Tuesday, 3 June 1986 The PRESIDENT (Senator the Hon. Douglas McClelland) took the chair at 2 p.m., and read prayers. The Clerk —Petitions have been lodged for presentation as follows: To the Honourable the President and the members of the Senate assembled. The humble petition of the undersigned citizens of Australia sheweth that whereas: 1. The present Australian national flag is not distinctively and uniquely Australian and is confused with other national flags. 2. The people of Australia have never had an opportunity to express their views on an appropriate Australian national flag in a referendum. 3. The present Australian national flag does not properly represent Australia as a sovereign, independent nation. 4. The present Australian national flag falsely proclaims Australia as a colony, homeland, protectorate, dominion or government department of Great Britain. 5. The first condition in the flag competition of 1901 required that the design should show Australia's loyalty to the British Empire. The British Empire no longer exists. 6. A public opinion poll held in 1984 using the Gallup Method revealed that 52% of Australians surveyed wanted a competition for a new design for the Australian flag. 7. There is no inherent link between Australia proclaiming a unique and distinctive flag and the political issue of Australia moving to a republican form of government. 8. The adoption of a truly Australian national flag would serve as a focal point for Australia's bicentennial celebrations in 1988. Your petitioners therefore pray that your honourable house will: (a) Appoint a Committee of the Parliament with representatives from both Houses and all parties to invite and consider proposals for the design of a new Australian national flag, and (b) Require that Committee to make recommendations on the form of a minimum cost referendum at the time of the next general elections, in which the electors will be given the opportunity to vote for a flag from a selection of at least three designs which will include the present Australian national flag and the winner of the Ausflag-Bulletin-2MMM.FM competition of March 1985. And your petitioners as in duty bound will ever pray. by Senators Chipp (from 10 citizens), Haines (from 14 citizens) and Puplick (from eight citizens). To the Honourable the President and members of the Senate in the Parliament assembled. The petition of certain citizens of Western Australia respectfully showeth: That all legitimate business expenses incurred in earning or producing assessable income should be allowable deductions. That the proposed Capital Gains Tax is an unwarranted burden on the rural sector, which will severely affect its long-term viability. That the delay by the Government in introducing the legislation into Parliament is causing confusion and hindering farmers in the organisation of their affairs. Your petitioners humbly pray that the Government introduces the Capital Gains Tax legislation without delay and that the Australian Democrats join with the Opposition to defeat the proposed legislation. by Senator Chaney (from 56 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia respectfully shows that whereas: (1) Identification cards and numbers severely threaten our freedom to live unfettered by excessive bureaucratic surveillance; (2) the Government has been unable to present any realistic justification for the introduction of ID cards and numbers; We humbly pray that the Senate, in Parliament assembled should reject any proposal to inflict ID cards and numbers on the freedom loving people of Australia. by Senator Mason (from 791 citizens). To the Honourable the President and members of the Senate in Parliament assembled. Being signatures collected at a meeting organised by `Scientists Against Nuclear Arms' in conjunction with the Mosman Peace Group on Tuesday 11th February at which Dr Barrie Pittock of C.S.I.R.O. talked on the subject on `Nuclear Winter'. On 29 January 1986 the Sydney Morning Herald and The Australian reported that R.A.N. Lt. Commander Lynch (Ret.), who for four years had organised the visits of nuclear powered and/or nuclear armed warships to Western Australia, had warned about the danger to Perth posed by such visits. In the light of this warning, the undersigned residents of harbourside suburbs are concerned at reports in the Mosman Daily and The North Shore Times that nuclear armed and/or nuclear powered naval vessels will visit Sydney harbour in March/April and again in October. We appeal to our elected representatives to protect us from the possibility of a nuclear accident by ensuring that no nuclear armed and/or nuclear powered vessels are allowed to enter Port Jackson. by Senator Robertson (from 17 citizens). To the Honourable the President and members of the Senate in Parliament assembled: This petition of concerned Australian citizens asks that: 1. The Australian government exert pressure on Moscow to- a. Allow the International Atomic Energy Commission full expert investigation of the Chernobyl nuclear disaster and its human consequences; b. Allow Australian Ukrainians to send medical aid to family and friends in Soviet Ukraine; and, c. Allow free communication between Australian and Soviet Ukrainians. 2. The Australian Government- a. Launch a public appeal to help the Chernobyl victims; b. Support the removal of Russian nuclear weapons out of Ukraine; c. Support the decolonization of the USSR so that captive nations like Ukraine and the Baltic states are not exploited for Soviet Russian nuclear purposes. And your petitioners as in duty bound will ever pray. by Senator Peter Baume (from 120 citizens). To the Honourable the President and members of the Senate in Parliament assembled. The petition of the undersigned citizens of Australia showeth: That many Australian wage and salary earners and self-employed persons do not enjoy secure retirement incomes provided by superannuation; and That the Government issued in December 1985 guidelines for the implementation of the proposed productivity decision by the Conciliation and Arbitration Commission and draft operational standards for superannuation schemes. Your petitioners therefore humbly pray that the Government: 1. Guarantees to every employee the right and freedom to select the superannuation scheme of his/her choice. 2. Protects the individual exercising that freedom of choice from any coercion, influence or other pressure which may be applied by any employer, association or trade union. 3. Will recognise only those schemes which provide genuine superannuation and reject those schemes which do not provide for- preservation of benefits to retirement, vesting of employer contributions, equal employer and employee trusteeship control to ensure security of investments. And your petitioners as in duty bound will ever pray. by Senator Aulich (from 68 citizens). Petitions received. Senator GARETH EVANS(Victoria-Minister for Resources and Energy) —I give notice that, on the next day of sitting, I shall move: That leave be given to introduce a Bill for an Act to make provision in relation to the non-proliferation of nuclear weapons and to establish, in accordance with certain international treaties and agreements to which Australia is a party, a system for the imposition and maintenance of nuclear safeguards in Australia, and for related matters. Senator REID(Australian Capital Territory) —I give notice that, 10 sitting days after today, I shall move: That the following parts of the Seat of Government (Administration) (Amendment) Ordinance 1986, as contained in Australian Capital Territory Ordinance No. 4 of 1986, and made under the Seat of Government (Administration) Act 1910, be disallowed- (a) the omission of sub-section 10 (4a) of the Principal Ordinance by paragraph 3 (b); and (b) the omission of Part 4 of the Second Schedule of the Principal Ordinance by paragraph 4 (b). Senator JONES(Queensland) —I give notice that, on the next day of sitting, I shall move: That the Senate, noting that- (a) according to reports on Australian Broadcasting Corporation radio news on 3 June 1986, a high temperature thorium reactor at Haan on the Ruhr River in West Germany, the only one of its type, which opened in April 1986, developed a leak on 4 May 1986; (b) West German farmers have felt constrained to block roads leading to the nuclear reactor, claiming there was a cover up of news about the leak by the company operating the plant which initially blamed the high level of radiation in the area to the Chernobyl disaster in the Soviet Union; (c) the plant is now closed, indicating the seriousness of the situation; (d) the State Government covering the area has warned that if the results of an inquiry into the accident are not satisfactory the reactor's licence will be withdrawn; (e) local farmers, concerned about their crops, want the station closed for good; and (f) serious accidents at nuclear plants are becoming far too frequent for the general safety of mankind, urges the Federal Government to use its good offices in the United Nations to have world-wide safety checks instigated, with a view to setting minimum standards which all nations must observe. Senator COONEY(Victoria) —Pursuant to standing order 109a, I give notice that, at the giving of notices on the next day of sitting, I shall withdraw Business of the Senate, Notice of Motion No. 1 standing in my name for this day of sitting relating to the Northern Prawn Fishery Management Plan No. 3. I seek leave to make a short statement. Leave granted. Senator COONEY —The Standing Committee on Regulations and Ordinances was concerned about a possible inconsistency between the terms of the Fisheries Act and terms of certain paragraphs of the plan. I wrote to the Minister for Primary Industry (Mr Kerin) last Friday and the Committee urgently considered his reply this morning. In order to allay the Committee's concerns, the Minister has agreed to add further criteria to the plan in connection with the suspension and the cancellation of certain fishing licences. The Committee also noted that the Minister had received legal advice from the Attorney-General's Department, which he accepts, supporting the argument that the relevant paragraphs of the plan are valid. The Committee's scrutiny of this plan and related fisheries notices has been long and detailed, as I described in the Senate on 29 May 1986. The Committee acknowledges the considerable and very courteous assistance it has received from the Minister for Primary Industry in its scrutiny of the legislation. As is the Committee's usual practice, I seek leave to incorporate in Hansard the Committee's correspondence for the information of honourable senators and others. Leave granted. The correspondence read as follows- MINISTER FOR PRIMARY INDUSTRY THE HON. JOHN KERIN, M.P. Parliament House, Canberra, A.C.T. 2600 Telephone (062) 73 1711 Telex 62308 Facsimile (062) 73 2194 Senator B. Cooney Chairman Senate Standing Committee on Regulations and Ordinances The Senate Parliament House Canberra, A.C.T. 2600 Dear Senator Cooney Thank you for your letter of 30 May 1986 concerning Plan of Management No. 3 under the Fisheries Act 1952 (the plan) and Fisheries Notices Nos. 158, 160 and 162. I am pleased to receive your advice that the Senate Standing Committee on Regulations and Ordinances has accepted all but one of the explanations in my letter of 27 May 1986. I also appreciate your opening remarks about that letter in general. In relation to the unresolved issue of the possibility that paragraphs 35.1 and 36.1 of the plan may have the effect of fettering the discretion that section 9a of the Act confers on the Minister to suspend or cancel a licence, I enclose a copy of the advice from the Attorney-General's Department to which I referred in my letter. This advice indicates that in the opinion of that Department those paragraphs are a valid exercise of my power to make plans of management. Nevertheless, I have noted the general tenor of your letter which addresses the fairness of the two paragraphs. Given the reasons conveyed to you for not making reviewable a decision to suspend a licence and noting that a decision to cancel a licence is reviewable under section 16a of the Act, I have concluded that the interests of fairness will indeed be better served, without weakening the intent of the paragraphs to provide criteria on which to base decisions under section 9a of the Act, if I amend them so that the kinds of previous convictions to be taken account of by the Minister or the Secretary, in the case of a decision to suspend, or the Minister, in the case of a decision to cancel, are expressed more specifically. I therefore propose to insert a new paragraph in the plan that will describe an offence against paragraph 13 (1) (e), (f), (g), (h) or (i) of the Act, or against sub-section 14a (1) when the primary offence is against any of paragraphs 13 (1) (e), (f) or (i), as a ``relevant offence'' for purposes of Part 10. For purposes of sub-paragraph 36.1 (b) (i) of the plan, an offence against a provision of the Fisheries Regulations requiring the master of a boat to furnish information in relation to his fishing in the fishery will also be a relevant offence. Appropriate consequential amendments of Part 10 will also be made. In relation to your comments on the requisite intention which probably forms an element of many fisheries offences, the relevant intention is to do the act the substance of the offence, and not a criminal intention to damage the prawn fishery. The defendant's intention would have been to use a boat to which fewer than the applicable number of Class A units have been assigned or to take prawns in a closed area or during a closed season or with prohibited equipment. In the case of paragraph 36.1, which applies only to a master-fisherman's licence, the intention to withhold information or to furnish false information, required to provide me with essential data for managing the fishery, could also have existed. Since commencement of the plan, it has been open to a person who has had a master-fisherman's licence cancelled to seek review of the period specified, in accordance with paragraph 36.2, in the notification that I am required to give under sub-section 9a (3a) of the Act. I would have regard to the merits of the case when determining whether that period should be a matter of days, weeks, months or years, up to the maximum specified in relation to the particular case by paragraph 36.2. I think it appropriate, and the representatives of the fishing industry who advise me about management of the fishery strongly support me in this, that a chronic offender against the overall management regime for the fishery should not be permitted to continue to participate in it if the offences have been proved before a court. You will note that the plan does not provide criteria upon which I would make a decision to cancel a boat licence. It is not the intention of the plan, where a person has had a master-fisherman's licence cancelled, that the person should also be deprived of the right to hold a boat licence, although paragraph 37 of the plan does provide for suspension or cancellation of units of fishing capacity in relation to the boat involved in the offence. These provisions have been carefully drafted to provide the person with options that are reviewable if exercised by the Secretary. I believe that the proposed amendments of the plan will dispose of the paradox described in your letter. I do not agree that the AAT would have been precluded from considering any matter; they will be able to review any matter other than the fact of one or more previous convictions. The AAT had, and will continue to have under the amended plan, power to review a decision as to a period specified in accordance with paragraph 36.2. It was never the intention of the plan to cause mandatory loss of a right to a livelihood without appropriate review. First, the offence must be proved beyond reasonable doubt. Next, because the plan never envisaged the cancellation of a boat licence, the holder of a boat licence who also had his master-fisherman's licence cancelled can continue to use the boat for fishing in another fishery under the command of an employed master-fisherman. Third, the plan requires the decision maker to have regard to the merits of the case in relation to the period of refusal of a further master-fisherman's licence. Fourth, a decision made by the Secretary rather than a unit holder to cancel units assigned to a boat involved in the commission of an offence or to suspend that assignment, is specifically reviewable. The Secretary would make such a decision only if the unit holder had failed within the time specified to make an election as to which option he preferred. I have approved the amendments of the plan to which I have referred above and expect that they will come into force without delay after they are printed and notified in the Gazette. Yours sincerely JOHN KERIN PARLIAMENT OF AUSTRALIA THE SENATE STANDING COMMITTEE ON REGULATIONS AND ORDINANCES 30 May 1986 The Hon. John Kerin, M.P. Minister for Primary Industry Parliament House Canberra, A.C.T. 2600 Dear Minister, At its meeting on 29 May 1986 the Committee considered your letter of 27 May 1986 in connection with the Northern Prawn Fishery Management Plan No. 3 and Fisheries Notices Nos. 158, 160 and 162. The Committee acknowledges the consideration you have shown it in preparing such a detailed response to the Committee's letters of 15 April 1986. Indeed the Committee is happy to accept virtually all of the assurances and explanations given in your letter. However, the Committee respectfully seeks your further clarification in relation to one aspect, namely the validity of paragraphs 35.1 and 36.1 of the Plan, which the Committee originally considered may be an unlawful fetter on the discretion conferred on you by section 9a of the Fisheries Act 1952. This particular aspect is dealt with in the last 2 paragraphs on page 2 of your letter. These paragraphs do not completely resolve the Committee's uncertainties about the question. The Committee respectfully seeks your reconsideration of the question whether there may not be persuasive legal authority for the view that paragraphs 35.1 and 36.1 of the plan are invalid because they will have the effect of precluding the exercise of the discretion conferred on you and the Secretary by sub-section 9a (1) in connection with suspension of fishing licences, and on you alone by sub-section 9a (3) in connection with the cancellation of fishing licences. If in a particular circumstance you or the Secretary are precluded by the legislative instrument known as the Plan from actually exercising the suspension and cancellation discretions primarily conferred upon you by the Act, then these paragraphs of the Plan may be beyond power and may therefore be invalid. You may have disabled yourself and the Secretary from exercising the statutory discretion which Parliament has conferred on you in individual cases. The Committee would illustrate its concern in this way. Sub-section 9A (3A) of the Fisheries Act gives you a discretion to cancel a fishing licence if the holder has committed an offence under Commonwealth, State, Territory or PNG fishing laws. Cancellation of a licence means that a person and possibly a crew loses a source of livelihood. The Committee has no means of knowing with certainly, but it may be that some of the relevant offences in any of the 4 separate jurisdictions are offences of strict liability in the commission of which there has been no criminal intention to damage the prawn fishery. If there were no Plan, then, in such a case, or in any other case where mitigating circumstances were present, notwithstanding that there were two convictions you could exercise your discretion in favour of the licence holder and not cancel the licence. The Act gives you that discretion which must be exercised fairly in accordance with the purpose and objectives of the Act. General principles of administrative law might require that some measure of natural justice be afforded to the licence holder, for example the making of representations in mitigation, justification or excuse. However, if in the light of all of these matters, including the requirements of your own ministerial policy concerning the management of the fishery, you decided to cancel the licence, the merits of your cancellation decision could be reviewed by the AAT under section 16a of the Fisheries Act. The Tribunal could consider that given the purpose and object of the Act and your fishery management policy, the merits of the case did not, in all the circumstances, justify the individual's loss of livelihood. However, having made paragraph 36.1 of the Plan, which makes it mandatory that the licence of a holder who has two convictions under Commonwealth law only (paragraph 36.1 (b) (i) ) shall be cancelled, you may have disabled yourself from exercising a genuine discretion in a particular case directly involving individual interests. Yet this is the discretion conferred on you by Parliament in sub-section 9a (3a) of the Act in relation to individuals. General principles suggest that you must be prepared to make an exception to your general policy if the circumstances of the case warrant special treatment. The amplitude of the discretionary power to make Plans conferred on you be section 7b may not be so wide in connection with cancellation of licences as expressly dealt with in section 9A that you are expressly or impliedly entitled to adopt a fixed rule never to exercise your discretion in favour of a particular class of person. In the words of Lord Reid ``The general rule is that anyone who has to exercise a statutory discretion must not ``shut his ears to an application'' (to adapt from Banks L. J.) [in R v Port of London Authority, Ex parte Kynoch Ltd [1919]1 K. B. 176 at 183] . . . What the [decision maker] must not do is to refuse to listen at all''. (see British Oxygen Co. Ltd v Board of Trade [197] A.C. 610 at 625.) Paradoxically, where the relevant convictions have arisen under State, Territory or PNG law, paragraph 36.1 of the Plan may not apply and you may have retained your section 9a discretion. Nevertheless, where there are convictions under the Act or the Regulations you may have precluded yourself from considering any matter other than the fact of two Commonwealth convictions. In the adoption of such a rule you may have made it impossible to consider the merits of any particular case and the AAT may equally be precluded by the legislative Plan (as it would not be by a non-legislative statement of policy) from considering any question other than the fact of two convictions. If there are mitigating factors, such as strict liability offences or extenuating circumstances, these cannot be taken into account. The mandatory loss, under delegated legislation, of an effectively unreviewable right to a livelihood may be seen to be unfair and contrary to principle. The fact that you may not have actually exercised any discretion in the matter, when Parliament, in section 9a, intended that you should exercise some discretion, may make the cancellation unlawful. The paragraphs of the Plan, purporting to disentitle you from exercising any discretion, may be invalid. The Committee appreciates that complex legal questions are involved in the matter it has raised and that you have already given a detailed response which has satisfied the Committee on all but this outstanding issue. However, Principle (a) of its terms of reference require the Committee to scrutinise delegated legislation to ensure that it is in accordance with the statute and that it does not trespass unduly on personal rights and liberties. The Committee would be very grateful to receive your comments and advice on the issues raised in this letter. It may be that further considered advice from the Attorney-General's Department can allay all of the Committee's uncertainties. However, the Committee, while at one with you on the need to protect fisheries, is nevertheless concerned that the reasonable rights of fishing licence holders to engage in their livelihood should rest on clear and unquestionable legal authority and should not be dependent on uncertain or doubtful propositions. It would be most helpful if you could let the Committee have your further views as a matter of priority. Because the time within which the relevant notice of motion of disallowance must be withdrawn or dealt with is about to expire, it would greatly facilitate the Committee if it could hear from you by Tuesday morning 3 June 1986. Yours sincerely BARNEY COONEY Chairman Motion (by Senator Cooney)-by leave-agreed to: That Business of the Senate, Notice of Motion No. 1 standing in my name for this day for the disallowance of the Northern Prawn Fishery Management Plan No. 3, be postponed till the next day of sitting. Senator COONEY(Victoria) —Pursuant to standing order 109A, I give notice that it is my intention at the giving of notices on the next day of sitting to withdraw Business of the Senate Notices of Motion Nos 1 and 3 standing in my name for 6 sitting days hence relating to the Extradition (Finland) Regulations (Amendment) and the Rates (Amendment) Ordinance 1986. I seek leave to make a short statement. Leave granted. Senator COONEY —The Extradition (Finland) Regulations (Amendment) had the effect of removing from the legislation the requirement that, before extradition could be granted, evidence of criminality accompanying a request for extradition should be sufficient to justify the trial of the person under Australian law. The Committee was concerned about the removal of this protection. The Attorney-General (Mr Lionel Bowen) has explained that the deletion was made to give effect to last year's changes in the Extradition (Foreign States) Act which was designed to facilitate extradition to civil law jurisdictions which do not have pre-trial evidence procedures. For extradition from such countries, what is required is information as to the allegations against the fugitive. The Extradition Act itself no longer requires that prima facie evidence of criminality be provided and the regulations have followed that approach. In the regulations the Attorney-General is following the policy foreshadowed in the amendments to the Act and the Committee has accepted his indication that persons subject to extradition requests will not be unduly prejudiced by the change because of the presence of a range of other protections in the regulations. The Rates (Amendment) Ordinance 1986 changes the way in which rates are assessed when improvement work is done to land by private developers rather than the Commonwealth. The intention is to have all improved land assessed on a similar basis. The Committee was concerned to discover what effect the Ordinance would have on applications currently before the Administrative Appeals Tribunal concerning rates assessment on a basis more advantageous to occupiers of privately developed land. The Minister has assured the Committee that the amendments do not operate retrospectively and that pending applications for review will be dealt with in accordance with the law as it was before the amendment was made. As is the Committee's usual practice, I seek leave to incorporate in Hansard copies of the Committee's correspondence on extradition matters for the information of honourable senators. Leave granted. The documents read as follows- PARLIAMENT OF AUSTRALIA THE SENATE STANDING COMMITTEE ON REGULATIONS AND ORDINANCES 15 April 1986 The Hon. Lionel Bowen, M.P. Attorney-General Parliament House Canberra, A.C.T. 2600 Dear Attorney-General, At its meeting on 10 April 1986, the Committee considered the Extradition (Finland) Regulations (Statutory Rules 1986 No. 32) tabled in the Senate on 9 April 1986. These Regulations amend the Principal Regulations to take into account a Protocol to the Extradition Treaty between Australia and Finland done at Helsinki on 10 September 1985. The Principal Regulations now provide that the Extradition (Foreign States) Act 1966 applies in relation to Finland subject to the Treaty as amended by the Protocol. The Protocol appears to make an important change to the Treaty. Previously sub-paragraph 1 (f) of Article 5 provided that extradition could be refused where ``the evidence of criminality'' could not have justified the trial of the person sought under Australian law. Under the Protocol, inadequacy of ``evidence of criminality'' is no longer a matter to be taken into account in the exercise of the discretion to extradite. The discretions described in Article 5 of the Treaty are protective discretions. The deletion of the paragraph limits the range of reasonable protections which, until the gazettal of these Regulations, have been available to protect the rights of a person sought. The Explanatory Statement accompanying the Regulations is rather brief and does not refer to the deletion of the paragraph. In its letter to you of 15 May 1985 concerning Extradition (Republic of South Africa) Regulations, the Committee previously commented on the inadequacy of Explanatory Statements accompanying extradition regulations. The Committee would be grateful if you could explain the reasons and justifications for the deletion of the paragraph and indicate what consequence it will have for Australian extradition laws generally and the rights of persons whose surrender is sought in particular. From the point of view of the Committee's Principles ``persons whose surrender is sought'' may include innocent persons who may be migrants, refugees, exiles or political dissidents whose rights should not be eroded by delegated legislation without adequate justification made public in an Explanatory Statement. Yours sincerely BARNEY COONEY Chairman Deputy Prime Minister Attorney-General Parliament House Canberra, A.C.T. 2600 19 May 1986 Dear Barney, I refer to your letter dated 15 April 1986 in which you expressed concern about the Protocol to the Extradition Treaty between Australia and Finland done at Helsinki, on 10 September 1985 and about the Extradition (Finland) Regulations (Statutory Rules 1986 No. 32-`the amending regulations'). The amending Regulations give effect to the Protocol, by amending the Extradition (Finland) Regulations (Statutory Rules 1985 No. 163) to provide that the Extradition (Foreign States) Act 1966 (`the Act') applies in relation to Finland subject to the Treaty, as amended by the Protocol. You noted that the Protocol appears to make an important change to the Treaty in that the discretionary ground for refusal of extradition previously found in sub-paragraph 1 (f) of Article 5 of the Treaty has been removed. That sub-paragraph provided, in effect, that extradition could be refused if the evidence of criminality accompanying the request for extradition would not be sufficient to justify the trial of the person under Australian law. This is indeed an important change to the Treaty and I can well appreciate that the Committee is concerned that it might be seen to limit the range of protections for the rights of persons sought. I must say, however, that this change was carefully considered in 1985 and has not been made for a specific or ulterior purpose of limiting the rights of individuals. The change was made in order to give effect to the amendments to the Act that were made by the Extradition (Foreign States) Amendment Act 1985. In my Second Reading speech on the Bill for that Act I said (Hansard of 20 March 1985 at page 596) in reference to amendments proposed to section 17 of the Act that this amendment ``will enable Australia to conclude extradition arrangements with countries which do not require the requesting country to furnish evidence of guilt but rather information as to the allegations against the fugitive''. I went on to say, ``This amendment is of particular significance to civil law countries whose systems have difficulty in adapting to the provision of pre-trial evidence. The extradition arrangements of most European countries which are reflected in the European Convention on Extradition do not require the production of prima facie evidence.'' In other words, therefore, the deletion of sub-paragraph 1 (f) of Article 5 of the Treaty by the amending Protocol is purely consequential upon the fact that the Act no longer requires that prima facie evidence of criminality be provided. In order to put the matter you have raised concerning the amending regulations fully into context, I think that I should also inform you of other new extradition Treaties or Protocols to existing treaties which adopt a similar approach to that taken in the Protocol with Finland, that is, an approach which does not require prima facie evidence to support an extradition request. Following the amendment that I have mentioned above and other amendments of the Act, the Extradition Task Force that I established in February 1985 urgently to conclude extradition arrangements with appropriate countries has negotiated new