provide an opportunity for people in other States to be informed of what is already being achieved or what needs to be done. The National Occupational Health and Safety Commission will provide that focus. Its very existence will also, I think, increase and contribute to its first requirement or objective-that is, increasing community awareness. It is also important to make clear that the establishment of this Commission fulfils Australian Labor Party policy and a commitment by the Government to do so. In fact, very soon after the Government took office in 1983 it established the Interim National Occupational Health and Safety Commission. That Commission reported, and the legislation proposing the establishment of the Commission is in consequence of the Government accepting the Interim Commission's report. It is important to note that the establishment of the Occupational Health and Safety Commission is in line and in sympathy with and, in fact, included in, the accord. I will quote the statement which actually addresses this point. The National Economic Summit Conference, in its final communique, stated: The Summit believes that the nation must give occupational health and safety a greater priority and endorses the need for concerted government, employer and union action to improve the quality of the working environment in Australia. So we not only have a government commitment to establish the Occupational Health and Safety Commission, but also a commitment in the accord to do so. There is also a commitment to the importance that the Government places on the establishment of the Commission and the work that it will do. We have heard from Senator Messner that one of the reasons that the Opposition will oppose this Bill is cost. I draw his attention, and the attention of all honourable senators, to the cost that the Government considered when it went ahead with establishing this Commission. There is the cost to people in the work force, to individuals. Nobody can put a price on human life. But I think at certain stages we must acknowledge that many people have died in the work place and during their work. The figures currently range from 300 to 400 deaths in Australia per year. Those figures are grossly inadequate because the figures I have seen indicate a number approaching 300 deaths in New South Wales alone. The Commonwealth Public Service also alludes to over 180 deaths covered by its Commonwealth compensation payments. I am trying to suggest that we have very inadequate data. But we gather that well over 300 people die as a result of work related injuries or accidents in the course of one year. Those figures are, I think, appalling. The number of accidents is estimated at 100,000. Again, I would have thought that that was a very conservative estimate and fraught with the same inaccuracies as the estimate of the number of deaths. For those people who suffer accident and injury there is human misery, pain and suffering. There is the loss of their labour-the very thing with which they can bargain. There is the loss of prestige and, in particular, there is the loss of their contribution of income to family. There is very often a consequential social cost of family damage as a result of a person being out of employment either for long periods or permanently. Of course, there is the loss of potential earning. That is an assessment of the cost to an individual. The cost to the community, again, is prohibitive. Mr Macphee, when he was the responsible Minister during the later years of the Fraser Government, I think, in about the middle of 1982, was reported as saying that the estimated cost of accident and injury in the work force in this country in one year amounted to $6.5 billion. I have no idea how that figure was arrived at. I certainly have heard it cited on a number of occasions over the years since that time. There has been no advance on or withdrawing from the figure of $6.5 billion. I would like to be clearer about how such a figure was arrived at. But figures have been reported by the Opposition when in government-and sometimes when in opposition-and certainly by this Government that the cost to the community of accident and injury in the work place is not millions of dollars but billions of dollars. How can one compare the cost of a mechanism that might reduce that cost to the community-not, I would imagine, in one year, but over time-with the cost of establishing an occupational health and safety commission? I think that that is the way in which the argument should be advanced-not in terms of the cost of establishing a quango, to quote Senator Messner, but the cost of reducing the appalling dollar cost and human misery cost for accidents and injuries in our country. It is very important that we understand the cost equation in those terms, not in the simplistic way in which Senator Messner argued. It is also interesting to look at the economic cost in terms of productivity lost. In the dark days at the end of the Fraser Government's term of office, when industrial disputes were very much higher than they are now, it was estimated that days lost due to industrial accident were four times the number of days lost in industrial disputes. I have never seen extensive reportage in the media about the cost to productivity, employment, management, the Government or the country, of accident and injury, even though that cost is actually four times the cost of industrial disputes. I have read many articles which talk about the cost of industrial disputes. One has only to read what is happening in Queensland at the moment to know that the cost of industrial disputes is widely reported. The figure, which is four times higher, for the loss of productivity from accident and injury is not reported in the same way. I think it is a very telling story. The Occupational Health and Safety Commission as described in this legislation has a number of functions. These are spelt out in quite some detail. The Commission is asked to formulate policies and strategies. It is also asked to consider, and make recommendations in relation to, actions by and co-operation between governments, employers and persons engaged in occupational activities and their organisations. Further, it is asked to review and make recommendations relating to proposals for laws and awards. I will just simply say again that for Senator Messner to suggest that the Commission, in being asked to review such legislation and awards, is extending well beyond its legal limits or that this Bill is a piece of draconian legislation, shows that he fails to understand the meaning of the word 'review'. The Commission has also been charged with the task of declaring national standards and codes of practice. Again, I think it is quite clear, when we look at the area of occupational health and safety in this country, that we are sadly lacking in national standards and codes of practice that apply to the whole country. Senator Messner alluded to the importance of States rights. The difference of standards between States leads to quite significant problems when codes requiring, for example, warnings on the outside of chemicals are not the same from State to State. So, in one State people may have to be warned of the content of a product and in another State that is not necessary. I think national standards will be of benefit to the whole country and all Australians. Again, I do not believe that asking the Commission to address itself to formulating national standards is draconian or too invasive of the legislation that applies more, I suppose, to States rights. The Commission has also been asked to evaluate itself. I am pleased to see that a request for peer review has been spelt out in the task of the Commission. The Commission has the task of telling us what it is doing, how it is going about it and how well it is doing it. I admit that under a system of peer review the Commission will not be encouraged to tell us how badly it is doing. However, I think the honest men and the one woman on the Commission will make a good fist of that task. In addition, the Commission is charged with collecting and disseminating information. I think the point that Senator Messner alluded to in respect of the many disparate things happening around the country highlights the need for the collation and dissemination of information. At the moment it is clear that the bits of information about what is happening from State to State and business to business are not widely understood and, in fact, the information is not sufficiently shared. One of the main aims of the Commission is to deal with the very specific listed functions. Another important function of the Commission will be to act as a means of international liaison and allow Australia very directly to co-operate and collaborate with such organisations as the International Labour Organisation, the World Health Organisation and the Organisation for Economic Co-operation and Development. In fact, the Minister for Employment and Industrial Relations (Mr Willis) spelt out in some detail in his second reading speech some of the ILO conventions with which this country would like formally to comply and ratify. We will be able to do that easily once the Commission is established. The Commission is charged with establishing research and testing of a whole variety of matters. It can actually carry out research with organisations or it can allow for research to be carried out by individuals. It will have the task of administering a national occupational health and safety research fund which is proposed under clause 58 of this legislation. Of course, it can report to the Minister at any time on matters which come to its attention or which it feels ought to be raised. It can initiate its own ideas. An extensive number of occupations are covered by the legislation. I am rather pleased to discover that people who are in unpaid work are also understood to be covered by the definitions in this Bill. 'Occupation' means a full or part time occupation and covers occupations undertaken by people who are traditionally known as employees but also covers an independent contractor, a statutory appointee, a person working in a government service such as a defence force or a police force, a member of parliament, a self-employed person, a worker in a family business or a director. Further, the definition covers those who are not in paid employment-for example, voluntary workers, students and prisoners. I find a nice contradiction here in that I presume under this definition an unpaid housewife at home would not be covered by the definition of 'occupation', but if the housewife employed a paid housekeeper, that person would be covered. So I suppose that under the notion of 'paid housekeeper' the occupational health hazards of living at home can be brought, by whatever means, to the attention of the Commission. However, I think we have to continue to make sure that occupational health and safety is addressed to every member of the community. I am delighted to discover that members of parliament are judged to be people in occupation. Sometimes we hear cynical suggestions that politicians are overpaid and do not work. However, by definition now under the National Health and Safety Commission Bill they are presumed to be in paid work and are covered by the legislation. I have alluded before to the fact that we are charged with the important task of increasing community awareness of occupational health and safety. In particular, I think we have to move to encourage politicians to understand what occupational health and safety is about. I am advised that something like 2,000 people work in and around this Parliament House. This number includes politicians, their personal staff, the staff who maintain this Parliament, drivers, cooks, caretakers, cleaners and other support staff. I think one could probably not go past Parliament House and the people who work here as an example of poor occupational health and safety standards. I would be pleased if the Commission at some stage took a brief to look at the occupational health and safety of people working in Parliament House. I have already discovered the specific problems experienced by people who suffer from paint fumes when parts of Parliament House are being painted. I have drawn this problem to the attention of the Speaker on a number of occasions. This is one of the fairly predictable work hazards. Painting Parliament House is probably not too different from painting other buildings. I think probably Parliament House is different from other work places in terms of the hours and the stress experienced by people who work here. Again, I think Parliament House would make a very nice occupational health and safety study. I think the point Senator Messner made about the increased cost to industry of establishing the Commission is given the lie by any number of examples, one of which I have already alluded to in the Senate but which I will refer to again. I draw the attention of the Senate to a report in the Age of 23 April 1985 concerning Repco Australia's Launceston plant manager, Mr James. The article stated: . . . his company's RSI rehabilitation and prevention program had reduced working hours lost due to RSI from 3,960 in 1982 to nil so far in 1985. The company's workers compensation payments had been halved . . . That is one very special example or illustration which I think quite clearly indicates the way the establishment of an occupational health and safety commission and the consequent increased awareness of different practices relating to health and safety in industry will in fact lead to savings-savings in hard dollars but also savings in terms of injury and the human loss to which I referred earlier. Another important point that is illustrated beautifully in this article is the necessity for management and union co-operation. Neither one by itself can achieve what is possible without co-operation. The article continued: Mr James said that the RSI could not be prevented without the co-operation of management and unions in accepting the conditions as genuine and developing strategies designed for specific workplaces. In fact, Repco's RSI program is the subject of a video called 'Stopping RSI' released by the Amalgamated Metal Workers Union. One has in that example an excellent model of what the Occupational Health and Safety Commission would like to see illustrated in many more work places and in many more conditions. There is often reference-and I have heard mention of it in this debate-to draconian legislation in Victoria. If workers' rights are allowed to go too far, if they recognise a potential hazard in terms of safety, it is said that these wretched workers will turn off industry across the face of Australia. Whenever I speak to union representatives or hear people in the union movement speaking about occupational health and safety, they make it clear that they are not expecting a risk-free world. They are talking about responsible management in respect of recognised safety hazards in the work place. It is precisely because somebody is close to machines or using tools that he or she is best placed to know what the risks and safety hazards are, and to know when a guard is missing or something out of kilter. I would have thought it quite reasonable to expect workers to be able to initiate action and report on what they recognise as unsafe. The comments about Victoria are also interesting because, although I have not had the time to find the quotation, I am clear that the business organisations in Victoria were working very hard prior to the election to support the passage of the occupational health and safety legislation through the upper House in Victoria. If that was the attitude of industry and business in Victoria, I think that it also gives the lie to the claims of Senator Messner. He also suggested that this country had a very good record in this sphere. I would like to quote his colleague Mr Downer, newly come to Parliament and probably still blatantly honest. Mr Downer, as reported in the House of Representatives Hansard of Thursday, 9 May 1985, at page 2039, said: Honourable members are aware that Australia's record in the field of occupational health and safety is, in global terms, one of the worst. In early 1984 the National Safety Council claimed that Australia had the third highest work place accident record in the world. He continued later in his remarks: In my state of South Australia alone, the annual cost of work-related accidents is around $500m. These figures are at least part of the explanation as to why workers compensation premiums cost Australian industry $1.7 billion in 1982-83. Mr Downer is clear that we are not too good and that we could up our game a whole lot. The model that we are proposing is not freakish, way out or leading the field. In fact, it is very much in sympathy with the models that are in place in the United Kingdom, in Canada, to some extent in the United States of America and places in Europe. The Opposition raised the spectre of what must be described as its own best fantasies by suggesting, to quote Mr Shack, as reported on page 2028 of the same Hansard of 9 May: . . . workers in Australia are not chewed up and spat out, drained and damaged in the process of production. Employees in Australia enjoy working conditions on a par with, if not superior to, those of any other country in the world. One wishes that Mr Downer had listened to Mr Shack, or that at least they had got together in the corridors of power and agreed on their lines. It is interesting that Mr Shack said that the record is not too bad and Mr Downer said that it is the third worst. It is also interesting to say to Mr Shack that because we are not the worst in the world does not mean that we cannot improve or that we should not take steps to improve. In fact Australia should be unashamed about trying to be the model of occupational health and safety in the world. I do not think it is set fair to do that, but it is ridiculous to say that because we do not 'chew up and spit out' our workers we can therefore rest on our laurels. It is clear from the cost figures, the numbers of deaths and accidents in this country, and even by quoting Mr Downer, that we have lots of room for improvement in the matter of occupational health and safety. I find Mr Shack's argument quite spurious, and in fact silly. The proposals in this legislation are not draconian and I think that word is quite ill placed by Senator Messner. In fact, it is a responsible and reputable model, and I hope that the establishment in Australia of this Commission will lead to considerable gains and achievements for workers and management, and also to a dramatic reduction in the costs I quoted earlier. I wish to express my concern that the presence of the Department of Health in the Occupational Health and Safety Commission be significant and maintained. I note that one of the places on the Commission is reserved for a representative from the Department of Health, and I am delighted that a person of senior level will be there. Although the Commission has been established and one hopes that there will never be any need for health care in the work place again, I do not presume that that state will be reached too rapidly. It is important that the Commission focus its main aim on the prevention of accident and injury, but that it also provide adequate treatment and management for those workers who suffer an accident or