treaties with Belgium, The Netherlands, Norway, Ireland and Italy and Protocols amending existing treaties with Austria and Sweden, as well as with Finland. These new treaties and protocols employ this approach, as do the texts of treaties that have been negotiated with Switzerland, Portugal, Luxembourg and Monaco. Negotiations for new treaties, once again using this new approach, are also at an advanced stage with France, Spain and the Federal Republic of Germany. In fact, I would hope that by the end of this year Australia will have modern extradition treaties or arrangements with all the non-communist European countries and that significant progress will have been made for new treaties with the United States and a number of North African, Asian and South American countries. The new treaties will, wherever possible, adopt the approach that prima facie evidence is not required. I must stress, however, that these treaties and protocols either reflect or will reflect the scheme of the Act and provide the internationally accepted grounds for the refusal of extradition. Those grounds serve to protect the rights of all persons whose extradition may be sought. I should also mention that the new approach in relation to extradition treaties is not confined to civil law countries. Later this year I hope to persuade countries which are members of the British Commonwealth that the requirement that prima facie evidence be provided for extradition between Commonwealth countries should be deleted. I intend to try to do this at the meeting of Commonwealth Law Ministers which is to be held in Zimbabwe at the end of July and I am fortified in my resolve to propose this change by the publication recently of a White Paper by the British Government for Plans for Legislation in relation to Criminal Justice. In that White Paper, a copy of which is attached, the Home Secretary announced that the British Government intends to discard the prima facie case requirement for the purpose of extraditions between Britain and non-Commonwealth countries. It is worthwhile that I note in passing one particular passage from the White Paper, because it accords with my own thinking and is most relevant to the Committee's concern about the amending Regulations. The White Paper states at para 50: ``. . . the Government believes that the prima facie requirement should be abolished. The requirement does not offer a necessary safeguard for the person sought by the requesting state; if does, however, present a formidable impediment to entirely proper and legitimate extradition requests. There are other effective ways in which the rights of the fugitive are protected-for example; by the double criminality rule and by the proper application of the political safeguard.'' I have noted your concern about the brevity of the Explanatory Statement accompanying the amending Regulations. In view of the fact that my Second Reading Speech, to which I have referred above, foreshadowed that there would be changes to the prima facie case requirement in future extradition treaties, perhaps the Committee will see the brevity of the Statement as being a matter of less concern than the Committee had originally thought. Be that as it may, however, I have directed my Department to ensure that Explanatory Statements contain more detail in future and, in particular, that the Statements in relation to the new Treaties that I have mentioned above do likewise. Yours sincerely LIONEL BOWEN Senator Barney Cooney Chairman Senate Standing Committee on Regulations and Ordinances Parliament House Canberra, A.C.T. PARLIAMENT OF AUSTRALIA THE SENATE STANDING COMMITTEE ON REGULATIONS AND ORDINANCES 2 June 1986 Your ref: M86-5323 The Hon. Lionel Bowen, M.P. Attorney-General Parliament House Canberra, A.C.T. 2600 Dear Attorney-General, At its meeting on 29 May 1986, the Committee considered your letter of 19 May 1986 concerning the Extradition (Finland) Regulations (Amendment) (Statutory Rules 1986 No. 32). The Committee also considered aspects of the British Home Office Paper ``Criminal Justice, Plans for Legislation'', March 1986 (Cmnd. 9658, in particular, Part IV, Extradition) which you were good enough also to send to the Committee. The Committee has obtained the Green Paper referred to therein, on which Part IV of the Report was based. As is evident from your letter, you appreciate that this Committee would naturally be concerned about the apparent loss from extradition law, of a seemingly protective requirement for extradition. While the Committee could not regard the Finnish legal system or its law enforcement officials in the same manner as it might regard those in South Africa with which it originated its continuing interest in extradition regulations, the Committee is nevertheless, on principle, concerned at any prospect that the rights of any persons whose extradition is sought should be diminished without clear and persuasive explanations. The Committee thanks you for your very detailed and considered reply which indicates that the change reflected in the Regulations is a flow on from amendments made last year to section 17 of the Extradition (Foreign States) Act 1966 which repealed the former requirement in paragraph 17 (6) (b) for the production to a Magistrate of such evidence as would, in the opinion of the Magistrate, according to the law of his or her jurisdiction, justify the trial, in that jurisdiction, of the person for the alleged extradition crime. Without such authority from Parliament itself, the Committee might not have accepted the removal of the evidence of criminality provision in the absence of compelling examples of how its continued inclusion in Treaties had thwarted proper and effective extradition of persons who otherwise deserved to stand trial in requesting countries. For example, the Committee notes from the British Green Paper ``Extradition'' (Cmnd. 9421, February 1985) that ``Something like a third of applications made to the United Kingdom under our extradition treaties fail, often because of the inability of the requesting state to satisfy the prima facie case requirement. Furthermore, there are occasions on which some states are deterred from making a request at all because they believe that it will be too difficult to meet the requirement.'' (emphasis added) The Committee also notes the argument, made at paragraph 2.6 of the Green Paper, that ``If we are sufficiently satisfied with the standards of justice in a foreign state to enter into a treaty obligation, we should not require that country to meet procedural requirements here which differ markedly from their own. It should, in principle, be for the requesting state to judge the sufficiency of the evidence for a trial of the fugitive.'' The Committee acknowledges, of course, that generally, and particularly since its scrutiny of the South African Regulations, you have manifested your commitment to ensure that effective extradition procedures operate in tandem with effective protection of the rights of prima facie innocent persons. The Committee notes your comments about Explanatory Statements and welcomes your decision to ensure that these are somewhat more detailed in future. These statements are of considerable assistance to the Committee and others in comprehending the background to an instrument of delegated legislation and in understanding a Minister's intentions as to its particular effects. Yours sincerely BARNEY COONEY Chairman Senator COONEY(Victoria) —I give notice that, seven sitting days after today, I shall move: That the Export Control (Unprocessed Wood) Regulations, as contained in Statutory Rules 1986 No. 79 and made under the Export Control Act 1982, be disallowed. Senator COONEY(Victoria) —I give notice that, seven days after today, I shall move: That the Defence Determination Amendment of 15 April 1986, as contained in Determination No. 19 of 1986 and made under section 58b of the Defence Act 1903, be disallowed. Senator COONEY(Victoria) —I give notice that, seven sitting days after today-- Senator Haines-Come on, Barney! Senator COONEY —I shall move: That the Southern Bluefin Tuna Fishery Management Plan (Amendment), as contained in Plan of Management No. 5 of 10 April 1986 and made under the Fisheries Act 1952-- which Senator Haines will understand is a very important Act- be disallowed. I seek leave to make a very short statement. Leave granted. Senator COONEY —Those notices have been given to preserve the right of the Committee. Senator GRIMES(Tasmania-Manager of Government Business) —I table papers in accordance with the list circulated to honourable senators. With the concurrence of the Senate I incorporate the list in Hansard. Leave granted. The list reads as follows- 1. Government's policies for marketing rural produce-text of a statement by the Minister for Primary Industry. 2. International Labour Conference-instruments adopted at its 71st session in 1985 concerning labour statistics and occupational health services together with the text of a statement. 3. International Labour Conference-70th session 1984-Australian delegation report. 4. Tenth Conference of Asian and Pacific Labour Ministers-Melbourne, October 1985-report. 5. Western Australian Local Government Grants Commission-Annual Report 1985-pursuant to section 10 of the Local Government (Personal Income Tax Sharing) Act 1976. 6. Commonwealth programs and policy development for schools: A report-Commonwealth Schools Commission. 7. Report on financial assistance granted to each State in respect of 1984-pursuant to section 78 of the States Grants (Schools Assistance) Act 1983. 8. Luggage, handbags and similar containers-IAC report. Senator CHANEY —My question is addressed to the Minister representing the Treasurer. I refer the Minister again to the Prime Minister's comments at Canowindra in which he said that he would investigate the impact of the fringe benefits tax on farmers providing accommodation for their employees. I refer also to Mr Hawke's answer at Question Time in the House of Representatives yesterday in which he said that he was seeking information and kept open the possibility of change to the fringe benefits tax. In view of the fact that the debate on the legislation is likely to finish today, I ask the Minister: Has the Government completed its inquiries in this matter and, if so, will any change be made to the tax on farm accommodation? Senator WALSH —This was going to come out in the Committee stage of the debate this afternoon, but yesterday, as well as the matter having been raised at Question Time, Senator Chipp spoke to me and asked me whether I would try to get a statement from the Prime Minister for the benefit of the Australian Democrats. I said I would and later last night the Prime Minister supplied me with a copy of the letter. I think the best thing I can do is to read it now. I am sure Senator Chipp will not mind. The letter is addressed to Senator Chipp and says: At Canowindra on 31 May 1986 I received representations suggesting that the draft Fringe Benefits Tax legislation as it applies to rental accommodation-- the Prime Minister only ever talked about the rental accommodation aspect of the fringe benefits tax-- for farm employees would impact heavily on rural producers. In response to these claims I undertook to secure an assessment of the likely impact of this aspect of the tax. Advice received today confirms that account has been taken in the draft legislation of important concerns of rural producers. The review now underway is considering whether there is any valid basis for further flexibility in the manner in which the proposed tax is to be administered. There is no question of the Government moving to defer adoption of the draft legislation now before the Senate. The letter is signed by the Prime Minister. Senator ROBERTSON —Has the Minister for Finance seen an article in the Melbourne Age of 19 May, headlined `Study predicts fall in workers' living standards'? In that article the acting Federal Secretary of the Administrative and Clerical Officers Association was quoted as asserting that Australian workers' living standards at the end of 1986 would be lower than they had been under the Fraser Government. Has the Minister examined the study referred to in the Age article? Are its findings on Australian workers' living standards accurate? Senator WALSH —I have examined the article and its findings are not accurate. The study paints an excessively gloomy picture of the living standards of Australians during the period since the present Government took office. It also contains a number of conceptual errors. I am surprised that the ACOA, which commissioned the study, has been quoting its results so uncritically, although perhaps one should not be surprised. The professor's projections for developments during 1986 assume that the Commonwealth Government will cut real spending by 10 per cent in the areas he defines as being part of the social wage-that is, housing, health, culture, recreation and roads. He has drawn up those definitions, not me. I do not know where he got the idea of a 10 per cent real spending cut from. He takes account of the fact that wage and salary earners will see their next indexation pay rise discounted by two percentage points, but does not take account of the fact that pensioners and other welfare beneficiaries will not have their payments so discounted. When it comes to comparing living standards today with the standards applying under the previous Government, he adopts a very peculiar treatment of Medicare. He takes the levy off disposable household income because it is a tax, but in assessing health costs and, therefore, living costs directly, he uses the consumer price index figure which disregards Medicare. In other words, he uses an inflated CPI figure-the one that would have applied had Medicare not been introduced-but subtracts the Medicare levy from disposable income. I would have thought that that was a very serious conceptual error for an academic to have made. I am surprised that ACOA was satisfied with that and disappointed that the officials of that union, which has many members in senior positions in the Commonwealth bureaucracy who would be completely familiar with these things, did not seek sound advice from their members, instead of unsound advice from some academic scribbler. He also tracks the incomes of households in receipt of average weekly earnings and the incomes of households in receipt of unemployment benefit but ignores the fact that more Australians are in work under the present Government than was the case under the previous Government. Living standards for Australian workers generally will fall during 1986. The fact is that the terms of trade movements over the last 12 months have wiped about 3 per cent from national income. There are only two possible responses to that situation-either living standards on average must fall or the gap must be bridged with increased borrowings from abroad. While I am on this point, it is absolutely unfair that the entire burden should fall on wage earners. Groups in the community other than social welfare beneficiaries ought to be prepared to do their bit as well. I find it quite obscene that there is such trenchant resistance from other more fortunate groups to doing their bit and pulling their weight. In conclusion, the study does paint an excessively gloomy picture. It contains a number of errors. I am disappointed that the ACOA did not look more closely at the figures before going public with them. Senator DURACK —My question is directed to Senator Walsh in his capacity as both Minister for Finance and Minister representing the Treasurer. I refer him to the claim by the Western Australian Premier, Mr Burke, that State governments should be compensated by the Commonwealth for the cost of the fringe benefits tax on their Public Services, which Mr Burke estimated in the case of Western Australia will be between $6m and $8m a year. Does the Minister accept the Western Australian Government's contention that the new tax will have particularly damaging effects on remote areas and that Commonwealth estimates of the costs and benefits of the package are seriously in error? Will the Government compensate the States, as requested by Mr Burke? Senator WALSH —I did read the report to which Senator Durack referred. As to the accuracy of the figures, I am in no position at this stage either to confirm or to deny them. But I should express the scepticism that I have generally about people who present figures and who are claiming that they have been done in the eye by the Commonwealth Government. History certainly has verified that scepticism. I would be surprised if that changes in the future. I also note, of course, that Mr Burke did acknowledge that it would be quite wrong to exempt State government employees from the provisions of the fringe benefits tax-as it would be quite wrong, of course to disregard it in the case of Commonwealth employees. In particular, I would be surprised if the claims that Mr Burke is making about the alleged effects on remote areas are correct. As to the question of compensation, the overall financial arrangements between the States and the Commonwealth will be settled in the context of the Premiers Conference, as is normally the case. Senator DURACK —I ask a supplementary question. Does the last part of the answer by Senator Walsh indicate that the Commonwealth Government will seriously entertain such claims for compensation in the course of the usual horse trading that goes on at the Premiers Conference? Senator WALSH —No, I will not confirm that. The reason is implicit in Senator Durack's last few words; that is, at the Premiers Conference a lot of horse trading goes on. I do not think anybody could say-with any degree of scientific certitude, anyway-what had been traded off, what had been seriously considered and what had not. Senator TATE —My question, which is directed to the Minister representing the Attorney-General and Minister for Defence, concerns the report of the Senate Standing Committee on Constitutional and Legal Affairs entitled `Conscientious objection to conscripted military service' which was tabled on 28 May 1985. Is it a fact that the six senators on that Committee unanimously recommended that the scope of conscientious belief which should gain exemption should be enlarged and tested in a less adversarial forum than was the case during the Vietnam War? As more than a year has passed without a Government response, can the Minister inform the Senate why the Government has not managed to assess and respond to the unanimous view of the Committee? Senator GARETH EVANS —I am aware, as is the Attorney-General, of the admirable report of the Committee, prepared under Senator Tate's chairmanship, which was, as he said, tabled on 28 May last year and was unanimous. That is a precedent which I would commend to other honourable senators in their committee work because it makes life easier for governments. As to the substance of the question, the Attorney-General's Department has been asked by the Prime Minister to assume the primary carriage of the Government's response to the Committee's report. In this regard it should be noted that the Attorney-General does not administer the legislation that was the subject of the report-namely, the Defence Act and the National Service Act. The Attorney-General's Department has become involved in this issue largely as a result of Senator Tate's own initiative, from which I take it-I cannot be sure about this-that he does not now resile. In its task the Attorney-General's Department will, of course, have to get significant input from other departments, such as the Department of Defence, as provisions of the Defence Act are in issue, and the Department of Employment and Industrial Relations, as the National Service Act is administered by the Minister for Employment and Industrial Relations. There are also a number of wider issues relating to conscription and conscientious objection that have been signalled in a letter from the Minister for Defence, and I am advised by the Attorney-General that departments have all these matters under discussion. While I am not able at this stage to respond in a manner that I would expect to satisfy Senator Tate, I am informed that there are good prospects that a response will be given after the winter recess. Senator HAINES —My question is directed to the Minister representing the Minister for Social Security. Is he aware of the enormous number of recipients of German restitution payments who still have not received their full entitlements under the changes made by the Government in November last year? Can the Minister say how many restitution recipients are entitled to have this money excluded from assessment for eligibility for Australian pensions; how many of those people have made application; how many of those who have applied have been processed and are now receiving the higher benefits; and how many have had the full benefit to which they are entitled paid retrospectively from March 1985, as the Government promised? Finally, what explanation can the Government give for the protracted delays in administering this new system? Senator GRIMES —As Senator Haines said, we changed the system in 1985 so that German restitution payments were not counted in the means test or the incomes test as a result of an Administrative Appeals Tribunal decision that was made earlier that year. However, there have been difficulties in verifying the nature of payments received by some clients who do not have documents which specify the nature of the payments they receive from Germany. Most clients potentially affected by the changes have held the necessary documents, are now being paid at the higher rate and have received their arrears back to March 1985. I do not think that that indicates sloppiness or whatever else Senator Haines may call the administration of this legislation. For example, in one Sydney office there are 50 cases and in 40 of these the German restitution payments have been entirely disregarded and the arrears paid. In the remaining cases the clients are receiving restitution in respect of loss of income. In Melbourne three offices are most affected by the changes. I have only approximate figures but I will get the exact figures later. Some 400 cases have been identified in these three offices as perhaps benefiting from the change. Of these, all but 50 have been finalised and in only a handful of cases are the German restitution payments still being taken into account because they represent restitution for loss of income. The difficulties are partly due to confusion amongst some people-not only among pension-receiving people of German origin, I might add-because of the distinction which is being made between the restitution for loss of income and restitution for other reasons, such as loss of property. In addition, there have been some cases where the Department has been approached by people who are receiving normal German social security pensions which, of course, are still treated as income. Steps have been taken to seek assistance from the German authorities in order to overcome the difficulties for those people who are unable to provide the Department of Social Security with relevant documents, and the Department will continue in its efforts to assist those people to obtain the relevant documents, or will even obtain those documents on their behalf. No recipient of German restitution payments has experienced a decrease in income in consequence of the revised treatment. The issue is whether such recipients may be eligible for an increase in the amount paid to them by the Department of Social Security and a consequent increase in their total income. That is the issue which is being pursued by the Department and about which the Department is conducting inquiries with the German Government. That issue is not assisted by silly statements from politicians and others who claim that the Department is no administering the changes properly and is encouraging people in receipt of normal German social security payments which are not affected by the changes that were made to come to the Department of Social Security in the expectation that they will received increased pensions. Senator DEVLIN —My question is directed to the Minister representing the Minister for Territories. In view of the level of concern that has been expressed concerning the introduction of self-government in the Australian Capital Territory, can he inform the Senate how this measure is progressing? Senator GIETZELT —The question of self-government in the Australian Capital Territory has been on the agenda for a number of years. The Government acknowledged the importance of taking steps to resolve that issue and prepared legislation to resolve the matter in what it believed to be a satisfactory manner, to find that the majority view, as expressed by the Opposition and the Australian Democrats, meant that the legislation would not be supported. So the residents of the Australian Capital Territory are being denied their democratic rights to a self-government body because of the attitude of the principal parties of the Opposition in this place. In the interests of achieving self-government, the Government was prepared to make significant compromises as to the original self-government package and prepared amendments to the Australian Capital Territory Council Bill and the Australian Capital Territory Council (Consequential Provisions) Bill. I seek leave to have the Government's proposals incorporated in Hansard. Leave granted. The documents read as follows- AUSTRALIAN CAPITAL TERRITORY COUNCIL BILL 1986 (Amendments and new clauses to be moved on behalf of the Government) (1) Page 1, clause 1, line 5, leave out ``Council'', insert ``House of Assembly''. (2) Page 2, clause 2, line 2, leave out ``Council'', insert ``House of Assembly''. (3) Page 2, clause 3, lines 7 and 8, leave out the definition of ``by-election'', insert the following new definitions: `` `Assembly' means the Australian Capital Territory House of Assembly established by sub-section 5 (1), and does not include a committee; `Assembly authority' means a body corporate established for a public purpose by or under an Assembly Law; `Assembly Law' means an Assembly Law made in accordance with sections 37 and 38; `Assembly money' means revenues, loans and other money received by the Assembly; `by-election' means an election to fill a casual vacancy in the office of a District member;''. (4) Page 2, clause 3, lines 14 to 22, leave out the definitions of ``committee'', ``Council'', ``Council authority'', ``Council Law'' and ``Council money'', insert the following definition: `` `committee' means a committee referred to in Division 1 of Part V;''. (5) Page 2, clause 3, after the definition of ``District'' insert the following definition: `` `District member' means a member referred to in paragraph 9 (1) (a);''. (6) Page 2, clause 3, after the definition of ``member of the staff'' insert the following definition: `` `non-District member' means a member referred to in paragraph 9 (1) (b);''. (7) Page 3, clause 3, lines 8 to 10, leave out sub-clause (4), insert the following sub-clause: ``(4) Where the regulations so provide, the Chairperson, Deputy Chairperson or Head of administration may be referred to, whether in any law, instrument or otherwise, either by a title provided by this Act or by another title specified in the regulations.''. (8) Page 3, line 21, Heading to Part II, leave out ``COUNCIL'', insert ``HOUSE OF ASSEMBLY''. (9) Page 3, line 22, Heading to Division 1, leave out ``Council'', insert ``Assembly''. (10) Page 3, clause 5, lines 24 and 25, leave out sub-clause (1), insert the following sub-clause: ``(1) There is established an Australian Capital Territory House of Assembly.''. (11) Page 3, clause 5, line 27, leave out ``is a body corporate, with'', insert ``has''. (12) Page 3, clause 5, line 30, leave out ``corporate'', insert ``own;''. (13) Page 3, clause 5, at the end of sub-clause (2) add the following word and paragraph: ``; and (e) may enter into contracts.''. (14) Page 4, line 31, Heading to Division 2, leave out ``Council'', insert ``Assembly''. (15) Page 4, clause 9, lines 33 and 34, leave out sub-clause (1), insert the following sub-clauses: ``(1) Subject to sub-section (1a), the Assembly shall consist of- (a) 10 members, each of whom is elected to represent a particular district; and (b) 9 members, each of whom is elected to represent the whole of the Territory. ``(1a) The regulations may provide for numbers of District members and non-District members differing from the numbers specified in sub-section (1) but, where the regulations so provide, the number of District members shall exceed the number of non-District members by one.''. (16) Page 6, clause 12, line 27, leave out ``7'', insert ``10''. (17) Page 6, clause 13, lines 34 to 38, leave out sub-clauses (1) and (2), insert the following sub-clause: ``(1) A meeting of the Assembly shall be held in public.''. (18) Page 7, clause 14, line 1, insert ``, and meetings of each committee,'' after ``meetings''. (19) Page 7, clause 14, line 3, insert ``(except the minutes of a meeting of a committee held in private)'' after ``so kept''. (20) Page 7, clause 15, before sub-clause (1) insert the following sub-clause: ``(1a) No action, suit or proceeding lies against a member in respect of any matter or thing done or omitted to be done by the Assembly.''. (21) Page 7, line 36, Heading to Division 3, leave out ``Council'', insert ``Assembly''. (22) Page 8, line 31, Heading to Division 4, leave out ``Council'', insert ``Assembly''. (23) Page 9, clause 23, after sub-clause (2) insert the following sub-clause: ``(2a) Where the Governor-General dismisses all the members from office under sub-section (1), the Minister shall cause a statement of the reasons for the dismissal to be laid before each House of the Parliament within 15 sitting days of that House after the day of the dismissal.''. (24) Page 10, line 32, Heading to Part III, leave out ``COUNCIL'', insert ``ASSEMBLY''. (25) Page 10, clause 26, line 37, leave out ``members'', insert ``District members and non-District members''. (26) Page 11, clause 27, line 2, insert ``of District members'' after ``elections''. (27) Page 11, clause 28, at the end of the clause add the following sub-clause: ``(2) The Rolls of the electors for each District shall together form the Roll for the whole of the Territory.''. (28) Page 11, clause 30, line 36, insert ``District'' after ``of a''. (29) Page 12, after clause 30 insert the following new clause: Casual vacancies for non-District members ``30a. (1) Where a casual vacancy occurs in the office of a non-District member, the Assembly shall choose a person who is qualified to be a candidate for election as a member under section 32 to hold the vacant office as a member for the remainder of the term of the member who last held that office. ``(2) A person chosen by the Assembly to hold a vacant office as a member under sub-section (1) commences to hold that office immediately after being so chosen. ``(3) Where a casual vacancy has occurred in the office of a non-District member and, at the time when the member was elected, he or she was publicly recognised in a particular political party as being an endorsed candidate of that party and publicly represented himself or herself to be such a candidate, a person chosen under this section in consequence of that vacancy and a subsequent vacancy or vacancies, shall, unless there is no member of that party available to be chosen, be a member of that party.''. (30) Page 12, clause 31, line 14, leave out ``A person is entitled to vote at an election held on a particular day'', insert ``At an election held on a particular day, a person is entitled to vote''. (31) Page 12, clause 31, at the end of the clause add the following sub-clause: ``(2) At an election held on a particular day, a person is entitled to vote to choose non-District members if, on that day, the person is entitled to vote at an election to choose a District member.''. (32) Page 12, after clause 32 insert the following new clause: Multiple nominations prohibited ``32a. (1) Where- (a) a general election is to be held on a particular day; and (b) at the hour of nomination there exist nominations of the same person for election for 2 or more Districts or for election as a District member and as a non-District member, each of those nominations is invalid. ``(2) For the purposes of sub-section (1), where a person has consented to act if elected in relation to a nomination in relation to an election and the person, in the prescribed manner, withdraws that consent before the hour of nomination, the nomination of the person for the election shall be taken to have ceased to have effect at the time when the person withdrew that consent.''. (33) Page 13, clause 33, line 1, leave out paragraph (c), insert the following paragraph: ``(c) at an election, a person- (i) shall not vote more than once for the election of a District member; and (ii) shall not vote more than once for the election of non-District members;''. (34) Page 13, clause 33, line 2, before ``an elector'', insert ``at an election for a District member,''. (35) Page 13, clause 33, at the end of the clause add the following paragraphs: ``(e) at an election for non-District members where a group of candidates has a group voting ticket, an elector- (i) shall vote by indicating that he or she is adopting the group voting ticket; or (ii) shall place the number 1 in the square opposite the name of the candidate for whom the elector votes as his or her first preference, and shall place the numbers 2, 3 and 4 (and so on, as the case requires) in the squares opposite the names of all the remaining candidates so as to indicate the order of preference for them; (f) at an election for non-District members where there is no group voting ticket, an elector shall place the number 1 in the square opposite the name of the candidate for whom the elector votes as his or her first preference, and shall place the numbers 2, 3 and 4 and so on, as the case requires) in the squares opposite the names of all the remaining candidates so as to indicate the order of preference for them.''. (36) Page 13, line 36, Heading to Part IV, leave out ``COUNCIL'', insert ``ASSEMBLY''. (37) Page 14, clause 37, line 4, insert ``terms and'' after ``determining''. (38) Pages 14 and 15, clause 38, line 15 on page 14 to line 14 on page 15, leave out the clause, substitute the following clause: Notification of Assembly Law ``38. (1) Where a proposed law has been passed by the Assembly, the Chairperson, or another person authorised by Assembly Law to do so, shall notify the proposed law in the Gazette. ``(2) Where a proposed law is notified in the Gazette, it takes effect upon the day of notification or, if the proposed law otherwise provides, as so provided. ``(3) The production of the Gazette containing the notification of an Assembly Law shall, in all Courts, be evidence that the law has been made.''. (39) Page 18, line 6, Heading to Part V, leave out ``COUNCIL'', insert ``ASSEMBLY''. (40) Page 18, after the Heading to Division 1, insert the following new clause: Committee of the whole ``49a. The Assembly may, from time to time, resolve itself into a committee consisting of all the members of the Assembly.''. (41) Page 18, clause 49, line 21, insert ``established under sub-section (1)'' after ``committee''. (42) Page 18, clause 49, line 22, insert ``established under sub-section (1)'' after ``committee''. (43) Page 25, clause 73, line 34, leave out ``applies'', insert ``, and regulations made under that Act, apply''. (44) Page 28, Heading to Schedule 1, leave out ``COUNCIL'', insert ``ASSEMBLY''. (45) Page 28, Schedule 1, leave out ``Council'' (twice occurring), insert ``Assembly''. (46) Page 29, Heading to Schedule 2, leave out ``COUNCIL'', insert ``ASSEMBLY''. (47) Page 29, Heading to Part I of Schedule 2, leave out ``COUNCIL'', insert ``ASSEMBLY''. (48) Page 31, Heading to Part II of Schedule 2, leave out ``COUNCIL'', insert ``ASSEMBLY''. (49) Page 31, Heading to Part III of Schedule 2, leave out ``COUNCIL'', insert ``ASSEMBLY''. (50) Page 32, paragraph 3 (2) (b), leave out ``members of the Council'', insert ``District members''. (51) Page 33, sub-clause 3 (4), leave out ``Council'', insert ``Assembly''. (52) Page 35, sub-clause 7 (2), insert ``District'' after ``number of''. (53) Page 35, sub-clause 8 (2), leave out ``members of which the Council is to consist'', insert ``District members to be chosen at a general election''. (54) Page 38, sub-clause 15 (3), leave out ``members of which the Council is to consist'', insert ``District members to be chosen at a general election''. (55) Page 39, paragraph 17 (2) (b), leave out ``Council'', insert ``Assembly''. (56) Leave out from the following clauses ``Council'' (wherever occurring), insert ``Assembly'': clauses 3, 5, 6, 7, 8, 9, 10, 11, 12, 14, 15, 16, 17, 18, 21, 22, 23, 24, 32, 34, 37, 39, 40, 41, 42, 43, 44, 45, 46, 47, 49, 50, 51, 52, 53, 54, 55, 56, 57, 58, 59, 60, 61, 62, 63, 64, 65, 66, 67, 68, 69, 71, 72, 74, 75, 76 and 77. (57) Page 1, title, leave out ``council'', insert ``body''. AUSTRALIAN CAPITAL TERRITORY COUNCIL (CONSEQUENTIAL PROVISIONS) BILL 1986 (Amendments to be moved on behalf of the Government) (1) Page 1, clause 1, line 5, leave out ``Council'', insert ``House of Assembly''. (2) Page 2, clause 2, lines 2 and 3, leave out ``and the Commonwealth Electoral Act 1918''. (3) Page 2, clause 3, lines 7 and 8, leave out the definition of ``Council Act'', insert the following definition: `` `Assembly Act' means the Australian Capital Territory House of Assembly Act 1986;''. (4) Page 2, clause 3, leave out ``Council'' (wherever occurring), insert ``Assembly''. (5) Page 2, clause 4, line 19, leave out ``Council'', insert ``Assembly''. (6) Page 2, clause 5, leave out ``Council'' (wherever occurring), insert ``Assembly''. (7) Page 2, clause 6, line 34, leave out ``Council'', insert ``Assembly''. (8) Page 3, clause 7, leave out ``Council'' (wherever occurring), insert ``Assembly''. (9) Page 3, clause 7, after sub-clause (4) insert the following sub-clause: ``(4a) The Assembly and the Commonwealth shall consult with the Australian Council of Trade Unions, the Council of Professional Associations and any other organisation that the Minister wishes to include in the consultation, in relation to the initial terms and conditions of employment of- (a) persons to whom sub-section (1) applies who are to be employed in accordance with Assembly Law; and (b) persons who, immediately before sub-section 43 (1) of the Assembly Act comes into operation, are employed in accordance with a law specified in Schedule 2 of the Assembly Act and, immediately after that sub-section comes into operation, are to be employed under Assembly Law.''. (10) Page 3, clause 8, line 24, leave out ``Council'', insert ``Assembly''. (11) Page 3, clause 9, leave out ``Council'' (wherever occurring), insert ``Assembly''. (12) Page 4, clause 11, line 16, leave out ``Council'', insert ``Assembly''. (13) Page 4, clause 12, lines 20 and 21, leave out ``applies, subject to section 13, as if the Council and all Council'', insert ``, and regulations made under that Act, apply, subject to section 13, as if the Assembly and all Assembly''. (14) Page 4, clause 12, after sub-clause (1) insert the following sub-clause: ``(1a) An Assembly Law in respect of the receipt, expenditure and control of Assembly money has effect subject to the Audit Act 1901 as applied by this section and section 13.''. (15) Page 4, clause 13, line 27, leave out ``(other than the Council'', insert ``, and regulations made under such an Act (other than the Assembly''. (16) Page 4, clause 13, line 30, leave out ``Council'', insert ``Assembly''. (17) Pages 5 and 6, Schedule, leave out the Schedule, substitute the following Schedule: ``SCHEDULE Section 15 CONSEQUENTIAL AMENDMENT OF ACTS AUSTRALIAN CAPITAL TERRITORY ELECTRICITY SUPPLY ACT 1962 Section 4- (a) After the definition of `approved bank' insert the following definition: ` ``Assembly'' means the Australian Capital Territory House of Assembly established under the Australian Capital Territory House of Assembly Act 1986;'. (b) Omit the definition of `House of Assembly'. (c) After the definition of `member' insert the following definition: ` ``the Assembly member'' means the member appointed under sub-section (3) of section 6;'. (d) Omit the definition of `the elected member'. Sub-section 6 (3)- (a) Omit `member of the House of Assembly elected by the members of that House', substitute `person appointed by the Assembly'. (b) Omit `that House', substitute `the Assembly'. Sub-section 6 (7)- Omit the sub-section. Sub-section 6 (8)- Omit the sub-section. Sub-section 6 (10)- Omit the sub-section. Sub-section 6 (11)- (a) Omit `election', substitute `appointment'. (b) Omit `Speaker of the House of Assembly', substitute `Chairperson of the Assembly'. (c) Omit `elected' (wherever occurring), insert `appointed'. Sub-section 10 (3)- Omit the sub-section. Sub-section 11- Omit `elected member' (wherever occurring), substitute `Assembly member'. EVIDENCE ACT 1905 Paragraph 4a (c)- Before `Ordinances' insert `Laws or'. Paragraph 4a (d)- Omit `an Ordinance', insert `a Law, Ordinance'. PUBLIC SERVICE ACT 1922 Sub-paragraph 47c (1) (a) (i)- After `Northern Territory' insert `or the Australian Capital Territory House of Assembly'. REMUNERATION TRIBUNALS ACT 1973 Section 3- (a) Omit sub-section (3). (b) After sub-section (4) insert the following sub-section: `(4a) For the purposes of paragraphs (4) (a) and (b), the Australian Capital Territory House of Assembly Act 1986 shall be deemed to be a law of a Territory and not a Commonwealth Act.'. RESERVE BANK ACT 1959 Section 27- Add at the end the following sub-section: `(2) The Bank shall, in so far as the Australian Capital Territory House of Assembly requires it to do so, act as banker and financial agent of the Assembly.'.''. (18) Page 1, title, leave out ``Council'', insert ``House of Assembly''. Senator GIETZELT —I am advised that the Government was anxious to take the steps that it offered holders of the other view, obviously the majority view, and it did so in the belief that the compromises it had worked out had a measure of support in the Australian Capital Territory. In every mainland State the electoral system used involves single-member electorates. However, the Government is prepared to provide for an electoral system under which there are 10 single-member electorates in Canberra and nine members for the whole Territory elected by proportional representation. This amends the Government's initial proposal for 13 single-member electorates. The case for single-member electorates is overwhelming. It is the system recommended by the Parliamentary Joint Committee on Electoral Reform, and it is the system that the previous Liberal Government legislated to introduce into the Northern Territory. As I said, it is the system used in every mainland State. The Opposition's attitude, therefore, should be seen in that light. The Opposition does not want to contest the election on equal terms because, obviously, it fears defeat. It is opposed to this system because it cannot predict the result. It will be a test of the popularity of its Party leader, John Howard, which, obviously, is something that honourable members opposite want to avoid in the current political climate. Unfortunately, the people of the Australian Capital Territory are to be denied a democratic voice in their own affairs. The Opposition parties have not been prepared to meet the Government on its compromise proposals. Unless the Opposition parties indicate that they are prepared to support the Government's amendments, the Minister advises me that there is no point in wasting the time of the Senate in debating the Australian Capital Territory Council Bills. It is the Opposition senators who will leave the Australian Capital Territory as the only significant Western community without a form of local administration answerable directly to the people. Senator LEWIS —My question is directed to the Minister for Industry, Technology and Commerce. The Minister will probably be aware that his colleague, Mr Barry Jones, said on AM this morning that he had foreseen the current trade crisis, which he said was obvious 10 or even 12 years ago. Does not the Minister wish that he was as wise as Mr Jones so that he could have warned the Government about what it is now claiming is an unpredictable crisis in our terms of trade? Does the Minister now regret dropping the Minister for Science from the ministerial Committee on Industry Restructuring early last year? Finally, will the Government take more notice of the Minister for the Future in the future? Senator BUTTON —Of course, I wish I were as wise as the Minister for Science. Let us be quite clear on that. I also wish that Senator Lewis were as wise as somebody with a less than average IQ, because that would be an improvement and the honourable senator would not ask questions like this. Mr Barry Jones was not dropped from the Committee on Industry Restructuring; he was never on it. It is very difficult to be dropped if one has never been appointed to a committee of that kind. So he was not dropped, as the honourable senator says, from that Committee. Senator Lewis —But your Committee excludes the Minister and Senator Ryan. Senator BUTTON —I do not know what scrappy bit of paper the honourable senator is reading from, but it has nothing to do with the reality of the matter. I heard the Minister's claims. It has never been the Government's view that the trading position of this country has deteriorated suddenly. It has been the Government's view at all times that it has been deteriorating for many years. I think anybody who has any thoughtful view of that matter would agree with that. We have a thoughtful view of that matter. The honourable senator asked me about the gift of prophecy and whether the gift of prophecy is beneficial. The only thing I am able to prophesy with any degree of certainty is that the honourable senator will still be sitting on the Opposition benches after the next election. Senator BLACK —My question is addressed to the Minister representing the Minister for Health. Has the Minister seen a report in the Brisbane Daily Sun in which a visiting Canadian medical practitioner alleges that the Government's drug offensive campaign contains false and alarmist material about the use of tranquillisers? Is the Minister aware that this doctor's trip to Australia was sponsored by the tranquilliser manufacturer, Wyeth International? Will the Minister advise the Senate of the accuracy or otherwise of the allegations? Senator GRIMES —Yes, I noticed the article in the Daily Sun. Senator Black drew my attention to it. I noticed also in the article that Dr John Saunders from the Royal Prince Alfred Hospital drug and alcohol unit described Professor Rosser, the doctor concerned, as a museum piece if he believed that the tranquillisers that he talked about were not addictive. The pamphlet on tranquillisers of the national campaign against drug abuse does not say that there has been an alarming increase in the use of tranquillisers. In fact, it points out that tranquillisers, because of their greater safety, are increasingly being prescribed in place of barbiturates, which is a very desirable development. The national campaign against drug abuse has adopted a balanced approach to all drugs. The material-certainly the material that I have read-is not alarmist, nor does it make value judgments; it makes what I believe are sensitive statements as to indicated usage and the risks involved. All jurisdictions in Australia have sought actions on these and on other drugs. In the case of the tranquillisers it is difficult to obtain accurate figures on the number prescribed. Neither I nor the Minister for Health has any accurate information at the moment on why Dr Rosser is in the country at all or who sponsored his visit. I must say, though, that if it has been sponsored by one of the pharmaceutical companies, particularly by Wyeth, it is reasonable for one to speculate as to the accuracy of his comments and his motives for making them. What we have tried to do in this Parliament, in the Senate, and more recently in this Government is to have a rational and sensible debate on the drug problem in this country. It is not achieved by people on either side making alarmist and stupid statements. I do not believe that the documents that have been put out by the Government and by all the State governments contain alarmist material, nor do I think the situation is advanced by statements of the like made by Professor Rosser who, like many visiting professors, apparently thinks that, because he is not in his own country and not amongst his own peers, he can make statements which will not be questioned and which do not need to be backed by facts. I would not hesitate to suggest that, back in Canada, he would not make such statements. If he does, his tenure of office as a professor will not be a very long one. Senator Sir JOHN CARRICK —I ask a question of the Minister representing the Minister for Foreign Affairs. What specific instances exist of breaches of the SALT II agreement by the Soviet Union? Does the development and deployment of the SS24 and SS25 Soviet long-range missiles constitute such a major breach? Has the Hawke Government ever protested to the Soviet Union about any such breaches? Has the Hawke Government previously drawn the attention of the people of Australia to such breaches? Senator GARETH EVANS —I will need to take on notice the question as to identified and identifiable Soviet breaches of the SALT II Treaty. There have been many alleged breaches and certainly the deployment of the SS25s, for one, has been commonly so regarded. But I will seek further information as to the Government's position on that. As I have indicated in answer to questions in recent days, the Government does understand United States concerns about Soviet compliance with particular provisions of the SALT agreements. We have made clear Australia's view that the Soviets have a case to answer on specific issues. As I think I said a few days ago in answer to a question, this view has been conveyed directly to the Soviet Government, most recently in a letter from the Prime Minister, Mr Hawke, to General Secretary Gorbachev. Equally, however, we are concerned, as I have indicated, with the United States announcement of its intention not be be bound informally, albeit, by SALT in the future, and the Prime Minister has now written, as I foreshadowed yesterday, to President Reagan to convey Australian views on this matter. Senator Sir JOHN CARRICK —Mr President, I ask a supplementary question. I thank the Minister for indicating that he will take on notice the specifics of my question. Has the letter from the Prime Minister to Mr Gorbachev to which he referred been made public? If not, could its contents be made public? Senator GARETH EVANS —I will seek advice on those questions. I imagine that it would be the intention of the Prime Minister to make public his communications with both the Soviet and the United States leaders. Obviously I will need to establish whether that is possible. Senator FOREMAN —Did the Minister for Finance see a report in the Sydney Morning Herald on 26 May 1986 entitled `What They Did in Canberra'? In that article the latest workings of the Opposition's Waste Watch Committee, under the leadership of Senator Michael Baume, were reported on. Can the Minister state whether it is true that this Government has given grants totalling $20,000 to public servants in the Department of Social Security to stage an in-service play on the highs and lows of departmental life? Senator WALSH —The short answer is no; it is not true. Like so many of the scandals the Waste Watch Committee purports to unearth, it is wrong again. I have seen the report in the Sydney Morning Herald and it refers not only to Senator Michael Baume's fearless leadership of the Waste Watch Committee stunt but also to some of his former careers in less than flattering terms. The article notes that the senator's Waste Watch Committee tends to be particularly active on Sundays when things are generally a bit quiet and it can get a run in the papers on Monday. Actually I think the real reason the honourable senator wants to get a run is to further his own ambitions to find a place on the Opposition front bench. Indeed, it is more specific than that; he wants to supplant Senator Messner as shadow Minister for Finance. The Waste Watch Committee is the vehicle that he hopes will carry him onto the front bench. He hopes to eclipse Senator Messner's less than dazzling performance with the publicity that his Waste Watch Committee stunts generate. It is not my place to give advice to the beleaguered Leader of the Opposition on sensitive matters such as saving his own skin. I reckon he has already got enough lead in his saddle bags without adding Senator Michael Baume to it. In his haste to obtain some personal publicity, Senator Michael Baume did not check back quite far enough on his facts, an error he has made before; indeed, an error he consistently makes. Grants totalling $20,000, the original source of which is the Federal Government, have been given to public servants in the Department of Social Security so that they can stage the in-house play In-Security, which apparently does explore the highs and lows of life in that Department. The funds were allocated through an Australia Council program called Art and Working Life. Rather than simply criticising and trivialising the destination of those funds, if Senator Michael Baume wants to criticise the policy of holding the Australia Council at arm's length from government and giving it funds that the Australia Council distributes, he should do so. But that is not the real point that I want to make. The real point is that that particular program was established by the Australia Council in September 1982 and the most innumerate member of the Opposition should know that we were not in government at that time, but the Fraser Government, in which Senator Michael Baume was allegedly an influential back bencher was in office. Senator BJELKE-PETERSEN —My question is addressed to the Minister representing the Attorney-General and concerns the film Hail Mary. Is the Minister aware of the many protests of Christian people throughout Australia who are concerned about this film which they consider to be most offensive and porno-blasphemous and which has been passed by the Film Censorship Board in Australia? Is the Minister also aware that this film has been publicly condemned by the Pope and the two archbishops of Sydney, both Anglican and Catholic, but has been publicly praised by L'Humanite, the official organ of the French Communist Party? I ask the Minister: Is it possible, because of the many protests made in Australia, to take action to review the decision of the Censorship Board not to ban this film? Senator GARETH EVANS —It has become obvious that the stridency of the condemnation of this film varies in precisely inverse proportion to people's knowledge of what it is about. There has been a conspicuous absence of any personal experience of the film by those who have been most strident, starting with the Pope and ending with most of the editorial writers in the Catholic journals of this nation who have been waxing most strident on it. Senator Chaney —Have you seen it? Senator GARETH EVANS —No, I have not. I am just drawing attention to a state of affairs. I make the point that if anyone thinks Mr Lionel Bowen could contemplate being a party, enthusiastically or otherwise, to an exercise in porno-blasphemy, to acknowledge Senator Bjelke-Petersen's new coinage, he simply does not know our Attorney-General at all. His tolerance for libertarian extravagance in any form is limited. I can assure honourable senators that did the Attorney-General think that there was either a power on his behalf to intervene or an occasion to do so, he would have so acted. Senator COATES —I direct my question to the Minister for Resources and Energy. It refers to this morning's reports concerning the manufacture in Tasmania of lightning-arresters using the radioactive substance americium and the 20 damaged lightning-arresters at present stored in a Tasmanian Department of Health building in Davey Street, Hobart. These arresters apparently are radioactive and were damaged when they were exposed to lightning. The South East Asian countries concerned returned the lightning-arresters when they discovered the damage. What controls should a State government exercise over the manufacture of goods containing this substance? Should the Tasmanian Government have more stringent controls over the manufacture of such goods? Was the americium properly imported into Australia in the first place? What controls were exercised when the goods were exported and when the damaged goods were reimported? Will the Minister fully investigate this matter? Senator GARETH EVANS —Yes, I will fully investigate this matter, which has been brought to my attention only as a result of the article in the Press this morning. It is apparent that there is a safety problem with these arresters containing americium. I understand that State authorities in Tasmania and elsewhere have acted to ban-and I will need to check this-the use of this type of lightning-arrester in Australia. the extent to which they are still being manufactured in Tasmania for export and the extent to which they are still being exported is, however, something on which I am seeking further information. The Commonwealth's capacity to intervene in these matters is, I suppose, pretty well limited to our capacity to control exports, but it is obviously a matter which arouses some concern, given the terms of the Press report, and it is something which I will be fully investigating. Senator COLLARD —The Minister representing the Minister for Transport will be aware that the parliamentary Public Works Committee has rejected the ill-conceived and inadequate proposal to spend $20m over three years on the renovation of the international terminal at Sydney (Kingsford-Smith) Airport, concluding that the congestion will be even worse after the work is completed than it is now. What does the Government propose to do as a matter of urgency in the provision of a new and adequate terminal, and the relaxation of the curfew by one hour in the morning, as recommended by the Committee, so that the congestion which is now creating a bad image for Australia is not allowed, through Government inaction, to become a national disgrace? Will the Government consider immediately building an international terminal at the new Brisbane Airport which should be curfew-free when it is opened, and thus help alleviate the worsening situation at Kingsford-Smith Airport? Senator GIETZELT —I have 12 items under the transport brief which is provided to me by the Minister for Transport. The issues raised by Senator Collard are not listed there, but they are matters of some importance and I will seek an early response from the Minister. Senator COLSTON —I direct my question to the Minister representing the Treasurer. Has his attention been drawn to the ANZ Bank employment advertisement series which shows that in Queensland in February, the latest month for which figures are available, the number of job advertisements in the Courier-Mail, Brisbane, fell by 0.6 per cent? Is this contrast with the Australian average increase of 5.9 per cent further evidence of the poor state of the Queensland economy under the Bjelke-Petersen Government? Senator WALSH —I am aware of those figures which show the result or the outcome for the month of February which Senator Colston has mentioned. That is not an aberrant figure; indeed, it confirms a trend which has been very clear for many months, that is, that the advertised job vacancies in Queensland are consistently on a trend line below those of the nation as a whole, which is of course yet another example of the constant stream of economic indicators coming out of Queensland demonstrating the rapid deterioration of that State's economy under a government in its declining years. The actual decline of 0.6 per cent in the job advertisement figures against a national average of a 5.9 per cent increase is another fairly dramatic indictment of Queensland's economic performance. I guess the Premier's attitude to that would be the same as his attitude to the comments of his prominent National Party colleague, Sir Roderick Proctor. However, clearly, with annual net migration in the last year in excess of 5,000 in the prime working age group of 20 to 34 years-the key job seeker age group-there are many people who are worried about the lack of job prospects in Queensland. The refrain of the Queensland Government used to be that Queensland has a high unemployment rate because it is such a lovely place to live, that people are drifting up from the south to lie around or to work in the sun. More frequently, according to the Queensland Government, dole bludgers from the south were coming up to lie in the Queensland sun. That argument was never credible. It is now demonstrably statistically disprovable. In fact, people in that prime working age group have been leaving Queensland in the last 12 months. There has been a net outward migration of 5,000 people. Those people are voting with their feet. They are leaving Queensland because they know that they have much worse prospects of getting a job in that State than they have in the Labor governed States to the south. Queensland has been the lucky State in a sense for many years. It has attracted easy investment because of its resource endowments. That period has now come to an end. When the Queensland Government is being required by economic circumstances to stand on its own feet and to compare itself from the same base with other States in its economic performance, employment growth and so on, it is found to be severely wanting. I guess that one of the symptoms of any regime that is coming to the end of its period is a sustained and severe decline in its economic performance. Senator WATSON —My question is directed to the Leader of the Government in the Senate. When the Prime Minister gives an undertaking to review certain aspects of the fringe benefits tax and the Treasurer in the Parliament subsequently denies that there will be any legislative changes I ask two questions. Firstly, who is running the country, the Prime Minister or the Treasurer; and, secondly, is this incident another example of the Prime Minister telling interest groups just what they want to hear and then doing nothing to relieve their grievances? Senator BUTTON —The Government runs the country, and pretty well as a matter of fact. Insofar as the second part of the question is concerned, no, it is not an example. Senator COOK —Can the Minister for Education inform the Senate of the educational benefits following her recent visit to Papua New Guinea? Does the Minister intend utilising the services of either her Department or educational institutions in Australia to assist educational institutions in Papua New Guinea? Opposition senators interjecting- Senator RYAN —There is obviously a great deal of interest in Papua New Guinea on the other side of the chamber. I did visit Papua New Guinea for six days recently. My visit, like the visit by Senator Gareth Evans, who was there at the same time, was a part of our Government's program of improving and regenerating relationships with Papua New Guinea. Obviously in the education area we could give a great deal of assistance to all levels of education should the Papua New Guinea Government decide to allocate Australian aid funds for those purposes. I did have discussions with the Papua New Guinea Prime Minister, the Minister for Education, the Minister for Foreign Affairs and various other Ministers and also representatives of three provincial governments on ways in which education services and advice from Australia could assist in the various educational problems that have been identified. I believe that there will be a number of practical outcomes from these discussions. To begin with, I have made funds available for the Secretary to the Department of Education in Papua New Guinea to visit Australia soon to have discussions with Australian institutions and administrators and to observe the Australian Education Council. I have also made available, at the request of the Government of Papua New Guinea, a publications officer from the Curriculum Development Division of the Commonwealth Schools Commission to assist that country with developing publications suitable for its programs. I think it is important that the Senate should know that there are practical consequences of these visits; in particular, that the education services of Australia are held in high regard by the people of Papua New Guinea. I hope that the contribution we can make will assist the country to grapple effectively with the many developmental problems it is currently facing. Senator SANDERS —My question is directed to the Minister representing the Minister for Arts, Heritage and Environment and concerns the continuing destruction of Australian forests by woodchipping. Firstly, what control of domestic forestry operations will the proposed agreement between the Tasmanian Government and the Minister for Primary Industry give to the Commonwealth? Secondly, has the agreement been signed by either party? Thirdly, has the Commonwealth altered its previous position of gaining influence over domestic forestry operations? Finally, regarding the proposed woodchipping scheme for Queensland and northern New South Wales, does the Minister support the statement by I. D. Lamb for the Secretary to the Department of Arts, Heritage and Environment