injury. The importance of the place of the medical and paramedical professional people in providing that necessary and appropriate care cannot be understated. Not only do we need tripartite consultation between government, employer and employee, but we also need consultation between workers and health care providers to optimise the management of any accident or injury when it occurs to a worker. I saw in a rubber mill in South Australia a man whose arm had been degloved, which is an expression for the removal of the skin from the elbow to the fingertips, in effect hanging from the fingertips. This happened when the man's arm was caught in the mill. The immediate response of the people in caring for that worker was to support him in his state of shock and provide for him to be admitted to hospital, where it was expected that a general surgeon would amputate his arm. A colleague and I were very concerned about that and we-principally my colleague-were able to arrange that this man be attended by a plastic surgeon and the worker's arm was saved. It is important to know that in South Australia the plastic surgeons have made it quite clear that any worker who suffers an injury that could benefit from urgent treatment by plastic surgeons would receive priority treatment on the operation list of the plastic surgeons on duty that day. That is an interesting and useful illustration of the importance of health providers and people concerned in the work place for occupational health and safety co-operating to gain the maximum input and benefit for the worker. That is an important part of occupational health and safety. The other important part, which I hope will be spelled out by some of my colleagues, is the importance of providing the necessary information to people in the work place so that they know their rights and the measures they need to take in order to co-operate for the optimal effect for all workers. I commend this piece of legislation. Senator JACK EVANS(Western Australia)(6.18) —The Senate has just heard a most informed speech from somebody who knows not just the ramifications in political terms of the National Occupational Health and Safety Commission Bill but, in real world terms, both the need and the potential benefits of such legislation. No doubt we will hear contributions from members on both sides of the chamber who have a wealth of experience. I look forward to hearing those honourable senators because I regard this as a vital piece of legislation. I am pleased that this debate is being broadcast. It will give members of the community an opportunity-possibly for the first time-to be made aware of the desperate plight of Australia in occupational health and safety terms. I do not suggest for a moment, and I think nobody will suggest, that the establishment of the Occupational Health and Safety Commission will resolve all the problems in this sphere. But one of the things it must do-and I stress that this is an illustration of it-is to highlight to the public the serious state of occupational health and the lack of safety provisions across the community. I will spell that out in a bit more detail later. I am sure that other speakers have much more evidence to indicate that this is so overdue and desperately needed in certain areas. The National Occupational Health and Safety Commission Bill, which establishes the Commission, will do three things in the main. It will carry out research right across the board geographically, industrially and in the whole spectrum of individual occupations. The Commission's second major task will be to educate and publicise in order to increase community awareness of the needs for standards not only being set but also being adopted in the work place and in many other areas, which I will come to in a moment. The publicity will flow as a result of the research and the third area of concern for this Commission which is the setting of national standards and codes of practice. That will, in turn, result in the formulation of policies which will be recommended to this Government, to State governments and, I would think, to industry groups. One would hope that much of the progress that will be made in the next decade in this area will be self-imposed-will be imposed by the industries, the individuals and the firms themselves recognising that they are falling down in this area of occupational health and safety. The Bill provides for a Commission which I see as a tripartite representative commission because it does have representatives from the three main areas of concern; that is, government, employer and union representation. I think it is worth just running through the representatives mentioned in the Bill. The membership of the Commission includes a Chairperson; three members nominated by the Australian Council of Trade Unions; three members nominated by the Confederation of Australian Industry-that is the industry and union concerns recognised-a member nominated by the Premier of each State so that we get the proliferation of views right across Australia; one member nominated by the Minister for Employment and Industrial Relations; and another member nominated by the Minister for Health. The total membership will ensure a very good representation and, I think, a very wholesome input from a very broad spectrum of our community. The Bill is notable and I commend the Minister for the admirably wide definitions of health and safety. I think it is worth referring to the fact that the Bill covers occupational health and safety matters, including matters relating to both the physiological and psychological needs and well-being of persons engaged in occupations. That list of occupations is also very broad. It covers some interesting groups such as students, which possibly would not come into the normal definition of being in an occupation. This category of people is simply not recognised in legislative or regulatory areas in order to look after the occupational health and safety of such people. I pick up rather tentatively the point raised by Senator Crowley. I am also concerned about housekeepers and parents, occupations which probably include some of the very high risk areas but which are probably the most difficult, if not almost impossible, to legislate for. But I think that in time we may be able to embrace those two occupations. I think people are already recognising that they are occupations. At this stage of launching this Commission the difficulty is probably that giving the Commission those kinds of terms of reference would make its job very much more difficult and make it hard for it to zero in on some other urgent areas. The Commission will have the responsibility to co-ordinate and fund research nationally and to establish a national data base for research. This will be the first time that has happened. If the Commission does nothing else, it will provide us with the real story, the true statistics, on the costs-in every sense of that word-to this nation of the lack of safeguards and safety provisions for employers and employees alike in the work force. The Commission will set the framework for national co-ordination of health and safety standards in industry. It will carry out with some quite considerable powers public inquiries on occupational health and safety. Again I think that is a good thing because this matter does need to be thoroughly probed and we do need to have drawn to the attention of the community at large where the hazards are in industry. We need to put pressure on people to eliminate or, at the very least, minimise those hazards. I have been rather fulsome in my praise for the Bill and the prospects of this Commission, but I should mention that there are some weaknesses in the Bill. The principal weakness is probably that the Commission will be an advisory body only. In other words, the standards it sets will not be binding simply because the Commission has set those standards. The legislators will be left to determine whether they want to legislate those standards into effect within the realm of responsibility of the Commonwealth Government or of the respective State or Territory government. We, the Australian Democrats, would have preferred some degree of obligation in that area but we recognise the difficulties that are inherent in both our Constitution and our Federation, and the very physical difficulty of having Commonwealth legislation in this area imposed in remote areas in the States. The Bill applies only to Commonwealth Territories and areas falling within Commonwealth heads of power. But we hope for uniform legislation from the States and the full use of the co-operative arrangement under clause 8 (2) and clause 8 (3). I express on behalf of all of us, I believe, the hope that the States' representatives will carry the brief back to the respective States in an endeavour to have uniform legislation applied universally, right across the Commonwealth, at both Commonwealth and State levels, regardless of whether the recommendation is for the setting of standards or any other areas that come out of the inquiries of this Commission. The other area of weakness which we see is the sanctions which are written into the Bill to support the investigative powers of the Commission. I say candidly that they are fairly weak sanctions. They provide fines of a few hundred dollars up to an absolute maximum penalty of $10,000 for a corporation. Individuals may be hit a little harder because, in fact, there is provision for penalties of up to one year in prison. One can make an interesting comparison that a corporation such as Broken Hill Proprietary Co. Ltd would be up for a $10,000 fine for ignoring right across Australia the requests and demands of this Commission-that $10,000 would be a