in a letter of 13 November 1985 to the Secretary to the Department of Primary Industry that Hollow Tree Enterprises Pty Ltd should be designated as proponent in terms of the Environment Protection (Impact of Proposals) Act and subject to an environmental impact statement? Senator RYAN —Negotiations for a memorandum of understanding with Tasmania concerning the future of export woodchipping operations in Tasmania are being conducted by the Minister for Primary Industry. The following information has been provided by him in answer to Senator Sanders's questions. The issues raised in questions 1 to 3 of Senator Sanders's question fall within the portfolio responsibility of the Minister for Primary Industry. I expect that, when arrangements are finalised, the Minister will make details available so that the public can appreciate the mechanisms for protecting Tasmanian forests, particularly the National Estate areas. Senator Sanders will then be in a position to assess the answers to these questions. In relation to the Hollow Tree Enterprises project in southern Queensland and northern New South Wales, Senator Sanders's question appears to be based on the incorrect premise that if a proponent is designated for the purposes of the administrative procedures under the Environment Protection (Impact of Proposals) Act, the project will automatically be the subject of an environmental impact statement. As is made clear in the memorandum from the Department of Arts, Heritage and Environment to the Department of Primary Industry, referred to by Senator Sanders, the purpose of suggesting that a proponent be designated was to provide a basis for a decision on the need or otherwise for an environmental impact statement. In fact, the memorandum states that the initial view of the Department is that an environmental impact statement would probably not be necessary, provided certain conditions could be applied to the project. These conditions related to restrictions of exports, waste materials and the application of environmental protection guidelines to the agricultural clearing and management of the company's property at St George in Queensland. The approval of the Minister for Primary Industry for exports covers only sawmill wastes, timber from clearing on the property, which would be subject to compliance with the appropriate environment protection guidelines, and thinnings from New South Wales Government hardwood plantations established for wood production. The honourable senator will appreciate that the decision as to whether a particular proposal is environmentally significant and whether a proponent should be designated is one for the action Minister; in this case the Minister for Primary Industry. Senator GILES —My question is directed to the Minister for Veterans' Affairs. The increasing average age of veterans and war widows over the next few years will inevitably mean that the provision of institutional and non-institutional care will require significantly increased allocation of funds. What measures are being taken by the Department of Veterans' Affairs regarding the escalating costs of domiciliary care provided by private nursing organisations to veterans and war widows? Senator GIETZELT —The question of providing adequate care for veterans is a matter that has been before the Government since it came to office in 1983. The basic strategy, of course, is to keep people out of institutions. The reason for that, of course, is to meet the general aspirations and needs of veterans, as well as to apply cost effectiveness principles to the way in which those objectives are met. Domiciliary nursing costs have risen from $3.8m in 1979 to $17m in 1985-86. As a consequence, the Repatriation Commission has recently reviewed the procedures, with particular reference to New South Wales and Victoria, because there has been some blowout in expenditure and some laxity in the way in which the principles of domiciliary nursing have been applied. The Government is committing itself to providing services to veterans so that they can maintain themselves in their own homes. That is the basic principle involved in the way in which the system operates. Domiciliary nursing costs will increase, but institutional costs will increase faster. So we have a common objective in these areas. I have directed my Department to ensure that the interests of the taxpayers, as well as the interests of the veterans and war widows, are protected so that they are not exploited by profit motivated private nursing organisations. That has taken place in some cases in some States. As a result of the the recent review, from 1 September 1986 the maximum amount of domiciliary nursing which may be prescribed by a local medical officer without prior approval is one hour per day for a maximum of three months. Any nursing in excess of that will require prior approval. In New South Wales and Victoria the Department will exercise greater control over delivery of the service by assessing requests requiring prior approval, so that other than in exceptional circumstances the maximum payment for domiciliary nursing will be restricted to four hours per day. In order to meet that objective local medical officers will be reminded of the long-standing policy of my Department that where a government subsidised domiciliary nursing organisation exists, it should be used in preference to private or agency nurses, as we have less control over the way in which the money is expended if they are used. Senator McINTOSH —I direct my question to the Minister for Finance. In view of the recent calls by the business community for cuts in government expenditures, in areas other than those directly affecting business, will the Minister give an assurance that tax concessions and expenditure programs benefiting the business sector will be subject to the same degree of scrutiny? Senator WALSH —It has been standard practice since this Government came to office that all items of revenue and expenditure-at least all significant items-are scrutinised every year. I have noted the calls from the business community to which Senator McIntosh referred-in particular, one which was published in the Sydney Morning Herald yesterday and in the Adelaide Advertiser on the same day. I note that the business group is calling, among other things, for cuts in the funding to State and local government and has a quite extensive list of other specific program areas in which it is calling for cuts. I do not agree with all of the calls that it is making, but I will at least give the business community credit for having more courage and sense of responsibility than has the Opposition, which does two things. It says that expenditure should be cut, but never nominates an area in which that ought to take place. The second thing it does is that it promises $1 1/2 billion worth of additional expenditure in a variety of areas. Last week it promised another $500m-plus to the agricultural sector. So the Opposition, which is forever tediously saying that expenditure must be cut, does not nominate any specific area in which it should be cut. It irresponsibly promises $2 billion in additional expenditure, attempting to buy up the number of noisy pressure groups that it thinks will help to return it to government. Of course it has absolutely no intention of delivering those expenditure promises, should it get back into government. Senator Chaney informed us last week that the rural policy document, which was leaked, has no status; it is only a discussion paper. It lists about eight specific areas which contain promises for an extra $500m in outlays on the agricultural sector. Given that Senator Chaney has informed us of this, I have asked whether the Opposition is not committed to any of those individual promises in its discussion paper. I have asked which of those individual items the Opposition will welsh on or repudiate. Will it repudiate the commitment to refund all fuel excise to farmers, including the excise on petrol that they use to drive to the city and back? Will it welsh on the promise to fully restore the fuel freight equalisation subsidy, which would cost $110m? Will the Opposition repeal the sales tax on wine, which would cost the revenue $60m or the excise on brandy which would cost another $38m? Will it welsh on its promise to abolish charges for export inspection services which would cost about another $50m? I am still waiting for a reply from Senator Chaney, Mr Howard, Mr Sinclair or Mr Hunt on whether the Opposition will welsh on all those commitments and, if not, which ones will it welsh on and which will it stick by. Senator VANSTONE —I refer the Leader of the Government in the Senate to his answer yesterday to a question on the Priority One: Young Australia program. I refer particularly to his comments about the failure of the Ansett Airlines of Australia traineeships to materialise in which he said that he was not responsible in any way for what Ansett may or may not have said at any time. Given that the announcement of the Ansett traineeships was made by the Minister for Employment and Industrial Relations, Mr Willis, in October and therefore has the status of a Government announcement, will he now make some comment about the failure of these traineeships to materialise? Also, will he tell the Senate what has gone wrong with the Government's plan for the Priority One traineeships to proceed in the private sector. Senator BUTTON —I repeat what I said yesterday. The honourable senator asked me about statements made by Ansett and I gave an answer on that matter. If she wants to do a little 3 June add-on to what was said yesterday and ask me something about what Mr Willis said, that may be a different question and I will certainly inquire into the matter for her and obtain an answer. I suggest that the question would be more appropriately directed to the Minister representing the Minister for Employment and Industrial Relations if she wants to find out exactly what Mr Willis said about a particular matter as distinct from what Ansett said. Nonetheless, I will see that the question is referred to the Minister for Employment and Industrial Relations and an answer obtained for the honourable senator. Senator MAGUIRE —Has the attention of the Minister for Finance been drawn to a letter from a former farm worker in the South Australian country Press on the subject of the Government's taxation strategy? If so, can the Minister give the Government's response to the views on taxation policy expressed in that letter? Senator WALSH —I have seen the letter which gives a very different view of the magnitude of fringe benefits received by farm employees to that which is presented by members of the National Party of Australia and the President of the National Farmers Federation. From what I have heard from shearers who used to work on the pastoral properties owned by the President of the National Farmers Federation, there were certainly no fringe benefits for the shearers in those places. Indeed his pater used to be known as `Hungry McLachlan'. The average rural worker has been portrayed by Mr McLachlan, the NFF, the National Party and the Opposition generally as receiving in addition to wages, petrol, meat and so on-in other words, substantial income in kind. The retired rural worker who wrote the letter to which Senator Maguire referred suggested that if that was actually so he might be prepared to come out of retirement. He said that the only people that he knew of receiving those tangible additions to their wages were `blokes who come from agricultural colleges with a degree that says they know all about farming and get put in as managers or some such'. I will quote a little more from the letter in question. It says: During my time working as a rural worker on three different stations, never did I ever receive free meat, petrol or firewood: meat I had from- it says `employees', but that is clearly a typographical error- employer was paid for, free petrol is laughable, firewood I carted for myself in my own time, the `number of other benefits' I think are a figment of Mr McLachlan's imagination. I believe that later in the Committee stage of the debate on the fringe benefits legislation Senator Grimes will be detailing a response to-which, of course, means `a massive correction of'-the assertions which are being made by the National Farmers Federation. Senator RYAN —Yesterday Senator Peter Baume asked a supplementary question concerning the transfer of the Australian Capital Territory Apprenticeship Board to the Department of Territories. Since replying to Senator Baume's supplementary question I have ascertained from the Department of Territories that the Seat of Government (Administration) Ordinance was amended in such a way that responsibility for the Australian Capital Territory Apprenticeship Board was transferred to the Department of Territories and that this transfer was notified in special Gazette No. 173 of 18 April 1986. Senator GARETH EVANS —I am now in a position to supply some more information on the film Hail Mary. I think, in deference to Senator Bjelke-Petersen, that I should give a supplementary answer to her question today. The film, prior to its registration, was examined by the Film Censorship Board on two occasions. The Board is an independent statutory body, qualified to make judgments on community standards. The Film Censorship Board's unanimous decision-it was the whole board of 11 members who saw and voted upon the film-is that the film is neither indecent nor blasphemous but rather seeks to give the biblical story of the Virgin Mary a contemporary setting. Although the central theme in the film concerns the emotional, moral and philosophical questions posed by the rather unusual dilemma in which the central characters find themselves-namely, a virgin pregnancy-the Mary of the film's title is not the Bible's Mary and is clearly meant to be a contemporary character beset by late twentieth century social and moral conflicts. The director, Jean-Luc Godard, has described the film as devout. Against the protest that has been received from the church, one should mention that, as was spelt out in the Sydney Morning Herald of 14 May, La Croix, a French catholic newspaper, has called it Godard's `great Christian film', and a Catholic jury at the Berlin Film Festival last year gave it an award. Finally, now that the film has been registered and released from the control of Customs, the Attorney-General has no available powers, either constitutionally or under regulation 40 of the Customs (Cinematograph Films) Regulations, in regard to this film. The Attorney advises me that he is confident that the Film Censorship Board, as an independent statutory authority, has approached its duties in a responsible manner. Senator GARETH EVANS —I wish to give some response to Senator Sheil's question yesterday to me representing the Attorney-General about Mr Justice Lionel Murphy's staff. The answer is as follows: Mr Justice Murphy has a personal staff comprising an associate, a personal secretary and a tipstaff, who have continued to hold office during the pleasure of the Justice save for a period from 22 January until 24 March 1986, when the Justice was without the service of the tipstaff. All members of his staff have been retained. They are Mr Justice Murphy's personal staff and as such would carry out any duties that the Justice asked them to perform. None of them has been transferred to other duties. The staff continue to be paid by the High Court of Australia under its appropriation from Parliament. Senator GIETZELT —Earlier in Question Time Senator Collard asked me a question relating to suggested improvements to the international terminal facility at Sydney (Kingsford-Smith) Airport. The Minister for Aviation has provided me with the following information: The Kingsford-Smith Airport international terminal has from time to time been the subject of adverse media coverage and gives rise to many personal complaints. For some years, the terminal's deficiencies have been recognised by the Department and by the airlines. It is proposed that the terminal be remodelled and expanded in a number of areas to increase its capacity from 1,000 to 1,800 passengers per hour to cater more adequately for international passenger traffic at acceptable levels of service. The proposed works, which will concentrate on improving the passenger and baggage processing systems and public and passenger amenities, have been estimated to cost $20m. However, a Public Works Committee hearing dealt with these matters and that proposal was under its consideration on 4 February this year. The Committee reported to the Minister on 7 May and concluded that it was not expedient for the proposed work to proceed. It believed that the proposed work would not alleviate the congestion to any significant extent. It did not believe that the proposed work would be the most effective use of the money to be expended. The Committee recommended planning for the provision of a new international terminal building and stated that that should commence immediately. It recommended that the Commonwealth authorities provide staff to process passengers at a maximum attainable level. It also recommended that the curfew be reduced by one hour in the morning. That report from the Public Works Committee is currently being considered by the Minister and by the Government. No other information is available to me to respond any further to the question that was raised today by Senator Collard. Senator MICHAEL BAUME(New South Wales) —by leave-I claim to have been misrepresented, and I wish to make a personal explanation. At Question Time, the Minister for Finance, Senator Walsh, claimed that as Chairman of the coalition Waste Watch Committee, I had wrongly alleged that the Government had given $20,000 to employees of the Department of Social Security for an in-house play. Senator Walsh said that the $20,000 was in fact given by the Australia Council. Senator Walsh's claim is totally incorrect. It is yet another example of his intellectual sloth. I have a copy of my Press release on this matter, dated 25 May, which clearly shows that I made no such claim. I seek leave to have this Press release incorporated in Hansard to establish the facts. Leave granted. The document read as follows- GOVERNMENT DIVERTS FURTHER ARTS GRANTS TO UNIONS Grants of $20,000 to public servants in the Department of Social Security to put on an ``in-house'' play with a ``quite strong'' political message are among this week-end's examples of increasing volumes of Government arts money being diverted to the trade union movement, Chairman of the Opposition Waste Watch Committee, Senator Michael Baume said today. Senator Baume said under the Hawke government almost $1.5 million that would previously have gone to traditional arts areas has been diverted to trade unions and associated organisations. In addition, hundreds of thousands of dollars have gone to radical and ``front'' groups who use the arts to spread propaganda. At the week-end, the Australia Council's Theatre Board announced its final allocation of 87 grants for 1985-86, amounting to $800,000 and bringing its total grants for the year to $12.43 million. In line with Government policy, an increasing proportion of grants from the Australia Council for arts purposes has been diverted away from traditional recipients into programmes such as ``artists in community'' and ``art and working life'', in which the union movement is heavily involved. The $20,000 in the latest grants to public servants is to write and produce a play called ``In-Security'' which is described as exploring the ``highs and lows of life in the Department of Social Security'', depicting the work experiences of a demoralised staff. The play is being written as the group goes along from a working outline but a major theme developing so far is that the public is being ``short changed by the system''. In a scene from this still incomplete play, ``bucketfuls of cheques'' are poured out for a poor pensioner, an ironic reflection of the bucketsful of money the play is receiving from the Federal Government. ``Cut waste to cut taxes'' The first Australia Council grant towards this play was $10,000 from the Community Arts Board in November last year through the Administrative and Clerical Officers' Association, (the relevant union), followed by $1,000 from the Literature Board, and then this week-end's $8,416 from the Theatre Board. Organisers hope for another $8,000 grant when the show is hopefully ready for performance in July in Social Security offices around Sydney. Funding of this self-indulgence is bad enough, but depriving other genuine arts organisations of funds for this kind of wank is intolerable. If the Government believes it needs to improve morale among its employees in this fashion, it should not rob the artistic till to do so. Funding granted this year under the Government's guidelines by the Australia Council include: Workers' Cultural Action Committee (NSW) $28,500 lifting its grants under the Hawke Government to $88,678. Trades and Labour Council of Western Australia $33,000 lifting its grants to $153,477. United Trades and Labour Council of South Australia $54,000 lifting its total to $263,000. Victorian Trades Hall Council $58,500 increasing its total to $133,200. Trade Union Labour Day Celebration Committee (Victoria) $15,000 lifting its grants to $45,000. ACTU $11,350 increasing its total to $83,850. Other unions receiving arts grants this year include the Combined Unions Shop Committee NSW, the FEDFA, Ships Painters and Dockers, Storemen and Packers, Municipal Officers' Association, Musicians' Union, Painters & Decorators' Union, Professional Officers' Association, ABC Staff Employees' Association, and the Trade Union Community Research Centre (Tasmania). Radical and ``front'' organisations also receive arts grants such as the Australia Nuclear Free Zones Secretariat, FILEF (an affiliate of the Italian Communist Party which is a major recipient of Federal Government grants), the Australian Anarchist Centennial and numerous theatre and visual arts organisations whose objectives are political and which use the arts as a propaganda medium. If these Australia Council arts grants simply meant providing increasing opportunities for the arts to be available in the workplace or to working people who would not otherwise have access to them, then they would be justifiable, even in today's economic crisis. But these grants are mainly going to finance the spread of political propaganda under the guise of arts funding. At a time when a recent study showed the trade union movement having huge assets and enormous income, it is ridiculous for the Government to finance the spread of union propaganda through politically motivated songs, plays, banners, posters and newspapers produced at public expense under the guise of promoting the arts. If the union movement along with other political and radical groups wish to use the arts as a way of spreading their message then they are quite entitled to do so provided they pay for it themselves and not ask the Australian taxpayer to foot the bill. By making unions and radical groups into patrons of the arts at public expense, the Government is reinforcing the view that the easiest way for a writer, performer or artist to get money these days is to have a leftist or radical message, Senator Michael Baume said. 25 May 1986 For further information, phone Senator Baume 02/817-5625 Senator GARETH EVANS(Victoria-Minister for Resources and Energy) —As Minister representing the Minister for Defence I table the Review of Australia's Defence Capabilities by Mr Paul Dibb. I seek leave to make a statement relating thereto and to incorporate that statement in Hansard. Leave granted. The statement read as follows- I am very pleased to table today the review of Australia's Defence Capabilities by Mr Paul Dibb. Mr Dibb has worked directly for me as a ministerial consultant; His review is not a statement of Government policy, but an independent analysis of major defence policy issues facing the Commonwealth at this time. The Dibb review will now become a basic input to the development of a Government White paper on Defence policy, which will lay down our plans for the Defence Force over the next decade and beyond. In preparing his report Mr Dibb has consulted closely with the Australian Defence Force and the Department of Defence. The CDF, General Sir Phillip Bennett, and the secretary to my Department, Sir William Cole, have responded favourably to Mr Dibb's conclusions on Australia's strategic environment, and to his proposal for a National Defence Strategy for Australia. And they broadly agree with his specific recommendations on force structure, though with some differences on details such as numbers and timing. Overall they consider that Mr Dibb has done an excellent job-and I heartily agree. The Dibb review is an intellectually complex and rigorous analysis of the defence needs of this nation in the light of our strategic circumstances. This kind of analysis has rarely featured in the defence debate in this country, because public discussion of defence here has almost always been concerned solely with the broad foreign-policy environment of defence decision-making. One fundamental conclusion is that the contribution of all three services is seen as essential to our defence effort. There is a strong emphasis on maritime and ground force capabilities in credible contingencies. There is a proper regard given to the enhancement of our capacity to deploy air power across the vast distances of our continent and its approaches. And the potential for reserve forces to make a major contribution to our defence effort is clearly established. Defence Fundamentals When Mr Dibb was commissioned to review Australia's defence capabilities, he took as his starting point the strategic assessment endorsed by the defence committee. He then examined the three essential elements of our defence planning environment. These essential elements are not new-they reflect long-term historical trends and underpin basically bipartisan attitudes to our defence requirements. The first of them is that Australia should aim for defence self-reliance-the ability to defend ourselves from within our own resources from direct threats to our sovereignty and interests. Secondly, sound defence planning should be based on realistic Budget parameters. Australia's experience has been that peacetime defence expenditure has never consistently exceeded 3% of GDP. Indeed for most of Australia's peacetime history, defence expenditure has been well below this. Thirdly, we recognise that low-level military threats to Australia could emerge relatively quickly, but it would take many years for any country other than a superpower to equip itself to attempt a major military assault on Australia. On these foundations Mr Dibb has produced a rigorous and disciplined analysis of our force structure requirements. Self-Reliance Australians have a right to expect that their nation is able to defend itself. That is at the core of nationhood, and it has long been an Australian aspiration. Just fifty years ago this year, John Curtin told this House: The people of Australia would expect this country to be capable of defending itself should the occasion arise. And he went on to say: A greater degree of self-reliance in Australia's defence is essential. In that speech in 1936 Curtin predicted the events between December 1941 and March 1942. He foretold that Britain, fighting for its life in Europe, would be unable to send its navy to defend Australia from the Japanese, and that without that fleet the inevitable fall of Singapore would lay Australia open to peril. He concluded: The dependence of Australia on the competence, let alone the readiness, of British statesmen to send forces to our aid is too dangerous a hazard on which to found Australia's defence policy. In 1936 Curtin's policy was hotly debated and rejected-to Australia's great cost. But today self-reliance is beyond debate. A self-reliant Australia is an expectation both of the Australian people and of our allies. It has been required by our principal ally, the United States since the early 1970s. This requirement has been reiterated by successive United States Administrations. In a major policy statement in November 1984, Secretary of Defence Caspar Weinberger said: We have learned that there are limits to how much of our spirit and blood and treasure we can afford to forfeit in meeting our responsibility to keep peace and freedom. So while we may and should offer substantial amounts of economic and military assistance to our allies in their time of need, and help them maintain forces to deter attacks against them we cannot substitute our troops or our will for theirs. The previous Government recognised the relationship between self-reliance and a sound contribution to alliance relationships when it said in its 1976 white paper: This self-reliant posture derives essentially from our own national interests and responsibilities. It also accords with our status as an ally of the U.S., for by accepting our local responsibilities we can contribute to the alliance relationship and to the U.S. global effort. The ability to defend itself is the absolute minimum that any self-respecting country should contribute to an alliance. Australia can scarcely pretend to contribute to the defence of broader western interests if it cannot even defend itself. Indeed, as U.S. Secretary of Defence Weinberger said at the National Press Club in April: Defence of a country's own borders and own airspace and the sea around it, obviously, is a prime attribute of sovereignty and, of course, has to be one of the first priorities of any country. So a policy of self-reliance contributes to the strength of the alliance. And Australia makes a further substantial contribution to western security, as well as to international stability, by hosting the joint defence facilities and through a range of other cooperative activities, such as regular visits by ships of the U.S. Navy. Equally, the alliance with the United States contributes to Australia's ability to defend itself. Mr Dibb concludes that a self-reliant defence of a continent the size of ours demands access to intelligence, high-technology sensors and military equipment. For much of this the United States is the best source by far, and for some it is the only source. This is an important conclusion, and one which should not be overlooked in our thinking about the defence relationship with the United States. Our U.S. alliance will remain a significant deterrent to any potential aggressor. Any nation contemplating the use of force against us would have to reckon with the help-including possibly the direct military assistance which the U.S. might provide to Australia. That possibility would inevitably be a major complication in the plans of any would-be attacker, and thus it serves as a powerful deterrent. Our relationship with New Zealand is also of particular importance because of our common history and traditions, our proximity and our shared strategic concerns. Under ANZUS we have cooperated effectively with both the U.S. and New Zealand for many years to preserve our strategic environment. This cooperation continues with both parties, despite the difficulties in the US-NZ bilateral relationship. Nonetheless we look forward to the resumption of full trilateral cooperation under ANZUS when this becomes possible. We continue to value our excellent relations with all countries in our region and particularly with the members of ASEAN and of the South Pacific forum. Our good relations with our neighbours is a major enhancement of our security, and we value the contribution which good defence relations can make to the development of a broader understanding and harmony between ourselves and our neighbours, particularly under such programs as the defence cooperation program and the five power defence arrangements. Mr Dibb points out that such defence relations offer political benefits which exceed their direct military value. I believe there is no fundamental difference between this government and the opposition parties over the doctrine of self-reliance, and what this means for our alliances. The coalition government's white paper in 1976 was based explicitly on a self-reliant defence posture. In a key paragraph, that white paper said: A primary requirement emerging from our findings is for increased self-reliance. In our contemporary circumstances we can no longer base our policy on the expectation that Australia's Navy or Army or Airforce will be sent abroad to fight as part of some other Nation's force . . . We believe that any operations are much more likely to be in our own neighbourhood than in some distant or forward theatre. But despite this broad agreement on these basic issues, a clear conception of Australia's real defence needs in an era of self-reliance did not emerge from the coalition's seven years of government. There were a number of reasons for that. One was the coalition's failure to establish a reliable financial basis for defence planning. Australia spends about 3% of GDP on defence. We spend more on defence than on any other Commonwealth responsibility except social welfare and health. This year the defence bill is over $6.5 billion-almost 10% of total Commonwealth outlays. This is a huge investment of Australia's national wealth, and of the wealth of individual Australians. Defence costs every man, woman and child in Australia over $400 per year. Because such vast sums of money are involved, it is impossible to plan responsibly for defence without realistic financial guidance. Such guidance must respect the economic and political limits to the levels of defence spending which can be sustained in peacetime. The last coalition government twice proposed major expansions in defence spending, in 1976 and 1980. In both cases, the proposed high levels of expenditure on which defence planning was based simply could not be sustained. And on both occasions defence spending fell back to below previous levels within a year. The effect on defence budgeting of this glut-and-famine approach to spending levels has been very damaging. An effective and efficient defence force cannot be developed by making grandiose commitments when international crises make defence spending popular, and then slashing spending the next year as defence concerns recede. Yet that was what the coalition did. More fundamentally, the coalition government simply failed to put into practice the philosophy espoused in its 1976 white paper, because they would not tackle the hard issues involved in developing a self-reliant force structure. Comprehensive force structure planning was neglected and all too often procurement decisions reflected political and financial expediency. The protracted wrangle over replacing the aircraft carrier perfectly reflected their indecisiveness and lack of vision. In such an atmosphere it is not surprising that competing force structure philosophies flourished within the defence community. When this government came into office it sought detailed advice on our future force structure. But we found that there was no agreement, even on the scale of war we should be preparing to fight. Defence Planning The difficulties which the defence establishment has faced in resolving these issues is indicative of broader problems which Mr Dibb found in Australia's defence planning. One specific problem identified by the review is that each of the three services continues to do much of their initial force structure planning in isolation. This can lead to narrow and competitive views of Australia's defence needs. I am pleased to announce that the government has decided to tackle this problem by appointing a vice chief of the defence force directly responsible to the chief of the defence force for co-ordinating military planning. This officer will be equal in rank to the chiefs of the individual services, and his appointment will mean that increasingly, planning by the separate services will be fully coordinated. As well, the Secretary to my department and the chief of the defence force are examining other ways to streamline force-structure planning. I am also pleased to report that Mr Dibb's work has done much to reconcile different views within the defence community on some of the fundamental issues in our defence planning. In particular, the chief of the defence force and the secretary to my department have advised me that they accept and support Mr Dibb's conclusions on the level of contingency which should have priority in our defence planning. Threats and Warning Mr Dibb has endorsed the judgement that major threat to Australia's security-other than in the context of global war-would take some ten years to develop. This judgement has been endorsed by successive defence committees and has been accepted by successive governments from both sides of this house for over a decade. It is based on an expert technical assessment that no country, other than the superpowers, has the capability now to mount a major attack in the face of Australia's existing defence forces, and that it would take at least ten years for such a capability to be developed. But the capabilities to mount low-level attacks of various sorts against Australia already exist or are in prospect. Such attacks could be mounted with quite modest forces of a sort and level maintained by most countries for their own legitimate purposes. Such low-level attacks would not threaten Australia's national survival, but they would nonetheless be serious emergencies. Mr Dibb has found that this range of low-level military contingencies would pose more acute defence problems than is generally believed. A campaign of maritime harassment, and raids in remote areas, could severely test our present defence capacity. He recommends that these lower level contingencies should receive more attention in defence planning than in the past. This is not a prediction of military threat. I want to emphasise that Australia enjoys good relations with all its neighbours, and no country is likely to develop hostile intentions towards us. Before any country could develop an intention to attack us, relations would have to deteriorate dramatically and fundamentally. But because circumstances and intentions can change relatively quickly, our forces need to be prepared to cope with credible levels of conflict. These can be set by considering the limits of regional military capabilities. An important corollary of these judgements is that we would receive considerable warning of any effort to increase military forces to the point where they would have the capability to mount a major attack against Australia. Australia would have time to expand and develop its forces to meet higher threats as they developed. The challenge posed by the concept of warning time is to develop a defence force which could meet low level threats arising with little warning, and yet could also be expanded fast enough to meet a higher level threat should a potential adversary begin to develop the necessary capabilities. This challenge has not been adequately met in the past. The concept of a `core force' has been developed on the basis of warning time, and Mr Dibb notes that it provides a useful set of basic principles on which to define the capabilities required for high-level conflicts. But he sees, in addition, the need for a strategic concept focused on dealing with lower levels of conflict within our neighbourhood. Defence Strategy for Australia Force planning needs a clear overall conception of how Australia's defence forces would meet a threat, before it can be decided in detail what sort of forces are needed. In articulating that strategic concept Mr Dibb has made a most important contribution to improving our defence planning. To bridge the gap between strategic guidance and specific force structure proposals, Mr Dibb has developed a defence strategy for Australia, which he has called a `strategy of denial'. I want to make it perfectly clear that this has nothing to do with ``fortress Australia'', as some have suggested before they have seen anything of the review's contents. Mr Dibb's defence strategy embraces three key features. The first is a focus on the specific geographical features of Australia and its surroundings. The second is a concept of layered defence, which takes advantage of our geography. Thirdly there is a need for a clear understanding of the levels of threat we may face. The chief of the defence force and the secretary to my department endorse these basic principles. Strategic Geography Mr Dibb argues that our unique geographical environment should play a central role in Australian Defence planning. He argues that the vast maritime areas which surround Australia-known to strategists as the sea-air gap-and the remoteness and harshness of our northern areas, critically determine the military options of both attack and defence. Australia's huge distances contribute to its security, particularly from major attacks, because only the superpowers could project and sustain large-scale military force onto its shores. But in lower levels of conflict, the effects of distance work less in Australia's favour. Although the sea-air gap remains a formidable barrier to forces of any size, our vast northern areas mean that a major Australian defence effort could be needed to find and repel small attacking forces. Mr Dibb concludes that our defence forces need to be structured specifically to exploit the strengths and to guard the weaknesses inherent in our strategic geography. To provide this geographic focus for our defence planning, Mr Dibb has indicated an area of Australia's direct military interest. The characteristics of this area should be the over-riding determinants of the capabilities required in the ADF. Broadly speaking, this area of direct military interest covers the whole of Australia's land mass, and extends some 1,000 nautical miles beyond it in all directions. That area is around 10% of the earth's surface and it covers distances equal to those from Sweden to Afghanistan or from Finland to the Suez Canal. Australia's area of direct military interest is not, of course, the limit of our strategic concerns. Mr Dibb identifies a broader area which he calls our ``Sphere of Primary Strategic Interest'', extending throughout South East Asia, the eastern Indian Ocean and the South Pacific. We have important strategic relationships in this region which we should develop and strengthen. The area involved takes in almost a quarter of the surface of the globe. I defy anyone to describe this as an isolationist approach for a country with a population of only 16 million. The definition of Australia's area of direct military interest does not preclude the possibility of Australian forces being sent further afield, in either fighting or peacekeeping roles. What Mr Dibb proposes is that priority should be given to developing those capabilities which best enhance Australia's capacity to deny an enemy substantial military success against us within our area of direct military interest. That is the Australian Defence Force's prime national task, and that should determine its organisation and equipment. But forces designed to do that job will be capable of making a contribution further afield as well, should the need arise. Layered Defence Mr Dibb proposes that our strategic geography can best be exploited by a system of `Layered Defence' within our area of direct military interest. The first layer-and Australia's most important defence planning concern-is to prevent any hostile force crossing the sea and air gap. For this we need good intelligence and surveillance as well as air and sea forces capable of interdiction. Closer in-the second layer-a range of capabilities is needed to defend our offshore resources and the coasts themselves, including air-defence, mine countermeasures and appropriate naval ships. Lastly-in the third layer-we need highly mobile land forces capable of operating across the north to protect population, military installations, infrastructure, and industry. It is important to point out that under the strategy which Mr Dibb has proposed, each of our three services has a vital role to play at all levels of contingency. Force Structure I turn now to Mr Dibb's specific proposals about the force structure which his strategy requires. I will not attempt here to go through all his recommendations, but I want to identify some major issues and, where appropriate, to indicate the Government's intentions. The issues here focus on the classic question of ``how much is enough''. At a time when Australia is at peace, and expects to remain so, these are not easy matters to resolve. Defence has to fit into national budget strategies like everything else. Defence planning has to be very rigorous, and our defence dollar needs to be spent wisely. Let me emphasise first that Australia already has substantial military forces. Our intelligence and surveillance systems are the most advanced in the region. Our strike and interdiction capabilities include some of the most potent equipment available anywhere in the region. And we have well-trained maritime and land forces that are being progressively re-equipped with modern weapons and support systems. The high priority for intelligence and surveillance capabilities recommended by Mr Dibb accords with the Government's thinking, and is reflected in current programs. Mr Dibb gives special attention to the over-the-horizon radar project which offers the very real possibility of allowing continuous monitoring of the great expanses of our sea and air approaches. We are looking at ways in which this program can be accelerated and expanded. The review notes that the further development of over-the-horizon radar may have implications for other systems such as airborne early warning. I am on record as favouring the acquisition of airborne early warning aircraft. Mr Dibb's advice is that an early decision on acquisition is not required. Instead studies should go ahead in parallel with the further development of over-the-horizon radar. Those studies are proceeding and the capability will be considered by the government as the white paper is prepared. The introduction of the highly capable F/A-18 marks a major improvement in our air defence capacity. I accept Mr Dibb's advice on our need for aerial refuelling, particularly to provide the F/A-18 with an improved capacity to provide air cover for surface ships. Planning for aerial refuelling is continuing on this basis. The review gives careful attention to our strike forces. Our 23 F-111 aircraft and six submarines are unmatched in regional terms, and we have formidable strike potential in other forces such as the orion and F/A-18 aircraft. The review concludes that the F-111 force should be retained until the mid-1990s when decisions about its long-term future will be required. The review endorses the new submarine program, which will introduce new highly capable submarines into the force structure in the 1990s. The potential of mine warfare against Australia is given particular attention in the review. Mr Dibb observes that we have a major force structure deficiency in the much-deteriorated state of our mine countermeasures force. Although some progress is being made, this is an area where we have unacceptable vulnerabilities. I am determined to remedy this as quickly as possible. I observe here that this experience illustrates the need for setting clear force structure priorities. Arguments can be found to acquire many capabilities. Some would argue for another fleet underway replenishment ship. Some would argue for more fighter aircraft and more tanks, all equipped with the latest in electronic combat systems and weapons. But these arguments have to be set against clear deficiencies in our capacity to handle credible contingencies, such as an effective mine-countermeasures force. Similar considerations apply to our requirements for surface ships. Mr Dibb starts with the fundamental issues: For what purposes do we need surface ships, of what kind, and how many? He rigorously examines the demands of Australia's maritime environment. Mr Dibb identifies important roles for surface ships in lower levels of conflict. But he notes that there are some concerns about the vulnerability of surface vessels in higher levels of conflict, particularly when the very high costs of modern highly capable surface combatants are considered. He concludes that our surface fleet may become deficient in its capacity to handle a range of maritime contingencies if it is limited on the one hand to higher capability destroyers which can be afforded only in small numbers, and on the other to small patrol boats whose capabilities are essentially limited to peacetime tasks. He therefore proposes introducing substantial numbers of a new class of light patrol frigate in the 1990s. The light patrol frigate should be able to provide an effective maritime presence in credible contingencies in more exposed or distant waters, and to contribute to the protection of important focal areas and our shipping. This proposal represents a major advance in thinking about maritime priorities. These new frigates should be capable of carrying a complex modern weapon fit, including harpoon missiles, a gun, air defence systems and a helicopter. This is no brown water ship. Vessels like it are readily identifiable in NATO forces, although ours would need to be tailored specifically to meet Australian requirements. The outcome would mean, if the government were to adopt Mr Dibb's maximum suggestions, a substantial increase in the business end of the surface fleet. From 12 highly capable-if in some instances aging-warships we could go as high as 17. These ships would be in 2 categories. Firstly, heavy destroyers of the FFG/DDG variety, the capabilities of which were substantially enhanced by the government's decision to acquire Seahawk helicopters. Secondly, a class of light patrol frigate would replace aging destroyer escorts and some of the less capable patrol boats. Mr Dibb identifies a real role for the army, and he comprehensively refutes those who would do away with ground forces and rely solely on our air and naval forces. Mr Dibb concludes that low level conflict would be a formidable problem for our ground forces. The first priority for ground force planning would be forces to deal with raiding groups in a range of low-level conflicts. The emphasis would need to be on light but adequately armed forces, highly mobile, able to operate over vast distances, and needing the minimum of logistic support with concentrated protective forces in key areas. But Mr Dibb also notes that the possibility of fighting a conventional land battle in Australia is not so entirely improbable that we should not retain some limited skills and expansion capacity against such an event. The appropriate forces for such circumstances should be developed within the framework of a force giving priority of manning and equipment to the needs of lower-level, more credible contingencies. An important recommendation of the review is the need to upgrade substantially the tactical mobility of our ground forces by expanding the utility helicopter force. This is the single most expensive equipment addition to the current program that the review recommends. Mr Dibb also identifies a need for the army to be provided with adequate ground mobility and firepower. While the current M113 armoured personnel carrier may not be ideal it is generally adequate in the short term, perhaps with some modifications. In the long-term program for the replacement of the M113 there is time and scope for practical experimentation with different vehicle types, particularly in the north of the continent. There may also be a place for specialised mobility vehicles. Mr Dibb sees a reduced need for armour and mechanisation of our ground forces, and considers that artillery should be constrained. I emphasise that he does not propose doing away with these capabilities. Rather he proposes limiting the resources applied in these areas, and that the reserves should take a greater role in maintaining the expansion base elements. I note that there are some reservations in the defence force about the practicability or timing of some of these capability adjustments. Similarly, practical considerations may limit the speed with which the proposals for basing of major regular army units in the north can be implemented, although options are being considered for a smaller unit. These differences should not obscure the major contribution that has been made to our understanding of the role of Australian ground forces. Mr Dibb has confirmed our northern areas as the priority area for ground force operations; he has examined the nature of the conflict that could be expected there; and he has drawn attention to the huge logistic problems of dispersed operations across a vast and harsh northern hinterland. The Dibb review confirms the central role of airpower in the defence of Australia at all levels of conflict, and it endorses the RAAF's basic structure and capabilities. But the review calls for these resources to be more directly focused on the specific strategic requirements of Australian defence. To this he recommends the development of more air bases in the north, for example, and by acquiring air to air refuelling for the FA-18's. The review also confronts the airforce with the vital challenge of developing a comprehensive surveillance system involving an optimum combination of other, AEW and ground-based radar. I mention now some other issues raised in the review. The review does not propose any radical changes to the existing command and control system, but notes that the trend is for the joint command structure under the chief of defence force rather than single service operations. This trend is already reflected in the move towards functional command arrangements, and will be assisted by the appointment of a vice chief of the defence force. Other command and control proposals-the question of control of the battlefield utility helicopters and the establishment of a northern command-are already being examined within defence. Reserves Mr Dibb makes a number of major recommendations about the reserves, designed to give them more central and challenging roles in the ADF. Mr Dibb proposes that the army reserve should take over from the regulars some of the heavier weapons-including tanks and artillery-which are maintained primarily to provide a base for expansion. This would entrust the reserves with a vital and exciting role. But that does not mean that the reserves will only have a role in remote, high-level contingencies. It is also proposed that the army reserve should be given specific responsibility for the security of vital installations in our north. Mr Dibb has concluded that this task would be a major undertaking even in the type of low-level contingency which could emerge with little warning. Mr Dibb envisages that individual reserve units in southern states should be allocated specific towns and installations in the north which they would be deployed to defend in an emergency. Reserve units would deploy to exercise regularly in their allocated area of responsibility, giving them greater familiarity with their wartime tasks, and increasing their sense of purpose. Similar recommendations are made for the Airforce and Navy Reserves. In the Airforce Mr Dibb proposes that reservists take over specific roles in aircraft maintenance and airfield defence. In the Navy he proposes that reservists should take over the operation of mine countermeasures vessels, which as I have already said is one of the key areas of defence in plausible low-level contingencies. The Government is very concerned to strengthen the role of the Reserves in the ADF, and I believe Mr Dibb's proposals are an excellent guide to how this could be done. As a start, I agree with Mr Dibb's endorsement of the long standing proposal that limited call-out of the Reserves should be possible in situations short of a declared defence emergency. I intend to take legislation to this effect to Government. When implemented it will do much to increase the value and flexibility of the Reserves as an integral part of the ADF. These new tasks and directions for the Reserves will require a greater training effort, and we will be considering increasing the number of days' training each year. We will also consider an increase in Army reserve numbers from the current figure of 23,000 to a new ceiling of 26,000 by 1988, instead of the present ceiling of 30,000. Mr Dibb has examined the readiness and sustainability of our forces, and exposed some deficiencies in our capacity to measure this. He points to the need to ensure that key military forces are properly ready to pre-empt or respond to credible low level situations arising with little warning. An important consideration here is the need for a proper stockholding policy, which has been badly neglected in the past. We do not need large stocks of all items, but we do need to ensure that the forces required to respond at short notice are properly equipped and can sustain operations. Specific funding will be allocated to ensure that some current deficiencies are remedied as part of the effort to improve the readiness of our reaction forces as Mr Dibb recommends. Conclusion It is the custom of many defence commentators in this country to run up shopping lists of capabilities, without regard to their cost or practicability. Mr Dibb's review was not intended to be a cost cutting exercise, and has not been conducted as such. But he has costed out his proposals responsibly. His work on resource implications was not intended to provide a definitive financial prescription for the future. Rather he was concerned to demonstrate the affordability of his proposals, and to illustrate a way ahead for their implementation. As Minister for Defence, I have been impressed by the quality of this review. Mr Dibb has taken the broad principles of strategic guidance, refined them into a defence strategy and applied these concepts to our force structure in a comprehensive and balanced way. It is of course possible to suggest different approaches and to quarrel with some of the lines of argument used and the conclusions reached. But I believe that most will acknowledge this review as a significant intellectual achievement that should make a major contribution to the way in which Australians think about defence. It is not my purpose here to provide a final Government decision on the conclusions and recommendations of the review, although I have already indicated my acceptance of its broad approach and its main principles. I now intend that there will be the opportunity for discussion and debate on Mr Dibb's work, both in the Parliament and outside. I understand that the Australian Government Publishing Service intends to have copies of the review available in its bookshops around Australia within a few days. Mr Dibb himself will undertake a round of speaking engagements as part of the process of discussion and debate. The public version of the review is essentially the same as the classified version presented to me. Classified material has been removed, including some technical details on equipment performance and some material on intelligence matters. The public version does include, however, a full and comprehensive discussion of all the major force structure issues. It should now be clear that the Dibb review is a very complex, rigorous document. It demands deep study, and I hope those who participate in the debate will give it the detailed attention it deserves. Defence policy raises fundamental and serious issues for this country. Defence expenditure is now at the highest levels for peacetime, and constitutes a large financial burden for a nation facing some economic difficulties and many competing demands. Mr Dibb has developed his proposals within responsible financial limits. Yet his advice on the defence program provides for new submarines, a new class of surface vessel, many more helicopters for the Army, new surveillance and early warning systems, a revitalised mine-countermeasures force and an improved capacity to sustain air and ground forces across the north. The House has a right to expect that those who disagree with Mr Dibb will do more than mouth slogans. Where there is disagreement with this report we deserve to know what specific programs would be implemented instead, how these are justified by our strategic circumstances, and how much they would cost. When I appointed Paul Dibb in February last year, I said that I regarded his review as the most important appraisal of our defence capabilities since the end of World War Two. The result has more than met my hopes. I conclude by formally recording my thanks to Mr Dibb and his team for their outstanding work. Motion (by Senator Gareth Evans) proposed: That the Senate take note of the paper. Senator SIBRAA(New South Wales)(3.18) —When this Government came to power in 1983 it was evident that some serious defence thinking was necessary. An overview of Australian defence needs, capabilities and potential was clearly lacking. In 1983 the Australian Labor Party came to power, after spending 31 of the previous 34 years in opposition. The failure of the coalition to come to grips with the defence question was painfully apparent. All too often in the late 1970s because threats were not present-I might add that they are still not apparent-little was done to develop this comprehensive overview of defence. Mr Paul Dibb, a well-respected and independent analyst, was employed to review the whole question of defence. His brief was indeed a large one, because the whole picture has to be reviewed. The role of the Australian Army, the Royal Australian Navy, the Royal Australian Air Force, as well as the question of logistics had to be reviewed. This review also had to come to grips with the changing perception of Australia's role in this region and, indeed, in the world. Australia as a nation is a member of the Western Alliance and ANZUS which not only provide certain securities but also demand responsibilities. To be an effective member of that partnership Australia needed this defence overview. In dealing with this review some very important issues emerge. The Dibb Review of Australia's Defence Capabilities is an intelligent, comprehensive and coherent vision of Australian defence capacity at present and what options we ought to pursue in the future. Put simply, the Dibb report tells us where we have come from, where we are at and, most importantly for defence planners, in which direction we need to head. In 1941 Australia faced the possibility of a Japanese invasion. Already committed to a war on the other side of the world and already with considerable forces in Britain and the Middle East, Australia lacked the ability to defend either its merchant navy or even its shores from a Japanese attack. At the time the Labor Government had to face immediate threats, even though Labor Prime Minister Curtin had forewarned about such eventualities years earlier. In fact, in 1936 John Curtin stated in a speech in the other place: The people of Australia would expect this country to be capable of defending itself should the occasion arise. He went on to say: A greater degree of self-reliance in Australia's defence is essential. Five years after that speech the Japanese attacked Pearl Harbour, invaded Indo-China and swept through the Indonesian archipelago into Papua New Guinea. In February 1942 the Japanese proved that they were the masters of the western Pacific by taking the impregnable base of Singapore. The threat then, naturally enough, was obvious. The Japanese made the message clear by bombing Darwin, with a considerable loss of life and shipping only a few days later. The Curtin Labor Government was quickly made aware of its weakness and how Australia, relying on the bulwark of Singapore and upon Britain's ability to reinforce that base in time of war, was now in peril of attack. Curtin-I repeat, five years before Pearl Harbour and substantially before German rearmament-went on it that speech to conclude: The dependence of Australia on the competence, let alone the readiness, of British statesmen to send forces to our aid is too dangerous a hazard on which to found Australia's defence policy. The basic premise that has underpinned Australia's defence thinking since those dark days of 1942 is the necessity to be able to be self-reliant. Australian forces of sufficient strength need to be able to defend sovereign territory, coastal areas, sea approaches and trade. Australia in the 1980s, rather than the 1940s, has to take the primary responsibility for its own defence. These words of United States Secretary for Defence, Mr Weinberger, in an address to the National Press Club in April, made the point very clearly: Defence of a country's own borders and own airspace and the sea around it, obviously, is a prime attribute of sovereignty, and, of course, has to be one of the first priorities of any country. Secretary Weinberger had developed this point in a major policy statement in November 1984 when he stated: We have learned that there are limits to how much of our spirit and blood and treasure we can afford to forfeit in meeting our responsibility to keep peace and freedom. So while we may and should offer substantial amounts of economic and military assistance to our allies in their time of need, and help them maintain forces to deter attacks against them we cannot substitute our troops or our will for theirs. The previous Government also recognised the need to maintain defence self-reliance. In its 1976 Defence White Paper the following was stated: This self-reliant posture derives essentially from our national interests and