drop in the bucket to such an enterprise-whereas an individual, a partner in a small enterprise, is likely to suffer the penalty of a year in prison for the same offence. That needs to be looked at. Because I want to strengthen the arm of the Commission if it is denied the opportunity to impose its will where it is felt that it needs to be imposed for the good of all those concerned, whether they be employees, employers or governments, I simply flag to the Government that down the track the Australian Democrats would support the imposition of stronger penalties. The Commission, armed with that, may never need to come back to this Parliament or this Government and ask for stronger penalties were such a threat implied. We could put this whole debate into a context of the sort of cost involved in establishing a commission-as some people would say, another quango, a quasi-autonomous non-governmental organisation-by comparing the cost of establishing the Commission with the current cost of accidents and deaths in our community at this time. On average, one person is killed every day in this country as a result of an industrial accident. The national cost of industrial accidents is $6,500m. To put that into context, we have spent a good part of today talking about cuts that have hacked into large areas of our Government's budgets and the very best it was able to prune, after pretty healthy endeavours, was $1.25 billion. Accidents cost us $6.5 billion a year. That is not all. Occupational injuries and diseases cause twice as many work days to be lost as are lost by strikes. In the past 10 years twice as many people have died in Australia through work-related injuries as had died in acts of terrorism in Northern Ireland over the same period. Unfortunately-and this is why we need such a body-the reaction to these facts and to all the other occupational health statistics has been a deafening silence of resignation, apathy and indifference. That was a quotation from Mr Justice Kirby, who went on to say that for every Australian injured on the roads about five are injured at work. He said further that one million working days are lost each year through accidents at work. These are horrific statistics and they need to be taken on board when we are looking at the cost benefit of the establishment of a commission such as this. Quite candidly, in my opinion, if this Commission in its first year is responsible for reducing by 10 per cent the number of accidents that result in death simply by highlighting the need for better and safer working practices, and as a result can save 30 to 40 lives, I do not care if it is going to cost every one of those $6.5 billion. Those lives are worth that, particularly if that number of lives is saved every year. That is putting it into a vastly different context from the comparatively small cost it will really involve. Its job will be to publicise, to highlight, the massive task which we all have but which we parliamentarians have shirked over the years. We have known about these statistics and about the horror of industrial accidents and occupational hazards but have done comparatively little about them. Let me talk about something that has been getting a little publicity lately. It is another occupational hazard. It is something that some people are studying very closely and would come under the purview of this Commission. It is an area that very few organisations have yet found a solution to. I am talking about repetition strain injury. Our governments, Federal and State, are still groping for solutions to the problems caused by RSI. In New South Wales alone, where there is the most accurate data, RSI was the basis of nearly one-third of all workers compensation claims for women in 1977-78 and the basis of 2.5 per cent of all workers compensation claims for men in that year. As shortly after that as 1981-82, four years later, RSI climbed from 32.3 per cent to 54.8 per cent of all workers compensation claims for women, and for men it climbed from 2.5 per cent to 6.3 per cent of the total workers compensation claims. That is an indication of the urgent need for study by an acceptable body, not a vested interest body, into the causes and potential remedies and preventive measures for RSI. It is a growing plague in our community and needs to be taken on board by a body such as this Commission and given maximum publicity, not just to highlight the fact that it is there and growing but to encourage research into preventive measures which can be taken. A number of such measures have already been suggested but they do not have any status in the community because they are perceived to be coming from one corner of the community instead of the broad spectrum which this Commission will represent. In conclusion, I should indicate that the Australian Democrats are sympathetic to the creation of this Commission. We hope that the Commission does all that both I and other speakers in support of it, and even, I believe, those who speak against it, hope it will achieve. We will be watching the operations of the Commission and I, together with, I am sure, members of the Opposition, will be studying its activities very closely to see that it does not get led off the critical path needed for a body such as this. I believe this Commission is overdue. It has a vital role to play in our community. I believe that it can do a great deal of good for Australia, not just in the work force but right across the community, as it sets about its very difficult task in the years ahead. Senator SHEIL(Queensland)(6.38) —I lend the voice of the National Party to opposition to this National Occupational Health and Safety Commission Bill. I have been interested in the debate. I think Senator Jack Evans has picked all the weaknesses in the Bill. I am surprised that he has come to the conclusion he has after picking the faults in it. To oppose a Bill such as this is almost like opposing motherhood, and I would not like anybody to think that the Opposition is not completely sensitive to the issues involved with occupational health and safety. We definitely are. In fact I think the record over the years speaks for itself. People have been trying very hard to reduce the toll that these things wreak on us. In the years I have been in opposition in the Senate, I have always been surprised at how the Australian Labor Party can think up such nice names for the gigantic organisations it creates. I am reminded of Medibank and now Medicare. These big organisations do not do what they are supposed to do. In fact, the two organisations I mentioned are more about control than they are about health. I am sure the proposed National Occupational Health and Safety Commission will not do all the things that Senator Jack Evans hopes it will do. The type of three-headed organisation that will be created will not complete the job which I know the Labor Party and the Australian Democrats want. This is the main reason we are opposing the Bill. I suppose that in the days when the Pharaohs built the pyramids there was not a lot of occupational health and safety. I have actually seen the polished stones on the walls along the Yangtze-Kiang River which were worn by the shoulders of coolies pulling ropes towing junks up and down the river. I do not suppose there was a lot of occupational health and safety then either. Senator Cook —Do you want those standards in Australia in 1985? Senator SHEIL —That is fatuous. The modern history of occupational health and safety starts in modern times, in, I think, the 1700s, when a doctor first drew attention to the increased incidence of cancer of the scrotum in chimney sweeps. I think it took about 10 years before anybody took any notice of him. There was a similar history in relation to Dr Semelweiss who pointed out that if doctors washed their hands, women would not die after child birth of puerperal fever. He almost went mad trying to convince people that doctors should wash their hands. Senator Peter Baume —He did. Senator SHEIL —Yes, he did. We have come a long way since then. In fact, when I was a young doctor, miner's phthsis was a dreadful scourge. Indeed, all these diseases were called pneumoconioses and were contracted by farmers, silo workers, cotton mill workers and others. They were compounded by tuberculosis which also was a scourge. All those diseases have gone. We do not hear of them any more. I think that the history of industrial safety and health actually is quite exemplary. All we are getting now is a change in the types of injuries we are seeing. I remember hammer and drill disease which was a dreadful thing to have. Now, workers have jackhammers that do not recoil and in which the noise is damped down. Nearly all of industry is well aware of the importance of occupational health and safety. My father was an engineer and we used to travel around mines, construction sites, and places such as that. Occupational health and safety was one of the prime moving forces in the development of all those safety devices. I have been in lots of factories where attention to noise, light, ventilation and the comfort of people working there has always been of prime concern. In fact, I have been in quite a few places where protective gear such as goggles, earmuffs, and protective clothing is not worn by workers. It is important that workers take advantage of the advances that we have made. I say just out of interest that I was reading in the paper the other day about Senator Cook's workers paradise behind the Iron Curtain. It was reported that 70 per cent of the Russian work force is affected by grog. In fact, production and quality of work is down. Gangs of people have to see that workers affected by drink do not damage themselves on the machinery. That is taking it to the nth degree. Senator Cook —It is disgusting that you should accuse me of supporting that. Senator SHEIL —During the discussion on the National Occupational Health and Safety Bill, both Senator Jack Evans and Senator Crowley mentioned that occupational health and safety should be taken care of at a local level because every industry has its own problems. Those problems are all different. To think that they can be dealt with by a gigantic organisation such as the one that is proposed, is not right. It is not possible to have national standards for these things. For example, what we need on Thursday Island is a lot different from what is needed in Tasmania. Each industry has its own circumstances which have to be dealt with locally and on the ground. To think that it is possible to have meetings in a commission as big as the proposed National Occupational Health and Safety Commission and expect it to come up with results that will help in the work place is not practical. I agree also that it would be expensive. Although I have heard of the enormous costs in work time lost and deaths I do not believe that the Commission with its reports and codes will be able to reduce that cost. In fact, there are few indications to suggest that the Commission should be created at all. There are industrial health and safety organisations in operation now. They go out to new factories or to places where enterprises are to be started and give expert consultations. How does one tell a senator who is going up in a space shuttle what his occupational health and safety code will be? It would be ridiculous to have a national code for that sort of thing. However, that has happened in the world today. Most of the problems are now known. When new things such as repetition strain injury occur, they are quickly recognised and researched. Senator Elstob —Why were not the dangers of asbestos told to people? That was known in the early 1930s and nobody explained it to anybody? Senator SHEIL —The danger of asbestos was known for years. I remember learning about it. Senator Elstob —The dangers of it were never told to the people who worked it. Senator SHEIL —It was not known that one needed such a little dose to contract the disease. The severity of the disease is not related to the dose. In all those other diseases, one had to be exposed to a high dose over a long period, before one got the disease. Asbestos was different. Everything is not perfect. Other honourable senators have recognised that even the Commission will not have a 100 per cent perfect record. Senator Crowley said that not even the unions expect a 100 per cent perfect result. She said that they just want a fair go. This Commission will not achieve that. As has been stated, the Commission is a three-headed hydra. The three heads will snap. We will have a commission, an office and an institute. They will cost $33m and employ 300 people. We can argue about the powers of the Commission and whether they are draconian. They are big powers and the Commission will have an over-arching role. That is the new in-word in the creation of Federal bureaucracies. People will see a great range of activity with a Federal body over-arching all other things. It will have an overriding interference in the development of quite a lot of industries, particularly heavy industries. The Commission will interfere with local government zoning and licensing, for example. It will interfere with the licensing arrangements of State governments. The big danger that I see with the Commission is that it could be used as a vehicle by militant unions to interfere in industries. The Commission will have draconian powers. For example, it will be able to call for the provision of documents. It will be able to hold inquiries in which people have to be sworn. It will be able to impose fines, gaol sentences or both. Therefore, its powers will be big. As has been stated, for different reasons, there have been times of deterioration of industrial relations throughout the country. Of course, the row in Queensland has nothing to do with occupational safety and health. When there are problems of an industrial nature I can see that the Commission, following its investigations and its formation of the various codes, will issue those codes and they will become Federal industrial health and safety codes. Those codes may be incorporated into a Federal award. Once they are incorporated in a Federal award they come under the control of union organisers. In other words, the Government is putting the whole thing in the hands of the union organisers. If a person happens to be a militant union organiser the danger is that a whole development will be held up, causing the loss of jobs and costing money. Senator McKeirnan-And shop stewards, and members of parliament. Senator SHEIL —All of them can do that. I turn to the last couple of points that I want to raise. The Bill was referred to the Standing Committee for the Scrutiny of Bills. The Committee came up with a couple of recommendations and they have been circulated to honourable senators. The first point I make is that the Bill reverses the onus of proof. The employers have the onus of proof reversed on to them. It is a tenet of our common law that one is innocent until one is proven guilty. This Bill seeks to do the opposite. The second point, and the last, concerns the disclosure provisions and the publication of documents. Earlier I referred to the powers which the Commission will have. It is quite possible that trade secrets will be disclosed and published because the Commission has the power to publish. The ability of the Commission to investigate matters and make codes, the fact that a code can be put into a Federal award and the award used by militant unions to disrupt industry, the reversal of the concept of a person being innocent until he is proven guilty, as well as the ability to disclose trade secrets, I think, are sufficient reasons to reject the Bill, particularly as the Bill, with all the investigative, advisory and other powers which are contained in it, will not improve or enhance occupational health and safety one little bit. The Commission will be just as big a failure as Medibank was and Medicare is. Senator COOK(Western Australia)(6.52) —I support the Government's National Occupational Health and Safety Commission Bill 1985. Since I believe that time will beat me tonight, I will save many of my substantive remarks until I get a full crack at the debate. In the few minutes which are available to me, before I am cut off at 7 o'clock, I would like to open by replying to Senator Sheil's excursion into the gutter when, in his remarks on the Bill, he sought to link me with working conditions in Russia. I want to say this, for Senator Sheil's information: I do not support those working conditions, because the fundamental problem with them is a problem which is a feature of the problem with some working conditions in Australia. In Russia, work is organised on a target basis. People are put to work on a piece-work basis, to be paid per unit produced. Because the incentive is to chase money, safety in occupational health is forgotten in the pursuit of, in that case, the ruble. In many industries in Australia where there is piece-work-where the emphasis is on the pursuit of the dollar, not on the safety of occupational health-safety is forgotten; there is a high casualty rate; no attention is paid to dangerous chemicals, fumes, scaffolding and other safety conditions and workers, health suffers. People die, are crippled or suffer enduring diseases. When Senator Sheil starts to link me with working conditions of an obnoxious sort like those, let me set him straight. I do not support them. I think that it is an excursion in the gutter that he should try to do so. I also think it is interesting that his examples about occupational health in what was a meandering speech were examples first drawn from antiquity. Of course, when they built the Pyramids or when they towed the barges along the Yangtze they did not know what occupational health was. They were slave societies. It might be in the mind of a National Party senator from Queensland to believe that workers in Australia should exist in slave societies, but at least in modern Australia that is not a common view. Your personal and anecdotal history of industrial diseases was interesting. It proved that you did know something about occupational health. The DEPUTY PRESIDENT —Order! Senator Cook, will you address your remarks through the Chair rather than directly to Senator Sheil? Senator COOK —I will do so, Mr Deputy President. It did prove that Senator Sheil knew something about some events in modern industry. The problem is that once he proved his sensitivity he disproved any caring about what ought to be done about it, because he then indicated that he did not support the Bill, a Bill which is intended to bring together all of the organisations concerned, to provide a national framework to start to address the problem properly, to raise the level of consciousness about occupational health and safety and-this may come as a surprise-to save Australian industry a huge amount of money as well as to save Australian workers from untold suffering and disease which arise from industry and which often are not their fault. I find it more than passing strange that when the Opposition, which makes a fetish out of talking about strike statistics, is taken on in a debate about occupational health and safety all it has to say is: 'Let the market decide'. If we had let the market decide there would still be nine-year-olds working in the mines. It is because governments intervened to prevent the exploitation of labour that standards were set. It