responsibilities. It also accords with our status as an ally of the U.S., for by accepting our local responsibilities we can contribute to the alliance relationship and to the U.S. global effort. The problem was, of course, that whilst the bipartisan approach to self-reliance was a plank of defence policy, the actual implementation of the policy in the hands of our predecessors left much to be desired. Most of the hard decisions were avoided, put off for the next crisis, at which time expenditure could be much more easily justified, and the Defence Force's structural implications were not developed. In fact, Mr Dibb's job was made all the more urgent by the fact that some decisions had been put off for far too long. The Dibb report is based on sound par- ameters. In essence, three main bases for this report emerge: Firstly, the need for self-reliance as a primary aim, on which I have already made extensive comments; secondly, that costs be based on realistic budget estimates; and, thirdly, that we recognise that, whilst low level threats can emerge quickly, it would take many years for any country other than a superpower to equip itself for a major military assault on Australia. The second point, of course, is at the heart of the matter because the cost of a good, efficient, well-trained and capable defence force is not cheap. At present, budget outlays for defence are around 3 per cent of gross domestic product. That means for this financial year a cost of $6.5 billion. The 3 per cent figure is a realistic one even though it represents 10 per cent of Commonwealth outlays and is the biggest outlay behind the social welfare budget. Under the coalition the Budget outlay exceeded 3 per cent from time to time during some international crisis such as in 1980. However, in other years it was pared back well below that figure. The basis of this report is that an outlay of 3 per cent, which can be maintained, is better than the boom and bust syndrome with which defence planners until now have had to contend. As to the military threat to Australia, Mr Dibb makes certain contingencies clear in his report. Australia needs to have defence forces which can cope with low level threats, which can develop quickly or without warning at all. Such possibilities as incursions into sea and air space, harassment of fishing vessels and coastal shipping, terrorist-type raids on off-shore oil or gas rigs, covert mining of ports, air harassment of northern settlements, raids on northern communities and sabotage of installations would constitute a low level threat, a threat nonetheless that would require adequate and competent counter measures. Escalated low level conflicts would be more severe, more pronounced and would involve more regular attacks on shipping and on isolated settlements. The Australian defence forces would need to be able to react to all of these developments immediately. More substantial conflicts in which more pronounced threats to Australia and Australia's vital interests should be detected by intelligence forces well in advance. An example of this might be the acquisition of greater capabilities by one of our neighbours which, when detected, could see Australian forces develop adequate counter measures. However, it must be clearly stated, so that no confusion on this matter exists, that the Dibb report at present sees no threat to Australia or Australian interests on any level. Current defence thinking is not based on some perceived threat in our region, but on the axiom that Australians have a right to expect that their nation is able to defend itself. Under this report the Army will not be reduced. The Army reserves will go up from 23,000 to 26,000. The operational deployment force capacity to lift a company into battle will be expanded to a battalion. Located at Tindal in the Northern Territory, a battalion of troops will protect military installations and ultimately these forces will be of brigade strength. Of course one of the chief recommendations of this report is the exciting way in which the reserve forces will fit into this new defence posture. Senator MacGibbon —What about taking the tax off them? Senator SIBRAA —That is an issue that is being looked at very carefully by the Minister. Not every line in this report has to be followed. The reserves will have better equipment, more training and will be assigned specific tasks in the north in times of danger. Call out legislation will be needed for use of the reserve formation under this plan. It should be pointed out, however, that these are volunteers and not conscripts. To assess the ability of any enemy adequate intelligence is required. It is, of course, required not only before any conflict but also during it. This review calls for two Jindalee over the horizon radar installations with eventually two more. This will be at the backbone of early warning and will need to have a high defence classification for security purposes. The use of this facility for civilian purposes, such as the detection of drug importation and consequent enforcement, will be an added bonus. In this report the role of the Royal Australian Air Force is seen as crucial. The ability to project Australian military power some 1,000 nautical miles from our coast will require a $200m upgrading of the current 23 F111s, as well as the acquisition of mid-air refuelling capabilities. To achieve such a presence a new Air Force base in north Queensland will need to be built. Under this review the Royal Australian Navy will not have a carrier and will be reliant for air support from the Air Force rather than having its own fixed wing component, but it will still be a blue water Navy with a clearly defined role. One of the first areas to be tackled is that of mines and mine counter measures. It is a situation which can be described only as one of criminal neglect; that is the way in which previous governments and the Navy have treated this matter. If current Navy plans to upgrade this capability fail, three ships from overseas will need to be purchased in the near future. The life of much of Australia's destroyer escorts soon will effectively be over. The patrol boats which are in current use are also severely limited and of little strategic use. One specific recommendation is that five patrol boats and three destroyer escorts be replaced by eight light frigates. These frigates would be similar to the ones which are already in service with the North Atlantic Treaty Organisation. In essence, they would carry one Seahawk helicopter, be missile armed for surface-to-surface and surface-to-air capability and have guns for coastal bombardment. When the last of the FFGs are completed such vessels could be built in Australia to overseas design. There are many recommendations in this report and options for future defence planning. The Dibb review is a comprehensive set of recommendations based on a realistic set of precepts. The report does not have to be followed to the letter; far from it. A White Paper will be issued at the end of this year or early next year and it should be pointed out that Mr Dibb's comprehensive review has shortened the process that would necessarily have followed by at least 18 months. The Dibb review is the first comprehensive statement of Australia's defence preparedness and in which direction it should rationally proceed. This review is not an isolationist one. The review talks about projection of adequate military power to 1,000 nautical miles from Australia's coastline to being capable of defending Australian sovereignty and vital maritime interests. This review also recognises the value, as this Government does, of the membership of the ANZUS pact and the Western alliance. Recommendations are clearly shown about how Australia can usefully play a role in ANZUS and in the Western alliance, the foundation block of which must be Australian self-reliance. This review, I repeat, is not an isolationist one. It projects an Australia that can adequately defend almost 10 per cent of the earth's surface. Senator MacGIBBON(Queensland)(3.33) —I regret very much that the Senate has had very little time to look at the Dibb report, `Review of Australia's Defence Capabilities', which has just been tabled. It is a big report and it certainly is worthy of consideration. I have read in full the tabling speech by the Minister for Defence (Mr Beazley). I have read two-thirds of part 1 of the paper and I have skimmed the rest of it. I regret that I do not have time to take it apart piece by piece. I give notice that I accept the Minister's challenge in his tabling speech, and I will certainly be coming back to debate this matter in detail in the fullness of time. I hope that, in contrast to all the other speeches which I have made, the Minister this time will not run away from the arguments which are put to him. In all the years that I have been in the Senate I have never had the courtesy of a reasoned reply to any of the comments I have made in the defence field. Since the Minister has gone out on a limb this time and has invited comment, he will certainly get it from me and, I imagine, from a large number of my colleagues. This document authenticates Australian Labor Party defence policy. More than that, it authenticates what the Labor Party has already done in running down the capacity of the Australian defence forces to defend Australia. The document is certainly a very interesting academic treatise, from what I have seen; but regrettably it starts with some false assumptions and it builds its whole argument around these assumptions which are totally false. It does not matter how logical it is from there on; having made the false assumptions, or a series of false assumptions, one cannot get the right solution when starting from the wrong point. In the limited time we have this afternoon I certainly cannot go through this document in detail, so I will confine the few minutes I have to debating the conceptual basis, the conceptual inadequacies, of this report. One of the first points made in this report is that there is no threat. If we look at the history of mankind we will find that 90 per cent of armed conflicts between nations have never been predicted or foreseen. They arise de novo. We can see the origins of them very clearly when we look at them in hindsight; but with foresight, which is what we have to live with, we cannot see them. It suits the Labor Party to downplay defence and, in supporting that downplay of defence, it uses the assumption of no threat to back it up. I was very interested to see that the Minister quoted from a former failed Labor Prime Minister, Mr Curtin. He quoted at length from what Mr Curtin said in the 1930s. What he did not say was that six months before the outbreak of the Second World War Mr Curtin was saying that there was no foreseeable threat to Australia. Mr Curtin is reported in the Hansard of the House of Representatives six months before September 1939 as saying that there were no threats to Australia at all. What happened when Japan came into the war? Again we had this no threat doctrine. Honourable senators interjecting- The ACTING DEPUTY PRESIDENT(Senator Elstob) —Order! Senator MacGIBBON —I do not need any protection from illogical people such as those opposite, Mr Acting Deputy President. Within four months of entering the war, the Japanese swept through the whole of the western part of the Pacific. Where was the 10-year warning time then? We paid for the negligence of the Labor Party at that time with the lives of young Australians. I for one will not tolerate a situation like that ever again while I have a say in the matter. Another basic concept on which this report is based is the strategic assessment. Labor hides behind the strategic assessment, as if the strategic assessment were some sort of holy document which is always accurate. The strategic assessment on which Australian defence planning is based, according to evidence which has been given to the Senate Committee on Foreign Affairs and Defence and to the Joint Committee on Foreign Affairs and Defence, is a political document. In other words, the public servants in the Department of Defence write the strategic assessment in the light of the government of the day to cater for the known prejudices and beliefs of that government. It is not a document which deals accurately with the strategic situation. The third false assumption in this document is that Australia can never afford more than 3 per cent of its gross domestic product for defence. Three per cent of gross domestic product is simply not enough in the modern age and in the situation we face to meet the defence needs of the country. Mr Beazley will not accept that. One of the very first conditions Mr Dibb was given in his remit for the report was that he had to accept the financial restraints that exist at present; in other words, the 3 per cent of gross domestic product. That is simply not enough. Senator Grimes —How much would you spend? Senator MacGIBBON —I would take something out of the welfare budget. While I am on that point, the Minister dissembles; he says that the defence budget is the second largest expenditure behind health and welfare, but the point is that the defence budget is 10 per cent of Federal outlays. Under that lot opposite health, education and welfare expenditure is 50 per cent. Senator Grimes —How much would you spend? Senator MacGIBBON —I would look at cutting it down considerably. The fourth point which the Government goes on with is a jingoistic belief in self-sufficiency. I have always maintained that we should be self-sufficient in defence, but I do not mean that in the jingoistic way that the Labor Party means it. I believe that we should not be a parasite in the region. I believe that we should have effective standing forces so that we can maintain our alliances in the region. Finally, I come to the fortress Australia concept, which is the whole concept of what the Labor Party wants in defence. The bottom line of it all is: What can Mr Beazley get away with from the far Left of the Labor Party? The defence policy of this Government, like the foreign policy, is what the left wing, the Senator Cooks and people of that kidney, will accept. I do not accept that that is what the majority of Australians want, let alone what they need. With this report, we hide behind the flim-flam of a strategy of denial. There is no honesty in that. There is no declaration that this is fortress Australia. Instead, there is the dissembling point-it is a strategy of denial. I will come back to that point later. There is a dear belief in the Labor Party that, if we hide like a lot of good little children in our back yard and do not go out and play on the streets, we will be safe-no one will climb over the fence to get us. That might be a fine philosophy for kids, but it is not a philosophy for adults in an adult world. The Dibb report rationalises what has already taken place in the defence forces since Australia became governed by the Labor Party. The Labor Party got rid of any overseas deployment capability so that it could incorporate Fortress Australia as a fact of life. There were two keys to this. The first was abandoning the Fleet Air Arm. Not replacing the aircraft carrier means that we do not have air cover at sea. Despite what Senator Sibraa in his ignorance said, if we do not have air cover at sea we simply cannot have a blue water navy. But Mr Dibb, as he says in his report, cannot see the need for ships other than for coastal protection duty. I hammer this point: If we do not have air cover we cannot have a blue water navy. That maritime strategy has been known for 50 years. The second thing the Labor Party did to strip Australia of anything other than a Fortress Australia capability was to disband the amphibious squadron at HMAS Moreton. It got rid of the six landing craft heavy ships-Balikpapan, Brunei, Labuan, Betano, Wewak and Tarakan-and the amphibious heavy lift ship Tobruk. Not only did the Labor Party destroy that amphibious capability; it also in the same blow destroyed the training capability for the Army because 6 Brigade at Enoggera was tasked with training for the amphibious role. The most likely consequence for the use of Australian forces will be in the south-west Pacific area to support a friendly democratic government that is under attack, probably from some of the friends of the Labor Party from the Libyan Embassy, or the Cuban Embassy, in Vanuatu or something like that. Without an amphibious squadron, without an Army unit trained in amphibious operations, we simply cannot support our foreign policy in the region because the Labor Party has taken that resource and that capability away from us. In return it comes up with the Fortress Australia concept-the strategy of denial; the policy of layered defence. Mr Dibb put Mr Beazley's moat in terms of a thousand miles of what he, in a buzz word, calls the sea-air gap. Mr Dibb has only to look at the map to realise that the 1,000 nautical miles barrier around Australia has quite a lot of land in it. It is not a moat. It includes New Guinea, the Solomon Islands and Timor. It extends to Ambon, the Celebes and part of Indonesia. There will be bases in that land mass. He comes to the astonishing conclusion that although there will be this 1,000-mile barrier, we do not need to know what is going on in it because Mr Dibb recommends that we do not buy an airborne early warning capability. Without an AEW capability we simply cannot survey that area. The benefits of Jindalee, the over-the-horizon radar, are considerable. However, they are nowhere near precise or comprehensive enough to be able to survey those areas. We are going to have a moat of 1,000 miles and we are assuming that all the good people out there will not trouble us. We are going to have a brown water navy. We are not going to be able to put surface ships into the area because they lack air cover. Mr Dibb relies very heavily on the Royal Australian Air Force. As everyone knows, I have a very soft spot for the Air Force, which is an essential part of the deterrent function of Australian defence. However, the Air Force has a very limited use. One can either bomb someone or one cannot. One cannot influence the foreign policies of another country by putting aircraft overhead. That is not the way the Air Force works. One either destroys a target or one does not. Aircraft are very inflexible; what is more, they are very short term. One can be over a distant target only for minutes. Of course, the other casualty is the Army which is to be reduced really to riot police status. It will be a SWAT squad. The New South Wales Police Force would be able to take on the Army when the Dibb report is fully implemented because there is to be no armour, no armoured personnel carriers and no artillery. The Army is going to buy some helicopters, and that is good. However, one cannot fight from a helicopter. Soldiers have to get out of those helicopters if they want to do anything. I hope that the people running out of the helicopters are the Mr Dibbs and the Mr Beazleys of this world and that they have only a green shirt for protection. I hope that there are a few accurate markesmen on the other side because they will then learn-although it will be a fatal learning process-that we have to have armour on the ground and close fire support. The policy of strategic denial has some very fundamental flaws for Australian defence. It denies any alliances in the region. It abandons the notion that we are part of a community of nations which want to live in peace and stability. It says to those people in the region: `We in Australia will not be able to deploy the Army, Navy or Air Force, either individually or collectively, to help and support you if that need arises'. We are saying: `We are turning our back on you completely. You do not matter to us'. People in the region do not like it, as the Indonesians have made very clear. But more importantly, because we turn our back on those people, we are sending them a very clear signal that we see them as the potential enemies. The consequences of that for our foreign policy are enormous. At the end of the day one only has to look at history to know that no fortress has ever stood alone. We cannot pull up the drawbridge over the moat around Australia and live in peace in perpetuity. This simply cannot happen. I would now like to turn very briefly to the report itself which, of course, commences with that great statement I have already dealt with-the statement that there is no threat. The following statement is made on page 7 of the report: Air strike or naval interdiction capabilities that could contribute to our allies in more distant areas should not be a force determinant. That is a nonsense, and I have just dealt with that point. The report also states: Enhancement of the land-strike capacity of the F111 force is not required at this time. But the best part is in regard to maritime defence. I will refer to two statements in the report because they are factually incorrect. The report states: Land-based aircraft would be expected to provide maritime air defence where necessary . . . but we should avoid policies that require naval surface vessels to be placed at risk of air attack without access to our own defending aircraft. That is the most nonsensical piece of academic irrelevance that I have ever heard. Someone should have told Senator Withers or Senator Hamer when they were having the hell bombed out of them in the Mediterranean in the 1940s that there should have been a policy that should not commit ships without air cover. We do not control those situations. The second nonsensical statement is that the F111 can perform the role of a long-range air interceptor. One thing the F111 cannot do is to act as a fighter. It lacks the radar and the armaments to do it. All it has are Sidewinders. A big heavy aircraft like that simply cannot operate in that way. I will go through other things in the report in much greater detail at another time. However, in summary and in conclusion, this report is isolationist, it is insular, it is immature and it is impractical. It will destabilise the area and it is dangerous for Australia's long term security. Senator MASON(New South Wales)(3.48) —The Australian Democrats agree with the broad thrust of the Dibb Review of Australia's Defence Capabilities which we have been awaiting with some interest. We believe that the report should now be used as a basis for broad agreement on what our defence needs are going to be over the next decade or so. I note with some interest the promise in the tabling statement of the Minister for Resources and Energy (Senator Gareth Evans) that there will be a White Paper and that that White Paper will contribute significantly to our defence planning over the next decade and beyond. There is little doubt that for many years there has not been clear direction in our defence planning and that this has resulted in some very serious and expensive mistakes. We have been ineffectively spending far more on defence than have most other countries, notably such countries as Canada and Japan. The comparisons between Australia's performance and the performance of those countries are, to put it mildly, pathetic. This appears to have been due to an ambivalence in the planning area between whether we are going to operate in the world of today or whether all of our strategy, all of our thinking in defence, is going to be based on what happened 45 or 50 years ago. We might just as well go back to the Battle of Waterloo and plan on the basis of what we were doing then as go back to the lessons of World War II. I know that that argument has gone on in this place and the community since the days when the short deck aircraft carrier was proposed. This was a disastrous enterprise and a disastrous concept. I have put a number of questions on notice on this matter. The last one that was necessary was: In the event of war and the possibility of a nuclear attack submarine being in the vicinity of Australia, would the new short deck carrier put to sea? I understand that certain people in the Department of Defence gave this question a great deal of agonising thought and they came up eventually with the only possible answer which was yes. That was the end of the debate, because anybody with any rationality would know that such a ship at sea, with the means we have within our Budget to defend it, would not last five minutes in those circumstances. It would be a mere sacrifice of that ship and every living soul on it. Therefore, I think we are coming slowly and painfully to a more rational view of what might be done in this country from the point of view of defence. The concept of forward defence, with Australia substantially being defended by powerful friends, into whose forces Australia's forces were interposed to play minor roles, has been disastrous for this country in the past in terms of planning and would be even more disastrous in some circumstances one could think about. I put a scenario, for instance, in which both of the super-powers were severely mauled in a nuclear war-this is a very likely possibility-but in which Australia emerged relatively unscathed. I do not agree that that is necessarily a very strong possibility, but it exists. We would then be alone without powerful friends and forced to look after ourselves in a situation of virtual isolation of forces. If we went ahead purely with the concept of throwing in our lot with our powerful friends, we would inevitably be the victim of any casual opportunist or adventurer among our northern neighbours. Such an adventurer or opportunist may not exist now, but we must take into account, as the Dibb report has, that it may emerge and that it is not beyond the bounds of possibility. In other words, it is good common sense and rational planning for us to take a strong, independent attitude towards our own defence and to do everything we can within the reasonable expenditure of money in the circumstances to see that Australia is in a position to defend itself and particularly to be able to convey a foreign policy message to the world that we are thinking along those lines. To allow Australia to come to a situation where we were apparently quite without a defence capability in modern terms would be disastrous. I had hoped, until I heard Senator MacGibbon, that that ambivalence about our defence aims would now become a thing of the past. Unfortunately, it appears that that is not the case. The oceans in war time will be very unfriendly places, with weapons afloat, especially under the sea, which we would have no hope of dealing with. Blue water ships of the type we could readily afford would be sitting ducks for a nuclear attack submarine. The Government's plans to build smaller, patrol-type frigates in Australia are along the right lines, but I hope that the same disastrous mistake is not made as was made with the Fremantle class ships. Those patrol ships are excellent small warships, but their main armament is a bofors gun of the type used in World War II, which I understand on good authority is not capable of even firing a shot across the bows of a Taiwanese fishing boat if it is proceeding in a stiff breeze upwind. Senator Siddons —When it is very rough they cease to function. Senator MASON —I gather that is the case. It is absolutely disastrous and totally irresponsible to have perpetrated such a thing. I have spoken to senior officers-not naval officers-who are concerned with this class of ship and they have wept tears of blood over this. They know perfectly well that those ships could be missile capable. There is space in them for the control systems and missiles and they ought to have been designed that way from the beginning. Happily, that point is noted on page 129 of the Dibb report, but there is an ambivalence there. It is stated that these ships probably will not be missile capable, but they might be. I suggest that the Government ought to grasp that nettle right now and not build or buy any more light ships or frigates of that type which do not have surface to surface or surface to air missile capability. Our reasoning is based on the enormous advantage of the capability to fire missiles in large numbers. Phalanx and other quick firing gun defence systems can protect an enemy from a small number of missiles, but our ability to fire such missiles in large numbers from cheap, mobile, easily defended and to some extent expendable platforms would progressively increase our chance of completely destroying an invading fleet. That has been taught in regional wars where naval forces have been engaged, such as the Middle East and the Falklands. Perception by the rest of the world that we have the capacity to do great damage is a vital foreign policy weapon that we should have. It would be a serious deficiency if once again, as with the Fremantles, we built a whole class of small vessels without that missile capability. Such ships with small guns scarcely enable units at all; they are more coastguard type ships. Somebody mentioned earlier in the debate something about coastal gunnery. We are certainly not going to do much effective coastal gunnery with ships of that type in any war I could conceive in the future. In relation to the Air Force, we agree with the two major recommendations; to provide air to air refuelling for the FA18 aircraft-it is absolutely essential if these aircraft are to carry out any kind of reasonable role in the future-and to maintain the F111 aircraft force. Senator MacGibbon does not agree with that, but I think the F111s are worth maintaining and upgrading. They fill a role that the FA18s are not capable of filling. For many years the Australian Democrats have pressed for a modern, professional Army with the strongest possible airborne and parachute capability. We are delighted to see that the Dibb report has made recommendations in this direction. The last thing we would want is an Army which does not stress quick mobility, trained and equipped along conventional lines, based in south-east Australia. That is what we have had in the past. If we have that, we are looking at the possibility that any future threat to this country will come from either New Zealand or Antarctica. That is not so; any future threat to this country will come from the north or west. It is again square one stuff that we have to have a highly professional Army with the best light weapons we can provide; not artillery, but weapons that a man can use in his own hands. Those weapons exist and are indeed lethal. The Army must have the capacity and training to be moved quickly to any location in Australia where a threat might arise. I agree with the Dibb report that there is not really a major threat to Australia at the moment because of our geographical situation. If a threat emerged, unless we are in a position to have that kind of mobile force, which could actually go and fight and operate efficiently on the ground anywhere in Australia, we might at some stage have the considerable embarrassment of having to fight a long, drawn out conflict against a comparatively small force which had been landed somewhere in our north-west, which we might not know about, on our present state of reconnaissance, for days or weeks after it happened. We have to have the capability of getting a force in quickly which is capable of dealing with that. Here again the foreign policy message is important. It is essential for our neighbours and the rest of the world to know that we are smart enough to see things in those terms. As I recall, there was an agreement among the Whips, which the Democrats intend to honour, that this debate should be held to 10 minutes on this matter, so I have only one more thing to say. I am concerned at the early reaction of the Liberal and National parties to the Dibb report. As has been reported in the media today, their comments have been unconstructive and quite damaging to an effective Australian defence effort. We cannot go back to the past and make important judgments on the basis of the weapons, strategies and experiences of the past. It is important also that one should not take something such as this report, which has been carefully thought out and constructed in detail, and damn it out of hand. I hope that that tendency will not be continued by the Opposition. I will not say that the report is not beyond criticism-of course it is not, and that is probably the best reason for my appeal to the Opposition. If the Opposition has criticisms, let them be realistic and useful so that when the promised White Paper, which will determine how our defence will stand for the coming decades, is written, the Opposition will have some constructive and useful input rather than merely saying, quite emotionally, that we ought to go back to the forward defence policies of the past without qualification. Senator VALLENTINE(Western Australia)(4.00) —I welcome the general thrust of the Dibb report-the report of the Review of Australia's