is important to note in this debate that the Confederation of Australian Industry supports the Bill. The Opposition does not. Whom is the Opposition speaking for? I would like to know. The Australian Council of Trade Unions supports the Bill. The Government supports it. The Australian Democrats support it with some qualifications, qualifications which, I might say, are understandable and are certainly not out of our minds either. But the Opposition does not support it. We have a consensus document with widespread support from the key actors in the community, but the Opposition does not support it. Whom does the Opposition represent? What concerns does it really talk about? In a minute I want to turn to the Bill and what it means, but I think it is important to make some of these remarks. Last year $6 billion was wasted through loss of production and associated costs due to occupational injury and ill health; 300 people were killed; 150,000 people were injured at work. It is one thing for the Opposition to talk in here about its concern; it is another thing to try to vote down or debate down a measure aimed at addressing that problem and trying to resolve it. What the Opposition would want to debate in here is strike statistics. Double the amount of time lost to production can be saved if we get our occupational health and safety settings right and if we are able to address those questions so that health and safety are improved, accidents do not occur on the job and people are not killed when they go to work. I would have thought that there ought to be some sort of natural inclination, in the face of a widespread community consensus, from the Opposition to come out of its dug-out and be generous for once and support this legislation. I must say that this is a piece of legislation that I feel a little passionately about. Earlier in my career I worked as an industrial officer for a union. Part of my job was to service people who were applicants for workers compensation claims. I saw a long trail of human misery come through my office door when carpenters who had fallen off a single storey building roof and had crushed their ankles or wrists and could not work in their trade any more, were trying to recover themselves from injury, learn another occupation and, at great misery, personal cost and hardship to themselves and their families, go out into industry and try to find another career for themselves. Debate interrupted. The DEPUTY PRESIDENT —Order! It being 7 p.m., under sessional order, I put the question: That the Senate do now adjourn. Senator RICHARDSON(New South Wales)(7.00) —Tonight in the adjournment debate I wish to answer some queries put to me by certain journalists concerning the Enmore conspiracy case. As all honourable senators will by now be aware, long ago, in 1980, six people were charged with, among other things, forgery and conspiracy relating to the records of the Enmore Branch of the Australian Labor Party. Beginning with the Panorama program last year and continued in recent days by shows such as the National, a myth has been perpetuated that there were hundreds-the number varied between 600 and 750-of charges concerning the administration of the books of the Enmore Branch. According to the best information I can come across, there were 746 charges which related entirely to two of the defendants-Mr Meissner and Ms Perger. These charges concerned events surrounding the non-payment of parking fines and the alleged issuing of false statements and declarations in connection with those fines. That is of no great concern to the Australian Labor Party; it is of no great concern to me. The prosecution alleged that statutory declarations concerning the parking fines were forgeries because they contained false information. The magistrate held that this was wrong in law and dismissed the charges. The prosecution claimed that the documents were improperly executed because the justices of the peace who witnessed them did not exist. The magistrate said that the prosecution would have to prove that the JPs did not exist; the prosecution was not even able to begin that task. It was also alleged that Mr Meissner's left hand had been used to forge the signatures of some of the JPs. The magistrate did not accept that this could be established. There were approximately 21 charges relating to the minute book, the attendance book and the membership ticket books of the Enmore Branch. One of the defendants was even charged with forging his own ticket, on the basis that the definition of forgery was extended to mean that if the dates on the ticket were wrong and false information was contained on the ticket it was a forgery. I find it amazing after all this time that we still keep hearing of the 750 charges related to ALP books when almost all of them related to parking fines. The Panorama program, which featured Mr Domican in yet another tedious repetition of his allegations concerning the Enmore case, had its research work done by none other than Mr David Halpin, a freelance journalist who acted as Ms Perger's agent in this now discredited and rather silly love boat affair. The same Mr Halpin prepared the statement which Mr Domican gave to the Stewart Royal Commission of Inquiry into Drug Trafficking. When the contents of that statement were examined, the royal commissioner, Mr Justice Stewart, having gone over all the facts, stated that Mr Domican had 'prevaricated and told half-truths and untruths' and that 'he was prepared to, and did lie upon his oath to suit his own purposes'. Further, Domican admitted that he had lied. Mr Halpin appears to be bailing out of this current controversy, given what I have read and heard of the robbery of his car. The break and entry into his vehicle can be described as the most convenient robbery in living memory. He alleged that important documents relating to this case had been stolen. It was not a very original story. During this period when the Labor Party was examining books, taking charters off branches and expelling people, one branch secretary claimed that his car had been stolen and that when it was returned the next day the books had gone missing. Other people said that they had left the books in the pub. One person claimed that the books had been left in a bottom drawer and the rats had got at them. However, Mr Halpin has asserted what occurred and I cannot prove that it did or did not. However, it does help one to understand why Mr Halpin describes himself as a freelance journalist; it is because no reputable organisation will hire him. After his failure to put up in this fiasco I am sure that it will be a long time between drinks. To understand the ALP's opposition to criminal charges being laid against Party members, it is first necessary to understand the history behind that opposition. In the past there have been instances of book-rigging, forgery and falsification of records. In the almost 100-year history of the ALP these instances, which have occurred from time to time, had never attracted the interest of the police. No person had ever been charged over such matters until the Enmore case and no one has been charged since, despite the fact that there have been at least two well publicised instances of this sort of behaviour. When these matters were discussed in the appropriate Party forums, as the Secretary of the Party, I was instructed to convey the Party's wishes. As the letter I wrote to all Cabinet Ministers has apparently attracted the interest of some people, I seek to read it into Hansard. It is not a long letter; I do not think it will take up much time. The DEPUTY PRESIDENT —You may read it without seeking permission. Of course, if you wish to incorporate it you will need leave. Senator RICHARDSON —I would like to read it because it explains some of the matters. The letter, dated 8 February 1982, was addressed to all Cabinet Ministers in New South Wales and stated: The Administrative Committee at its meeting held on Friday, 5 February, 1982, carried the following resolution in relation to criminal charges laid against a number of Party members and ex-Party members, over the administration of the books of the Enmore Branch of the Party: ''That this Administrative Committee reaffirms the decision carried by the 1981 Annual Conference of the N.S.W. Branch of the Australian Labor Party to the effect that neither the police nor the courts should have any role in the internal affairs of the A.L.P. The Committee views with grave concern the development of the practice whereby police and courts intrude upon the internal affairs of the Labor Party to the extent that members of the A.L.P. have been arrested and charged with offences relating to internal party matters. We further express the definite view that questions of A.L.P. rules, and issues affecting the welfare of the Labor movement, should be the sole responsibility of the duly constituted bodies of our Party. We therefore call upon the responsible Ministers of the N.S.W. Government, the Attorney-General, Frank Walker, Q.C., M.P., and the Minister for Police, Peter Anderson, M.P., to withdraw those charges which have been laid against A.L.P. members in respect of internal A.L.P. affairs. It is an absurdity to suggest that breaches of A.L.P. rules should be subject to police and court action and the Government must act to bring an end to this farce.'' The Administration of Party books has never before in the history of any Party, and indeed the history of New South Wales, been the subject of criminal charges and investigations. If this precedent is allowed to stand, one can only imagine how a future conservative Government would be able to disrupt, harass and even rip asunder our great Party. If any of the persons charged in this case were to be committed for trial, how many other Party members, whose Branches have been the subject of investigation and disciplinary action by the Party over the past five years, can expect police investigation followed by arrest? This principle, however, should not only be applied to our Party, but to all political Parties. It would be just as unacceptable for the police to be involved in an investigation of those malpractices in the Liberal Party, made so public during the preselection for the Federal seat of North Sydney, now known as ''The Solomon Affair''. The fact that both the resolutions of the Annual Conference last June and the Administrative Committee last Friday were carried unanimously, shows the depth of feeling and the unity of all sections of the Party on this matter. The Defendants have been informed that the Prosecution intends to call some eighty witnesses during a committal proceeding, expected to last six to eight weeks. Such an extravaganza will be gleefully greeted by the press and the media in general. The reaction of the Leader of the Opposition on the ABC Programme ''AM'' this morning can only confirm the obvious-that this action represents the greatest gift to the Liberal party since the Wran Government same to Office. I respectfully request, therefore, that the Government gives this matter its most serious and urgent attention. With kind regards, G. F. RICHARDSON General Secretary Senator RICHARDSON —Over 800 delegates at our 1981 Conference, at which there was some bitter and acrimonious debates, were united on this one point. The administrative committee, representative of all groups in the ALP, was also united. The fact that I had written in such terms to the Ministers, which seems to be attracting interest now, attracted almost no interest at the time. If anyone wanted to suggest that such action was improper or wrong, he or she had plenty of opportunities to do so. In the Sydney Morning Herald, not some obscure journal, of 9 February 1982-there must have been an inspired leak on this occasion-Mike Steketee, who was then the State political correspondent, repeated all of the resolution which I have just read out in full. He mentioned that I had sent this information to all State Ministers. The New South Wales Opposition Leader at the time-the Opposition did have quite a few in that period-Mr Dowd, described the Administrative Committee's decision as disgraceful. He said that Labor Party members had contempt for the law. He was, of course, entitled to that view but at no stage did he or anyone else suggest that there was anything improper in what the Committee did or what I did as its Secretary in conveying its resolution. I had every right to convey the resolution. That matter was never in dispute. The Ministers had every right to do what they in fact did in the end, and that was to completely ignore them. I was not given a response. They were not discussed at Cabinet and, as we all now know, the case went ahead. It is well known-it is no great state secret-that Frank Walker and I were not close and that for a very considerable period, to the best of my recollection for some six or seven years, we did not exchange a word. I never spoke to him at the time about this matter and certainly not between the time that those who were charged were arrested and the conclusion of the case. It goes without saying that I have never spoken to the magistrate, Mr Brown. I have never met him. I have never sought to speak to him and I have never sought to communicate with him directly or indirectly. On this aspect there was no secret, there was no conspiracy and there is no problem. However, because interest was stirred up in the Panorama program and some of Mr Domican's other allegations, I believe that these matters should also be put into some proper prospective. First, we have the claim that he was provided with lists of witnesses so that he could visit them and persuade them to change their story. The facts are, as I am sure will eventually be revealed in the police investigation, that the prosecution provided the defence lawyers with copies of those membership tickets alleged to have been forged, minutes alleged to have been forged and pages of the attendance book alleged to have been forged or falsified. It would not take a genius to work out from the list that was provided by the prosecution just who might be called as a witness against those charged. But even if the prosecution had not provided that information the defendants would have been well aware just whom the prosecution would call against them. I am sure that neither Mr Brown nor the police knew what they were walking into when they walked into the Enmore branch. The reason that some unscrupulous people in the Labor Party have tried to manipulate and falsify branch records over the years is to ensure extra votes in preselections. Gough Whitlam once said that too often the person preselected was the person who could put the most friends and relatives into the local branch, not necessarily the person with the most talent. Of course, that is what happened at Enmore. There was an attempt to put a large number of friends and relatives into the Party. That there was forgery and falsification of the records of the Enmore branch has never been denied. In fact, I will give a brief history of how the Party dealt with complaints about the branch. The first complaint was lodged on 1 February 1980 and was acted upon immediately. By March 1980 an official had been to the branch, confiscated the books and its annual general meeting had been postponed. By April 1980 a full inquiry into the affairs of the branch was underway. Meetings of the branch had been suspended and the former secretary of the branch had been declared to be no longer a member of the Party because his original membership had been falsified. By July 1980, prior to the Baldwin bashing I might add, the branch charter had been withdrawn and it had been decided to resuscitate it at a later date, and that no Enmore branch members would participate in Marrickville Council preselections. These actions show that the Party had its own way of applying an appropriate Party penalty to those who broke the rules. That friends and relatives, therefore, would go into court and change their evidence to protect those close to them should hardly come as a great shock to anyone. Nevertheless, if any person was threatened about the evidence he or she was to give in the court case, the persons responsible for the threat should be charged appropriately. I am more than confident that the police can get to the bottom of that. The next matter of interest is the magistrate's concern over the defence team being in possession of some of the statements of the witnesses for the prosecution. At one stage during the case, because of that concern, the defence was asked to hand over to the prosecution all the statements that were in its possession. There were four statements, three concerning the Enmore branch. These were all from relatives of one of those charged, a Mr Kennedy, a garbologist from the Marrickville Council who had never been heard of prior to being charged in this case and who has never been heard of since. Apparently, three of the statements were from his wife, his mother-in-law and someone who, I am told, was his sister-in-law. The fourth statement, which was entirely concerned with the parking fine charges and which apparently had been at least photocopied from the police file, was from Virginia Perger's mother. I would not have thought it would be too difficult for anyone to work out how the defence would come into possession of those statements. It did not require Ministers to pressure police to lift them from the files. It did not require anything other than asking those involved. The only other statement that Mr Domican could possibly be referring to is the fact that at one stage he had in his possession the original record of interview with Peter Baldwin taken at Peter Baldwin's bedside after the bashing. While the defence lawyers are not certain of the exact date, when he did produce this and wave it in front of their eyes-they think it was at least 12 months after the interview had been conducted-they gave it straight back to him because it had absolutely no relevance to the case that they were preparing for the defence. Some people have gone so far as to say that there should be a royal commission into these matters. I suppose we could have a royal commission into the love boat allegations made by an unfortunate woman, who is a prostitute and a heroin addict, and a journo on the make, even though there are no photographs and no evidence-and there cannot be. All of the Party officials over the period have now been contacted and none of them have ever been compromised by Virginia Perger. I suppose we could have a royal commission into 746 charges relating to parking fines. I suppose we could have a royal commission into how four relatives gave the defence their statements. I suppose we could have a royal commission into whether Tom Domican visited a witness. However, I am sure that all fair-minded people would agree that the police can more than handle those matters. The tying up of the sorts of resources involved in a royal commission on this trivia would be the real way to pervert the course of justice. Senator CHANEY(Western Australia-Leader of the Opposition) —by leave-I move: That the Senate take note of the speech. I seek leave to continue my remarks later. Leave granted; debate adjourned. Senator REID(Australian Capital Territory)(7.19) —I want to follow up an answer to a question I asked of Senator Gareth Evans, the Minister representing the Special Minister of State, in Question Time on 14 May relating to