Defence Capabilities-that is, that Australia should be moving towards self-reliance in defence capabilities. This is an important document which highlights the need for a new approach to our foreign policy upon which this report is founded. A disturbing aspect of the tabling statement of the Minister for defence, Mr Beazley, is that Caspar Weinberger is quoted more than anyone else in the whole document. In fact, Mr Beazley moved swiftly from quoting John Curtin to quoting Caspar Weinberger, whose statements received a lot more prominence. It is as though we must have the United States' permission to develop our own defence policies. The reality is that we have been requested by the United States to develop self-reliance since the Nixon statement in Guam in 1969. The Dibb report merely complies with that directive from the senior partner in the nuclear alliance in which we are now involved. Pages five and six of the text of the Minister's statement are an apology to those who think it inappropriate for Australia to have any independent thoughts whatsoever. The discussion which has taken place already in anticipation of this report has been very healthy. There must be much more debate about foreign policy and defence issues in this country. I call for a community based defence review inquiry along the lines of the one being conducted in New Zealand at present. The Dibb report will serve as a very useful starting point for such community debate. Like the issue of nuclear disarmament, I believe that foreign policy and defence issues are too important to be left to politicians and academic experts. The people should have a say and I look forward to that happening. Debate (on motion by Senator Grimes) adjourned. Senator MACKLIN(Queensland)(4.02) —I move: That the Senate take note of the paper. The statement put down yesterday in the House of Representatives by the Minister for Primary Industry (Mr Kerin), presented in this place by the Minister representing the Minister for Primary Industry, Senator Walsh, deals basically with the single matter of the marketing boards which the Government is seeking to overhaul, as time and the legislative commitments of both chambers permit. We have already looked at the restructuring of some boards. Obviously a very large number are yet to be looked at. The Australian Democrats still see a number of problems with the proposition. We have been very firmly of the view that these marketing authorities should have a producer majority. The Government's second key principle, at page 5 of the text of the statement, reads: . . . boards of the authorities will be established on a corporate rather than a representational basis with members selected according to merit and relevant expertise. While that may sound very useful-I do not think anyone can be against expertise-we will lose a considerable amount of contact if we give away without question the representation base of these boards. Page 7 of the text of the statement, with regard to that representation base, reads: As such the system in which members are elected through ballots of particular interest groups is unsuitable since members would be answerable to those groups. I think that one of the particular strengths of the notion of a representative board as against a nominated board is that it is answerable to those groups. But, in being answerable to those groups, I believe that such a board is able to take those groups with it on most occasions with regard to the decisions that are made by that board. Surely it is of vital importance in regard to the boards of any of our major industries-or even some of the newer and smaller industries which have established boards-that the industries must have confidence in and support for the policies of those boards. By cutting ourselves off from the representative base, we give away one very real and effective means that has been used in the past to get the co-operation of the special interest groups. I remind the Senate that those special interest groups are not just any group in the community; they comprise the people who produce the commodity which is being sold. In other words, they have a very clear and distinct interest in what those boards do and in how successful those boards are. It is not the case that the representatives on those boards can in any way further the interests of the groups which they represent without at the same time furthering the aims of the boards, because the interests of those production groups and the interests of the boards are identical-that is, to increase the export of and markets for those commodities. Therefore, I think somewhat of a fallacy has crept into the Government's thinking with regard to this aspect. It is as though it believes there is some conflict of interest between those two groups. There is not, and there cannot be. When we were looking at representation on the Australian Wheat Board, which was one of the boards that the Government sought to restructure earlier, the Australian Democrats would not accept the Government's proposal and a compromise was reached whereby expertise was sought from representative groups. I believe that is a solution that should recommend itself to the Government so that we may be able to maintain both the representative nature that is currently available to the boards and the expertise that the Government is currently seeking. Senator VIGOR(South Australia)(4.06) —I rise to support Senator Macklin in his contention that the marketing boards should have a large amount of grower representation. The growers are the people who suffer from the rural crisis. They are the people who need to be protected against the problems that are imported from overseas. We do have a rural crisis, so it is very timely that the Government should be looking at reorganising the boards which are some of the main front organisations which handle our overseas marketing. Our prices overseas are very low because of dumping by countries all over the world, particularly by the European Economic Community and the United States of America, which subsidise their domestic production and also accumulate surpluses of the various agricultural products that they eventually dump on world markets. They also give aid through consumer credit programs. I believe the Government should consider allowing our boards to enter into that sort of program. I want to address a few other factors which the boards need to look at. I refer to the fact that many countries prefer to import pre-packaged or pre-processed goods which are ready for sale or final assembly into a salable product. If we can get into that area and have more value added to our products, we will get more revenue in this area. This is one of the points that was made quite cogently in the statement of the Minister for Primary Industry (Mr Kerin). The other problem is that a lot of our products are considered to be fair average quality-f.a.q.-products. What is sought by foreign countries is high quality products which they can sell in their markets at a special premium price. We also have low local prices. The boards do handle some marketing on a local basis. One of the major problems is that we have many small producers selling to a few large wholesalers. A small surplus of products can result in a large slump in prices on the local market. It is possible that dumped products may compete and produce a local lowering of the price of the product, particularly where the products which are imported are of a higher quality or greater variety than the ones which are produced here. Currently we also have rising costs because of high interest rates, government service costs, wage rises and other costs, and an inflated capital value of land, which poses a real problem for people living near cities. We also have the problem of the cost of tariffs due to the tariff protection of oils, machinery and fertilisers. The Government is kidding itself if it believes that it can solve the problems of producing an export efficient industry just by reorganising the marketing bodies. The Minister promises an effort to reverse the corruption of international markets as countries default on the General Agreement on Tariffs and Trade, but he does not say how this will be done. He talks about joint negotiations of marketing treaties with our Pacific neighbours, New Zealand for a start, through the closer economic relations scheme. I support that, but we must go a lot wider. It is very important that we should look at such innovative thoughts as tying the interest rates on overseas loans to commodity prices on world markets and try to institute that through all our systems. But the Minister does not address these views. I believe that we must get more and more behind getting higher value added products on to the market and exporting them. This can be done only through a sensible incentive program. I hope that the industry research and development legislation and the 150 per cent tax concessions will help in doing this and that people will look for sensible private sector solutions to complement the Minister. The DEPUTY PRESIDENT —Order! The honourable senator's time has expired. Question resolved in the affirmative. Senator COOK(Western Australia)(4.12) —I move: That the Senate take note of the paper. This is the first of a series of papers dealing with the International Labour Conference. It is important to note that Australia was a foundation member of the International Labour Organisation which is a branch of the United Nations devoted to labour studies. The ILO is a tripartite body which meets annually in Geneva and it begins its 1986 meeting next week. It is a body in which we have participated and by which we are well regarded as a country, although during the latter years of the Fraser Administration our standing in the ILO decreased because of activities by that Government on the industrial relations front in this country which contravened ILO conventions. However, this Government has adopted those ILO conventions that it is open to adopt and last November the Minister for Employment and Industrial Relations (Mr Willis) reported that convention 142 and convention 150-the first dealing with vocational guidance and the second with labour administration-had been adopted by Australia. These papers deal with two new conventions coming from the 1985 conference-convention 160 which concerns labour statistics, the method of collection, the formation of those statistics and what they cover; and convention 161 which deals with occupational health and safety. There are also recommendations in both those fields associated with those conventions. I wish to dwell on the one which the Minister has indicated he is prepared to adopt and ratify in Australia-that is, the convention on the collection of labour statistics. That convention tries to find a uniform international base for collection of statistics associated with employment, unemployment, underemployment, average earnings, hours of work, wage structure, distribution of income, labour costs, consumer price indices, household income and expenditure, occupational injuries and disputes. This would facilitate justifiable comparisons between countries. One would not be comparing statistics that are collected on differential bases and therefore are not quite accurate. This convention is desperately needed to bring greater sanity to the industrial relations debate. It is one of the provisions of the accord between the Australian Labor Party and the Australian Council of Trade Unions that we improve our statistics base so that we can address problems as they are instead of viewing them through rose tinted glasses and seeing them as various players in the industrial relations field would like them to be. We can now deal with reality, not illusion. The reason Australia can now move to ratify this convention is that we meet most of the standards and in the only two areas in which we do not meet them, we have steps in train to do so. The most important convention of the two is the one that concerns occupational injuries and diseases. As I said, there are steps in train to enable us to meet the standards of the convention on the statistics on labour costs. However, it is important to make the point that given the primacy of industrial relations and industrial disputes in the political debate in this country, there is nothing wrong with the provisions we have set aside ourselves as a nation for collecting statistics on industrial disputes. But we have absolutely no statistical base anywhere at all-nor have we ever had one-on the level of industrial accidents, injuries and disease. All the surveys that have ever been conducted show that losses to production in industry are between two and a half and three and a half times more as a result of injury, accident and disease than as a result of industrial disputes. It just turns out that industrial disputes seem more enticing as a political argument in public debate. Because that has been the case with conservative governments over the years, we have not attended to the need to get a statistical body of information together about accidents which are more damaging to our national output. This Government has moved in that direction with its occupational health and safety legislation; over time it will be able to meet the criteria set out in the proposed convention and it will be able to ratify the whole convention by adjusting its collection of statistics through the National Occupational Health and Safety Commission. When employers in this country bleat about the cost of workers' compensation claims, it should be remembered that they talk about reducing the cost of workers' compensation by reducing benefits, not by collecting the statistics to attack the problem and resolve the high human and financial cost to industry. The DEPUTY PRESIDENT —Order! The honourable senator's time has expired. Senator GILES(Western Australia)(4.17) —Among the documents in this particular group I wish to address those that deal with the collection of labour statistics-convention 160 and its accompanying recommendations, convention 170 of the International Labour Organisation. I was gratified to read in the accompanying statement by the Minister for Employment and Industrial Relations (Mr Willis) that the standards and goals set in Australia for collecting statistics in the area of labour are equal to or better than most of those embodied in the Convention and in the more detailed Recommendation and that where we currently do not fully meet the obligations of articles 11 and 14 we will certainly move to do so in the near future. The lack of comprehensive and reliable statistics of an international standard was brought home very closely to members of the Australian delegation which represented Australia at the United Nations Conference at the end of the Decade for Women in 1985. Strenuous efforts had been made by the United Nations to review and appraise the achievements of the United Nations Decade for Women. The information that had been finally collated was interesting and in some cases indicative, but in very many cases it was not particularly reliable. Of the 160-odd nations that are members of the United Nations, only about 108 were in a position to provide up to date statistics, not only in relation to employment matters, but also across a whole range of social and economic determinators. It was quite obvious, as we tried very hard to assess what had been achieved during the Decade for Women, that in many cases the data simply was not available. In the document that issued from that conference a number of references were made to the paucity and inadequacy of statistics. In paragraph 28 of `Forward looking strategies', the title of the document that was adopted by consensus at that conference, it says: According to ILO estimates and projections-- Not firm statistics, I point out-- women constitute 35 per cent of the world's labour force, and this figure is likely to increase steadily to the year 2000. Unless profound and extensive changes are made, the type of work available to the majority of women, as well as the rewards, will continue to be low. Women's employment is likely to be concentrated in areas requiring fewer skills and lower wages and minimum job security. While women's total input of labour in the formal and informal sector will surpass that of men by the year 2000, they will receive an unequal share of the world's assets and income. According to recent estimates, it seems that women have sole responsibility for the economic support of a large number of the world's children, approximately one third and higher in some countries, and the numbers seem to be rising. Out of the same conference came another reference to the lack of information about the work that women do and the value of that work. Paragraph 120 reads: The remunerated and, in particular, the unremunerated contributions of women to all aspects and sectors of development should be recognised, and appropriate efforts should be made to measure and reflect these contributions in national accounts and economic statistics. It is a source of considerable satisfaction to those of us who were on that delegation to note that the Australian Government has given instructions to the Australian Bureau of Statistics to include in a time series in 1988 a survey of domestic production in Australia and the value of that domestic production to the economy, thereby taking up the suggestion that contributions within households should be recognised within national accounting. Senator CROWLEY(South Australia)(4.21) —I rise to speak to the International Labour Conference papers too, although I must confess that a certain confusion about when papers are or are not coming on means that my preparation is less than comprehensive. I apologise to the Senate for that. I am very pleased to endorse strongly the remarks of my two colleagues Senator Cook and Senator Giles. I wish to pick up some of the points made by Senator Cook, in particular those concerning the lack of adequate statistics. Australia may have adequate statistics as compared to other countries, but I think that would mean that nowhere in the world are the statistics adequate, particularly when it comes to accident and injury and the problems of defining accident and injury, let alone the basic data collection concerning those matters. I think it is a matter of considerable pride that this Government has established the National Occupational Health and Safety Commission. A very great part of the central work of that Commission concerns the importance and adequacy of data collection. In fact, we received in our offices earlier this year a proposed outline of guidelines for the adequacy and standards of data collection in this whole area. I forget the exact title of that booklet, but I think it is put out by the National Occupational Health and Safety Commission. It goes to the very point that what we need at this stage is some guidelines as to what we mean by accident and injury and, further to that, how statistics relating to those definitions, once in place, can be collated and collected. It is certainly true that at the moment in Australia our statistics, albeit according to this report not unlike those collected in other countries, are worthy of the title `woeful'. The other important point highlighted by Senator Cook was the issue of how many working days are lost in this country due to accident and injury as compared to industrial disputes. In the late years of the Fraser Government Mr Macphee was on record as saying that the difference was a factor of four; that is, four times more days were lost due to accident and injury than were lost due to industrial disputes. That was in the heady days of very high industrial disputation under the previous Government. I hope that the number of days lost due to accident and injury has fallen as well as the number lost due to industrial disputes, but in fact that gap may be even wider if our accidents and injuries have maintained somewhat the same level as before, because the level of industrial disputation has fallen so dramatically under this Government. I refer honourable senators to the annual report of the Commissioner for Employees Compensation, yet another report which was tabled in this place but which, due to time constraints, was not spoken to. It is certainly one of the reports to which I had wanted to speak. On page 26 of that report, under the heading `Collection of compensation statistics', it is stated: Unfortunately, the statistics collected annually from departments and other bodies falling within the jurisdiction of the Act- that is, the Compensation (Commonwealth Government Employees) Act 1971- are not comprehensive. More detailed information is required to enable analysis of patterns of compensation expenditure. In coming months a statistical policy will be established that defines the statistics the Commissioner will collect and the purpose of these collections. This report, in this paragraph and others, goes to the very point raised by Senator Cook concerning the inadequacy of statistics and the importance and significance of our falling into line with the International Labour Organisation Convention so as to try to increase our statistics and data collection. One other matter that I point out concerning employees compensation relates to the dramatic increase in compensation payouts-from $21m to $156m between 1975 and 1985-as compared to a less than 100 per cent increase in the number of accidents. We do not have the statistics to enable us to understand why those figures are increasing so dramatically. We need them. I am delighted to endorse this report, which looks at Australia's place in the world on this very important issue. Question resolved in the affirmative. Senator VIGOR(South Australia)(4.26) —I move: That the Senate take note of the paper. The 1985 annual report of the Western Australian Local Government Grants Commission comes before us at a time when local government funding legislation is very much in the air. On 21 May the Leader of the Opposition in Western Australia, Mr Bill Hassell, received some publicity on this topic under the newspaper heading `Big rise in council rates predicted'. By the time the last edition of the West Australian had been printed, the story had worked its way from page one to page three. The point Mr Hassell was making was that Western Australian councils are in future to get a slightly smaller proportion of the national untied funds because that allocation is now moving to a per capita basis. The previous system disadvantaged South Australia and Victoria. The amount involved, while in the hundreds of thousands, is really nothing compared to the $2 1/2m which Western Australian councils lost last year because of the mini-Budget when the Liberals decided to assist the Hawke Government in pulling the plug on an election commitment. Honourable senators will recall that both Labor and Liberal policy in this area is that local government should receive 2 per cent of personal income tax collections by the Commonwealth Government. That was enshrined in the legislation until 28 May last year when the combination of Opposition and Government ranks saw it reduced to a 2 per cent increase in real terms. The difference turned out to be about $28m across the whole of Australia. The Lib-labs, that not so unusual combination of senators, sent a signal to the Self National inquiry into Local Government Finance that 2 per cent of personal income tax, or even some other proportion of a Commonwealth revenue or expenditure base, was politically impossible for the future. It was an unfortunate undermining of the work of the Inquiry, and was a view supported by all the local government associations and State Ministers for local government. I just wonder whether Mr Hassell was as strong a defender of local government last May as he paraded himself to be last month. If more Liberals had put the case for local government to their Federal parliamentarians in May 1985 the Western Australian Local Government Grants Commission, whose report we are discussing, would have had much more money to distribute. That in turn could have meant that over 100 extra people could be very gainfully employed in the areas of great need, because it would have been in these areas that the extra funds were distributed. There are some refreshing features in the eighth report of the Grants Commission. The State Government has increased local government representation on the Commission by substituting a nominee of the Country Urban Councils Association in place of a Treasury representative. An additional research position was created, taking the Commission's research and secretariat staff to four. This is indeed a modest overhead to ensure the fair distribution of funds and that contact is made directly with councils as the Local Government Grants Commission visits different parts of the State. In fact, the Commission has a four-year program for visiting all councils. It has also established a special hearing mechanism to give councils, which believe that their disabilities have not been properly recognised, an opportunity to make their case publicly. This is a very important part of the process. Quite often through this process it will turn out that councils get a better understanding of what information they need to provide to the Commission. Once councils understand roughly what goes into the calculations and how best they can put their submissions together, they will be happier with the processes and the outcomes. I notice also that the Western Australian Local Government Grants Commission refers to the need to improve the collection of financial and other statistics. It mentions that a standardised local government accounting system will improve the quality of information from 1985-86. That is an area in which Federal resources can be applied very effectively through both the Australian Bureau of Statistics and the Office of Local Government. As local government moves more and more into the human services area, it will be essential to get a quantitative idea of the needs. The DEPUTY PRESIDENT —Order! The honourable senator's time has expired. The time allotted for consideration of Government Papers has also expired. Motion (by Senator Reid for Senator Walters) agreed to: That so much of the Standing Orders be suspended as would prevent the Joint Select Committee on Video Material meeting during the sitting of the Senate on Wednesday, 4 June 1986. The DEPUTY PRESIDENT —The President has received a letter from the Leader of the Opposition, Senator Chaney, requesting changes in membership of the Standing Committee on Education and the Arts and the Standing Committee on Constitutional and Legal Affairs. Motion (by Senator Gietzelt)-by leave-agreed to: (1) That Senator Parer be discharged from further attendance on the Standing Committee on Education and the Arts and that Senator Newman, having been duly nominated in accordance with Standing Order 36aa, be appointed a member of the Committee. (2) That Senator Alston, having been duly nominated in accordance with Standing Order 36aa, be appointed a member of the Standing Committee on Constitutional and Legal Affairs. Consideration resumed from 2 June. FRINGE BENEFITS TAX ASSESSMENT BILL 1986 Clauses 25 to 29-by leave-taken together. Senator WALTERS(Tasmania)(4.35) —On 29 May when I was speaking in the second reading debate on the fringe benefits tax legislation, I said: Schools and colleges where teachers live in, housekeepers-- I was interrupted by Senator Chipp, who said: But they will not be now. Don't you know what the facts are? I ask Senator Vigor whether he is able to explain to me what his Leader meant by that statement. I presume he does not know. Perhaps Senator Chipp will come into the chamber and enlighten me as to what he was talking about. Perhaps Senator Chipp does not know either. Could the Minister for Community Services, (Senator Grimes) inform me whether it is a fact that teachers and housekeepers from schools and colleges who live in will be affected by this fringe benefits tax? Senator GRIMES(Tasmania-Minister for Community Services)(4.36) —I was just checking up on the honourable senator's second point. I am interested in the way she approached this matter. If teachers are provided with permanent subsidised housing, their employers are subject to the fringe benefits tax. Senator Walters —There is nothing there, apart from the fact that Senator Chipp told me that I didn't know what I was talking about. Senator GRIMES —I make the point that they are employers like anybody else in the community. I understand that the honourable senator can make a point with certain groups in the community. I hope that when she does she will try to justify their being treated differently from anybody else. Senator WALTERS(Tasmania)(4.37) —I think the Minister for Community Services (Senator Grimes) misunderstands me. I was just pointing out the people who would be affected. When I listed them Senator Chipp made that interjection. I wondered whether the Minister knew what the honourable senator was talking about because his Party does not seem to be able to enlighten me. It does not know what he was talking about. I was just wondering whether the Government knew. Senator Siddons —I suggest that you ask Senator Chipp outside the chamber. Senator WALTERS —If Senator Chipp is not prepared to come into this chamber, I have no intention of asking him outside. Senator BROWNHILL(New South Wales)(4.38) —Last night, I asked some questions of the Minister at the table at that stage regarding the revaluation of housing within a period shorter than 10 years. I do not think I need to repeat the questions. Senator GRIMES(Tasmania-Minister for Community Services)(4.38) —I understand that the honourable senator's question was: Why are the indexation arrangements for housing reviewed only every ten years? The proposal to index the market rental value of housing provided to employees is designed to make administration of this aspect of the fringe benefits tax easier for employers. As with the existing remote area housing provisions of the income tax law, it avoids the necessity of establishing a fresh market value every year. At the same time, it is necessary to bring the index value into line on a regular basis with the actual market rental value. These factors were balanced when determining the ten-year review period. I think that was the sum total of the honourable senator's question. Senator Brownhill —Actually there were about six questions. Another related to the way the distance was to be measured. Senator GRIMES —The honourable senator asked how distances were specified to determine an area as remote. The measurement is by the shortest practicable surface route, as explained on page 147 of the explanatory memorandum in relation to clause 140 (2). I do not think there is any need for me to read that out. Senator Brownhill —The other question was about employers who are forced by a union award to pay a fringe benefits tax. Senator GRIMES —I was not sure of the basis of the question that was obviously asked last night. The fact that they are acquired under an award does not mean that they are not benefits; they are still benefits and, therefore, they are still taxable under this legislation. Senator MACKLIN(Queensland)(4.41) —I wish to follow up that question. Senator Brownhill was probably referring to, say, the Rural Accommodation Act in New South Wales, which requires, particularly in the case of single people, that accommodation be provided free. In terms of some of the comments made by Senator Walsh yesterday with regard to the ability to cash out benefits, it would seem fairly obvious in those circumstances that cashing out is not an option. I ask the Minister whether the Government intends holding discussions with those States where those Acts or awards are in existence so that remedial action may be able to be taken as soon as possible. Senator GRIMES(Tasmania-Minister for Community Services)(4.42) —I think that is a sensible proposal. The award that has been struck now has been struck on the basis that there is no fringe benefits tax. Now that there is a fringe benefits tax it is a new ball game. Quite clearly, the employers, the employees' representatives and the people in the Department of the Treasury ought to sort out that situation because it is a whole new ball game. Senator BROWNHILL(New South Wales)(4.42) —My last question was about making tax deductible the fringe benefits tax. Senator GRIMES(Tasmania-Minister for Community Services)(4.43) —Making tax deductible the fringe benefits tax would effectively cut the tax by half. The non-deductibility of the fringe benefits tax is consistent both with non-deductibility of income tax and with the principle behind the fringe benefits tax of subjecting the benefits provided to employees to tax income tax which is payable on the salary and