the availability of the crime collection unit of the Australian Federal Police in Canberra. In my question I asked: Why were the two officers of that very important unit not replaced? Why was that unit left two-thirds unoperational? In fact, I think it was left wholly unoperational. The answer was given by the Minister representing the Special Minister of State from notes that he had been supplied with. It has now been suggested to me that there is more to the explanation than has been given, but in no sense do I suggest that Senator Gareth Evans misled or gave other than the information which had been supplied to him though the office of the Special Minister of State (Mr Young). The Minister referred to the fact that there was only one officer on duty and not three, and he then went on to say: As to the larger part of her question, in any case, as the Special Minister of State tells me, information on Commonwealth warrants held by the branch was readily accessible by computer at any one of a number of terminals . . . To that I would suggest that the correct statement is that they should have been. The Minister then went on to explain what is the usual practice in that area. That answer has excited some interest as I am told that in fact the criminal records unit of the AFP was on that day closed for the first time in 23 years, so information was not available and could not be supplied in response to interstate requests. I am told that the one officer who was on duty was in the passport alert section. He had been in the force for only four months and had neither the expertise nor the ability to get into what I am told were the locked sections closed off by a roll-down garage door device covering the crime collation unit and the criminal records unit. It seems that a telex was received from Victoria requesting information about a certain person, and a response was sent. I seek leave to have the telex incorporated in Hansard. Leave granted. The telex read as follows- GA30717VKC AA30717FEDPOL AA62004From: FEDPOL CanberraTo: Chefpolice Message No: 322 1705HRS 11.05.85 Re your Telex No. 364 DOB26/11/60 is recorded in the A.C.T. our Docket No. 19926 refers. We are unable to advise on priors as our crime collation unit will not be on duty until 2300 hrs 11.05.85. No warrants found existing in A.C.T. for above. NOBLEOperations FIN......PJNVKC AA30717FEDPOL AA62004 Senator REID —The name of the person about whom information was sought has been deleted from the telex. It otherwise refers to the fact that the police were unable to advise on priors-that is prior convictions-as its crime collation unit would not be on duty until 2300 hours on 11 May 1985. It refers to the fact that no warrants for the person in question were found to be existing in the Australian Capital Territory. There is considerable concern in this community about the present state of policing. It stems mainly from the fact that, as is fairly common knowledge, in certain areas, overtime has virtually been cut out and the level of policing is not what it ought to be. There are not as many motor vehicle patrols as usual and there is a ban on overtime. That perhaps would be the reason why these two officers were not on duty and were not replaced on that Saturday. We hear of the drug unit not operating after 4 o'clock in the afternoon. We hear of the scientific squad not being available after 4 p.m. unless a senior officer specifically says that it ought to go to a break and enter or other crime which is thought to have been committed. If overtime has been cut to the extent that these facilities are not available, I think we are entitled to know that. The records section in particular-if we are going to have a Federal police force with central records-needs to be available in other States. I gather that in Victoria in certain instances a person may be held for only six hours. These days, with communications as they are, police would expect to be able to get the sort of information they required well within that time. If units are going to be closed down because an officer is away, arrangements need to be made. There are questions that ought to be answered on this matter. Perhaps it is only a small thing from some people's point of view. Why is it that so much mystery is being created? I would like an assurance that this telex was sent from the AFP last Saturday setting out the accurate information as to what actually occurred on that occasion. Senator GRIMES(Tasmania-Minister for Community Services)(7.23) —I have no direct knowledge of the matters raised by Senator Reid. I will refer them to the relevant Minister and get the information for her. I have nothing to say about Senator Richardson's speech. Question resolved in the affirmative. Senate adjourned at 7.23 p.m. The following papers were tabled: Defence Act-Determinations 1985- No. 24-Flying Allowance and others. No. 25-Salary of Permanent Force Members. No. 26-Overseas Living Out Allowance and others. No. 27-Overseas Living Out Allowance and others. No. 30-Disturbance Allowance and others. No. 31-Salary of Permanent Force Members. Fisheries Act-Fisheries Notice- No. 135-Prohibition relating to the taking of snapper in proclaimed waters adjacent to Shark Bay, Western Australia. No. 141-Restrictions relating to the use of fish traps in proclaimed waters adjacent to Shark Bay, Western Australia. Public Service Act-Determinations 1985-Nos 28, 30, 31. GOVERNOR-GENERAL'S MESSAGE-ASSENT TO LAW: A Message from His Excellency the Governor-General was reported, informing the Senate that His Excellency had, in the name of Her Majesty, assented to the following Law: 15 May 1985-Message No. 12- Supported Accommodation Assistance Act 1985 (Act No. 22 of 1985) The following answers to questions were circulated: (Question No. 72) Senator Puplick asked the Minister representing the Minister for Sport, Recreation and Tourism, upon notice, on 19 March 1985: (1) Has the Minister for Sport, Recreation and Tourism noted a report in the Sydney Morning Herald of 20 February 1985 which claims that a large proportion of so-called 'Australian' souvenirs are actually manufactured overseas. (2) Has the Government awarded a contract to a company called 'Alaok' to operate an Australiana shop at the World Fair in Japan this year. (3) Does Alaok buy most of its 'Australian' souvenirs from Birociter Pty Ltd which, in the Sydney Morning Herald article referred to in (1) above, admitted importing most of its 'Australian' souvenirs from foreign sources. (4) Can the Minister give an assurance that 'Australian' souvenirs sold by Alaok at the Japan World Fair will be goods actually made in Australia; if not why was Alaok given this contract over companies who were prepared to sell goods which were designed and made in Australia. Senator Ryan —The Minister for Sport, Recreation and Tourism has provided the following answer to the honourable senator's question: (1) Yes. (2) The operation of an Australian concession at Expo 85 in Tsukuba, Japan, to provide items that are typically Australian has been awarded to a partnership of Consolidated Leisure Holdings Pty Ltd and Alaok Pty Ltd. (3) I am advised by Consolidated Leisure Holdings Pty Ltd that less than 1 per cent of the initial stock of goods for sale in Tsukuba was purchased from Birociter. (4) The Agreement entered into with the partnership for the operation of the concession includes provision that articles sold are to be of Australian manufacture. Alaok has manufacturing facilities for Australian made products sold in the souvenir market. I have been informed that a small number of animal dolls which were on display at the Australiana shop were not manufactured in Australia. These have now been withdrawn by the concession operator. However, I have authorised the sale of some Japanese language publications and a sound tape which were not made in Australia. It is unlikely that the Japanese language publications would be published in Australia. The sound tape records the music played within the Pavilion and would only be of interest to visitors to the Pavilion. (Question No. 120) Senator Colston asked the Minister representing the Special Minister of State, upon notice, on 22 March 1985: Are instructions given to Australian Electoral Commission officers on the way scrutineers are to be treated; if so, what are those instructions; if not, will the commission consider giving instructions to ensure that scrutineers are treated with courtesy. Senator Gareth Evans —The Special Minister of State has provided the following answer to the honourable senator's question: The Electoral Commissioner has advised that the rights and obligations of scrutineers as set out in the Commonwealth Electoral Act 1918 are further elaborated in the Commission's official publications, notably in the Scrutineers Handbook, made freely available to candidates in an election, and in the Polling Booth Control Manual issued to each Assistant Returning Officer. No specific instructions about the treatment of scrutineers have been considered necessary as Commission officers and polling officials are expected to treat electors, scrutineers or any other member of the public with normal courtesy. The Commission is not unmindful, however, of occasional difficulties which can arise when employing a temporary workforce of 65,000 people and is constantly seeking to enhance its recruitment and training measures. While there can be no excuse for rudeness, there is the possibility of an unfortunate exchange occurring but such occurrences are, in the Commission's experience, rare. If the honourable senator's question has been prompted by his knowledge of a specific compliant he may care to bring the relevant details to the attention of the Electoral Commission.