wage component of an employee's remuneration is not deductible. For income tax purposes, there is no reason that we can see why any different results should obtain for fringe benefits tax payable on the non-salary component. What we are trying to do is to introduce consistency in the treatment of income and non-income benefits of this type. Senator MESSNER(South Australia)(4.44) —Firstly, I ask why Senator Walsh is not in the chamber to carry on the debate in the areas we were discussing last night. It could be difficult for Senator Grimes to pick up the lines that we were following last night. Can Senator Grimes say when Senator Walsh will be coming into the chamber? On the question of the taxable value of housing fringe benefits, I want to inquire also about the announcement made today by Senator Walsh-this is one of the reasons why I had hoped that he would be in the chamber-during Question Time about the statement made by the Prime Minister (Mr Hawke) over the weekend. Senator Grimes will recall that the Prime Minister indicated to an audience in Canowindra in New South Wales over the weekend that he would have to investigate the fringe benefits tax as it applied to farmers. Senator Grimes —As it applied to the rental value of houses. He specifically said that. Senator MESSNER —As I understand the situation, the Prime Minister has now written to Senator Chipp on that matter and has indicated that no further action will be taken to change what was understood to be the situation until yesterday. I just wanted to have it confirmed that that is the correct interpretation, that there will be no further examination of the matter and that the Prime Minister has now acknowledged that these benefits are as was understood prior to the discussions over the weekend. Senator GRIMES(Tasmania-Minister for Community Services)(4.45) —The point made by Senator Walsh was that the Prime Minister (Mr Hawke) quite specifically referred to the rental value of houses. Senator Walsh actually read the whole letter at Question Time and obviously believed that that was sufficient. It obviously is not. I will get a copy of that letter and read it myself as soon as possible. Senator Walters —It was a bit vague towards the end. Senator GRIMES —I will get the letter within five minutes and read it again and I will then come back to the point asked by Senator Messner. I understand Opposition senators' deep concern that Senator Walsh is not in the chamber to joust with them. Senator Walsh is not in the chamber for very good reasons. I say that because that is the answer that we used to get when we were in opposition and we asked the same question of Senator Messner. Senator BROWNHILL(New South Wales)(4.46) —I was not here in those days and I wish to ask another question. Let me give a hypothetical example of an owner of a property who has a share farmer who is farming the land and who lives in a cottage or sometimes stays in a cottage on that farm. If that share farmer has an employee who also lives in the cottage, what are the implications for fringe benefits, implied or not implied, in rent forgone? Senator GRIMES(Tasmania-Minister for Community Services)(4.47) —If the person is an employee as defined in the legislation and he is getting a fringe benefit, a non-income benefit of that type, he is subject to the fringe benefits tax. Senator Brownhill —But the share farmer does not own the house and does not rent the house. The share farmer is getting it as a gift, if you like, and he is then letting his employee live in it. Senator GRIMES —I assume that the share farmer would be living in the house under an arrangement with the farmer. Someone down that line will have to pay the fringe benefits tax. Senator Brownhill —But the share farmer is not the employee. Senator GRIMES —But there is an employee. If the employee is receiving a non-income benefit from the share farmer I would assume that the share farmer would be liable for the tax. Senator Brownhill —But he really does not have a benefit to give because he does not own the house. Senator GRIMES —He has been provided with a benefit which he is providing to someone else. It seems to me that he is providing a benefit. Senator Walters —Can the Minister explain where that is in the Bill? Senator GRIMES —No, I cannot explain where that is in the Bill. I will find out for the honourable senator if she likes. We can indulge in that sort of tactic all afternoon too. Senator MESSNER(South Australia)(4.48) —I regard the crux of this debate at the point we have now reached as turning on the question of the statement of the Prime Minister (Mr Hawke). I do not think we can proceed beyond that point until we have the matter clarified. Senator Grimes —I will get a copy of the letter immediately. I am sorry that the honourable senator was not listening at Question Time. The TEMPORARY CHAIRMAN(Senator Townley) —As I see it, we have to discuss the clauses of the legislation as we see it in front of us now. It would help if honourable senators stuck to those clauses. Senator MESSNER —I am sorry to reiterate it, but this matter was a matter of great contention during the debate last night. The issue of the Prime Minister's statement is obviously critical to our understanding of this clause. Surely the Minister, as a member of the Government in this chamber, would want to have the matter cleared up and made absolutely crystal clear in Hansard so we know exactly where we are. It might appear as though I am being nasty about this, but we simply want to get the record straight so that we know where we are going. Senator GRIMES(Tasmania-Minister for Community Services)(4.50) —Not at all. I was determined that the record should be straight and Senator Walsh was determined that the record should be straight; that is why he read the whole letter from go to whoa into the Hansard today. I will read it out to honourable senators. The letter is addressed to Senator Chipp and says: At Canowindra on 31 May 1986 I received representations suggesting that the draft Fringe Benefits Tax legislation as it applies to rental accommodation for farm employees would impact heavily on rural producers. In response to these claims I undertook to secure an assessment of the likely impact of this aspect of the tax. Advice received today confirms that account has been taken in the draft legislation of important concerns of rural producers. The review now underway is considering whether there is any valid basis for further flexibility in the manner in which the proposed tax is to be administered. There is no question of the Government moving to defer adoption of the draft legislation now before the Senate. The letter is signed by the Prime Minister (Mr Hawke). What that means is that the Government intends to continue with the legislation as it is. Of course, there is a review. We do not put down pieces of legislation as though they are etched in stone and will never be altered. If there were any untoward effects we would take that into account. The problem with this whole area of fringe benefit tax on farm employers can be best seen by some of the nonsense that has been written and the inflammatory material that has been distributed. I noticed that the New South Wales Livestock and Grain Producers Association put out a statement saying that there are 56,770 farms with an average of one employee. That means there is a whole swag of them with half an employee, a third of an employee and a fifth of an employee because many farms have two, three, four and five employees. If a statement is started off with mathematical nonsenses like that in it, it is no wonder that the further down one goes in the statement the sillier it gets. Senator MESSNER(South Australia)(4.52) —I thank the Minister for Community Services for reading that letter into the Hansard. I ask: Will this review take very long? Is it anticipated that it will be available in the next day, week, fortnight, year of whatever? We would like to know the point which the review has reached. I must say in passing that the letter was dated 31 May, last Saturday, which is the day in which the statement was made at Canowindra. Senator GRIMES(Tasmania-Minister for Community Services)(4.53) —I think the best thing to do is to table the letter. I did not say the letter was written on 31 May; I said that the letter was addressed to Senator Chipp and says: At Canowindra on 31 May 1986 I received representations- That is the sort of thing that makes me reasonably suspicious that there is a lot of nit-picking and filibustering going on in this chamber. But pardon me, that is just my sensitivity; I have been around here too long, perhaps far too long. Senator Newman —You're super-sensitive. Senator GRIMES —No, I am not super-sensitive. What I said and what I thought was pretty clear and what the Prime Minister (Mr Hawke) said is that of course we will review the application of this taxation. He did not say and I am not saying that we have set up a committee of review which will report tomorrow, the next day or the day after. Senator Crichton-Browne —There is nothing unique about the letter in respect of the legislation. It is the normal thing that could be said about any legislation at any time by any Prime Minister. Senator GRIMES —No. It is a specific letter written to Senator Chipp in relation to a specific request. The Prime Minister is saying that of course we will review the legislation, of course we will keep the legislation under review. We will not bring in legislation and say that it will stay as it is for ever and ever despite any untoward effects that we may not have predicted, Opposition senators may not have predicted or someone else may not have predicted. But the basis of the matter is as Senator Walsh, I and everyone else have pointed out, that income in cash and income in kind should be treated the same for taxation purposes, and that is what we are doing. Senator MESSNER(South Australia)(4.55) —I just make the observation that from all the answers that we had last night to questions it sounds as though our understanding and that of the farm bodies is substantially correct and that we cannot expect any relief for farmers. For that reason the Opposition will be opposing these clauses. Senator WALTERS(Tasmania)(4.56) —Can the Minister tell me how many principal farm houses will be affected, that is family partnerships, non-living partnerships and that sort of thing? Can he tell me the actual number that are involved? I am sure the Government has done its homework on this matter and it would help me to assess the figures that I have in this regard. Senator Grimes —No, I cannot give the honourable senator an exact figure, and I doubt that anyone else can at the moment. Senator WALTERS —Figures are available. I was wondering whether the Minister could find out from sources just what the situation is. I am quite sure that the Government must have done some work as to how the legislation will affect the rural community. Senator Grimes —I am sorry, I just have not got them here at the moment. Senator NEWMAN(Tasmania)(4.57) —I ask the Minister for Community Services (Senator Grimes) whether he has done any calculations on what this tax will do to the housing scene in Tasmania where people such as teachers, policemen, health workers, national park rangers and hydro-employees are in government housing. As Senator Grimes will be aware, the State's income is seriously under threat. Can he tell us whether the Commonwealth Government will be taking this into account when the funding for the State goes ahead later on, or will the State Government be required to reduce services in the areas of health, education and welfare, et cetera? Senator GRIMES(Tasmania-Minister for Community Services)(4.58) —Obviously there will be costs to the State Government and some State authorities. No one has ever hidden that. There will be certain concessions for those who live in the tax zone on the west coast. The question of how much, if at all, the Commonwealth will compensate the State depends on Commonwealth-State negotiations, Premiers Conferences, Loan Councils and things like that. That is something for the future. We see no reason why that group of people, or that particular State, as much as I love it, should be separated for any other reason. If Senator Newman is saying that we are being unkind to Tasmania by introducing a tax of this kind, I point out that we are treating Tasmania like we are treating every other State. Senator NEWMAN(Tasmania)(4.59) —I think I asked at the beginning of my question whether the calculation had been made as to what this would mean to Tasmania. Would that amount be reimbursed not only for Tasmania but also for the other States? In view of the fact that Tasmania stands to lose heavily in other areas of Commonwealth funding, this matter is critical to Tasmania, more critical perhaps than for the other States. Senator GRIMES(Tasmania-Minister for Community Services)(4.59) —I think the total figure for State governments in the payment of the fringe benefits tax was about 9 or 10 per cent. Tasmania will pay its percentage of that tax. I am sorry, I have not got the figure in front of me. I thought I had answered the question about whether it will receive compensation. Senator Newman —Ten per cent of what? Senator GRIMES —Ten per cent of the total fringe benefits tax. Senator Newman —Nine per cent would come from the States? Senator GRIMES —Yes, I think I answered the question on compensation. When we are dealing with Commonwealth-State financial agreements and with Commonwealth-State tax reimbursements all these things are taken into account and will be taken into account in future. Tasmania will make its case and that case will be argued out at the proper forums as it always has been in the past. I remind Senator Newman that Tasmania does particularly well on income tax reimbursements on a per capita basis compared to other States. I am not saying that it should not; I agree that it should, but I do not think we do our cause in Tasmania any good by continually trying to squeeze every ounce of political, financial and fiscal advantage out of this situation on occasions such as this. Tasmania will put its case and will have its case considered like every other State. Senator NEWMAN(Tasmania)(5.00) —The Minister for Community Services would be aware of the situation regarding non-government schools and of the speeches made last night by people in this place concerning the problems of housemasters, headmasters, chaplains, et cetera, in boarding school establishments. These schools are already in difficulties with Federal funding, and I am wondering whether the Commonwealth Government will see fit to make allowance for the costs that these schools will incur, which they are forced to incur, through providing housing for staff members supervising the children. Will these schools be reimbursed when the time comes for funding, or will the costs of the tax have to be passed through the school system to the families, many of whom have two parents working to give their children this non-government education now? Senator GRIMES(Tasmania-Minister for Community Services)(5.01) —I suppose that I can give a couple of answers to those questions. As I said to Senator Walters, the employers whose employees in non-government schools receive non-income benefits will be subject to the fringe benefits tax. That is the first point. The second point is that those two-income families and those one-income families who are paying fees to send their children to non-government schools, particularly the latter and particularly if they are well off, will benefit considerably from the tax cuts which will be introduced as a result of this re-arrangement of the taxation system. So they will be assisted that way. Senator Watson —They have to wait. Senator Newman —Is it not called fiscal drag? Senator GRIMES —Oh, for God's sake! We will wait and see whether, when the time comes for people to get their tax cuts, honourable senators can say that they have not received their tax cuts, in the way in which we used to be able to say that they did not get the previous Government's promised fistful of dollars after 1977. The third thing is that the funding of non-government schools is a matter for the Government and the Commonwealth Schools Commission and all factors are taken into account. If the non-government schools want to bring this up as a further factor, they can. Senator NEWMAN(Tasmania)(5.03) —Can the Minister tell us what the situation will be not only in Tasmania but elsewhere-I mention Tasmania particularly because it has such a strong reliance on tourism-of chains of motels, which are estimating that tariff rises of approximately 10 per cent will be the outcome of the increased costs to them of the fringe benefits tax where they are providing live-in accommodation for necessary members of their staffs, not accounting for extra rises in so-called productivity awards and that sort of thing? They are expecting that they will probably have a much greater rise, but they attribute approximately 10 per cent of the increase in tariffs to the fringe benefits tax. The Minister for Community Services would be aware, I am sure, that this is a time when Tasmania is trying to attract tourists from overseas and from within the country. What will this do to the industry which we are trying to encourage? Senator GRIMES(Tasmania-Minister for Community Services)(5.04) —Yes, I read the estimate of a 10 per cent increase in tariffs which was put in the local Press in Tasmania. I asked a well known Tasmanian motel chain owner about that and he chortled; he laughed about the possibility of a 10 per cent increase. Senator Newman —Do you mean to say that Flag Inns are not telling the truth on this? Senator GRIMES —I think that it is very likely that they are handling the truth carelessly, yes, as people do when they are lobbyists. When lobbyists get up in this place they usually declare their interest, I might add. The other thing is that over the Tasman there is a country which is far more reliant on tourism that Tasmania is, which is far more efficient at tourism that Tasmania is, and which introduced a fringe benefits tax of this type. The world has not collapsed over there at all, nor is it likely to. Senator NEWMAN(Tasmania)(5.05) —In view of the fact that the Minister challenged me, I declare that I have an interest in the industry. It is an involvement in a family business which is in the industry. People such as us, who have a large family involvement, perhaps will not feel quite the pinch that some of these firms will who have to employ a lot of managers and assistant managers to make their industry run. Senator CRICHTON-BROWNE(Western Australia)(5.05) —I do not have to declare an interest; it was one of my poorer commercial judgments. I sold my farm. We had some discussion last night with Senator Walsh, and at the conclusion of the discussion I was no clearer than I was at the outset. Can the Minister make it clear to me what the position is with respect to a farm where the employee is a son who lives with the parents who own the farm? Is the farm proprietor, to wit, the father, required to pay fringe benefits tax to the value, so described, of the board and lodgings? Senator GRIMES(Tasmania-Minister for Community Services)(5.06) —In the circumstances where he lives in the home because of the family relationship-and he has probably lived there since he was three of four years of age-he is not liable for such a tax. Senator CRICHTON-BROWNE(Western Australia)(5.06) —That is the point with which I was having difficulty last night. I do not know that the Fringe Benefits Tax Assessment Bill 1986 in any way differentiates between a family relationship and a commercial relationship. I am interested in finding such a clause. Do I take it that a distinction might be made if a deduction is allowable by the father-of course, in this case the owner-of the amount of board and lodging, and that the son comes within the definition of clause 35 in the terms of industrial instrument being the board and lodging that he is provided with? I do not find the distinction easy to draw at law and particularly within this Bill. Senator GRIMES(Tasmania-Minister for Community Services)(5.07) —The fringe benefits tax is paid when the fringe benefit-in this case the housing-is provided in respect of employment of the person. In this case it is in respect to his family relationship. He lives in the house and, because of his family relationship, has always done so. That is not provided in respect of the employment. Senator MESSNER(South Australia)(5.08) —This takes us back to the argument we had last night. It is a very difficult question which was not answered by the Minister for Finance (Senator Walsh) last night. I hear what the Minister for Community Services said about the relationship between an employer and an employee and so on, but clause 148 states: A reference in this Act to the provision of a benefit to a person in respect of the employment of an employee is a reference to the provision of such a benefit- Then there is a string of exceptions. Exception (f) states: whether or not the benefit is provided or used, or required to be provided or used, in connection with that employment; Exception (a) states: whether or not the benefit is also provided in respect of, by reason of, by virtue of, or for or in relation directly or indirectly to, any other matter or thing; In other words, it seems that the law is so drawn as to override the point that the Minister is making about the establishment of a relationship between employer and employee. It is clause 148 which is the crux of our problem. I cannot see how the Minister can offer us such solace as he is trying to do by saying that it does not cover the situation which has been outlined. Senator GRIMES(Tasmania-Minister for Community Services)(5.09) —Clause 148 (1) reads: A reference in this Act to the provision of a benefit to a person in respect of the employment of an employee . . . That is the base reference point. That has to be established. It cannot be watered down by the rest of the paragraphs. If he is in that house, not because he is an employee but because he is a member of the household, he clearly is not covered by that clause. Senator Messner —But it says `whether or not' in relation to any other matter or thing. It appears to go running over the top of it. Senator GRIMES —What does the honourable senator mean by `whether or not'? `Whether or not' refers to paragraph (a). That does not water down the first part. Senator Messner —It applies to other circumstances as well. We can go through and define it closely. But the point is that there is an overriding provision in the Bill. Senator GRIMES —The paragraph states `whether or not the benefit is also provided in respect of' something else. We have to pass the base condition at the start of the clause, that a benefit is provided in respect of the employment of an employee. In this case it is clear that the bedroom that a kid has lived in for 20 years is not suddenly provided on the basis that he is an employee on the farm. It is provided because he is the son of the farmer. Senator MESSNER(South Australia)(5.12) —The point is that the tax is payable where there is the connection between employment and the employee. Fair enough, one might say that that direct condition does not apply in respect of housing which is provided to the son. But there is a relationship of employment between the employer and the employee. So that condition is satisfied. However, the next paragraph goes on to say whether or not in relation to any other thing. In other words, any other factor is disregarded. So the fact that he has occupied that room as a member of the family for 20 years or whatever does not seem to have any bearing on the matter because the Commissioner of Taxation can determine that the relationship between the employer and the employee is the determining one and that tax will be payable as a result. That is the crux of the point that we are getting at. Senator GRIMES(Tasmania-Minister for Community Services)(5.13) —This is the difficulty of dealing with legislation like this. I do not understand Senator Messner's interpretation of this legislation. From what I read in Hansard, I believe that last night Senator Walsh did not understand that interpretation either. However, if it is to make it perfectly clear-- Senator Walters —You are telling me he didn't. Senator GRIMES —He certainly does not understand what honourable senators opposite are going on about. I have seen this happen for 12 years when legislation has been brought into this place. It is very easy to pick up clauses and carry on in this way. Senator Walters —Why don't you clarify it? Senator GRIMES —Well, I am clarifying it right now. If this is what the Opposition needs-- Senator Walters —Amend it. Senator GRIMES —No, we do not need to amend it. The Commissioner of Taxation will certainly be putting down his clarifying ruling in this area, confirming what Senator Walsh and I have said and what I believe any reasonable person who reads that clause would believe. If the clause is to be interpreted in the way that honourable senators opposite selectively choose to interpret it, there is no reason for the clause to be in the legislation at all. Senator MESSNER(South Australia)(5.14) —Now we are getting down to the nitty-gritty. The fact is that the Minister resorts to name calling and carrying on in these circumstances without addressing the issue. The Minister now says that that clause will not override other clauses. If that is so I ask him, please, to tell me why that clause is in the Bill. What is the intention of the various sub-clauses of clause 148 if it is not to override the circumstances that we have been talking about? Senator GRIMES(Tasmania-Minister for Community Services)(5.15) —Clause 148 talks about the provision of benefits. The following very firm statement is made in the first two lines of the clause: A reference to this Act to the provision of a benefit to a person in respect of the employment of an employee . . . That is the absolute base; that is the first hurdle that one has to cross. Clearly a son living in a farmhouse that he has lived in all his life does not go anywhere near crossing that hurdle. Senator MESSNER(South Australia)(5.16) —With respect, it looks as though we have to go right through the whole thing again. The question of the current employer and the relationship with an employee is defined in clause 136. The clause defines the terms `current employer' and `current employee'. It refers to the Income Tax Assessment Act, the way in which a person gets a benefit and the way in which that benefit is taxed. The liability for tax is established by tracing through these provisions. Clause 148 does not in itself provide for the payment of the tax. It appears merely to define an employer and employee relationship. It then broadens that definition so that, in effect, the Commissioner is given an overriding power by determining the benefit in such a way as he can disregard or, in other circumstances apply, the factors relating to that relationship of employer and employee. This seems to me to be perfectly clear. I just cannot understand why the Minister cannot see that that is broadening the whole interpretation of that provision. Senator GRIMES(Tasmania-Minister for Community Services)(5.17) —If honourable senators opposite read the legislation, they will see that the aim of that provision, as is pointed out on page 151 of the explanatory notes, is not to broaden the scope. It is to ensure that it is not narrowed. The key words are still those in the first part of clause 148 (1). I do not know that I can add any more than Senator Walsh was able to say by way of explanation last night in an hour's debate in this place. I think it is interesting that honourable members opposite are getting down to bits and pieces of this type. It is just beyond our comprehension-apparently it is beyond the comprehension of everyone except for a few people sitting in the chamber at the moment-what the problem is. Senator MESSNER(South Australia)(5.18) —I have to take exception to that remark because I am in receipt of a letter from the Law Council of Australia that makes that very point. It seems to me that it is a point that ought to be answered. If the Minister is giving us an undertaking that he will examine the matter further, take into account the feelings that we have demonstrated during the debate, and either confirm or deny in writing the Government's intentions at some later stage, we will sit down and wait for that response. However, the point is that this matter has been raised by people who interpret these things on a day to day basis. I cannot understand-it appears quite clear to me-why the Government cannot see that in fact this provision will have unintended effects. Senator BROWNHILL(New South Wales)(5.19) —I just want to make one point. Numerous accountants have rung me up and made the same point about the wording `in respect of'. They say that the wording is very poor but I will not elaborate on that. They suggest that the wording should be changed to read `in relation to secure or maintain the employment of an employee'. They say that this would get over the problem that I think is concerning most of us. If this is not done, it becomes difficult to determine the interpretation that should be used in respect of children who becomes employees. The present wording leads to all sorts of inconsistencies. The following questions are examples of this: Did you give the use of the car to your son because he was your son or because he was your employee; did you give the use of the house to your son because he was your son or because he was your employee? Senator GRIMES(Tasmania-Minister for Community Services)(5.20) —I make the point that we are not talking about that at the moment. We are talking about the son who lives in the family house. Senator Brownhill —`In respect of'. Senator GRIMES —The honourable senator can broaden it all he likes. But we are talking about a specific case brought up here by Senator Crichton-Browne. We are talking about a young person living in the family house with his family. I am the last one in this place to say that the wording of legislation is always perfect. I am the last one to say that legislation does not have some untoward effect. I have seen enough of that in 12 years in this place. Senator Walsh last night and I today, on behalf of the Government, have asserted what the Australian Taxation Office, the Treasury and the Government believe is the proper interpretation of this legislation. There is, therefore, plenty of evidence in our statements in this place last night and today as to what we believe and what are our intentions. I have said that the Commissioner of Taxation intends it that way and I assert that on his behalf at the moment. If any difficulty or problems arise out of any of this legislation, it will be continuously reviewed. If the legislation has untoward effects, they will be corrected as they have always been in the past. Untoward effects of the type which would penalise individuals are always corrected very quickly. It is the fixing of untoward effects which allow people to evade and avoid taxes which have been delayed in this country, as we know. Perhaps this is a very good argument for something I have asserted for a long time; that at the start of every piece of legislation in this country there ought to be a clear and detailed statement of intent by the Parliament, as is done in the United States of America and other countries, so that when the legislation is interpreted later and people find areas of difficulty such as this, people can refer to that statement of intent. Unfortunately, we do not do that. I hope that we will do it at some time in the future. Senator CRICHTON-BROWNE(Western Australia)(5.22) —I understand what the Minister for Community Services (Senator Grimes) is saying, but having heard that and having read page 151 of the explanatory memorandum which gives an explanation of the intention of the clause, I would read it differently. The explanatory memorandum states that it is not intended to be narrowed in respect of the following matters. That point was raised by Senator Messner. Senator Grimes —He was saying that it should be broadened. Senator CRICHTON-BROWNE —It says that it cannot be narrowed for the following reasons. I do not think I can add much more to the debate on that. I ask one question in respect of the same matter. In the event that a son is living with his parents and the parents deduct from the income of the farm the son's salary plus the cost of board and accommodation, because it comes within the terms of the instrument as defined in the Bill, does that mean that the fringe benefits tax will apply to the employer? Senator GRIMES(Tasmania-Minister for Community Services)(5.23) —If people want to treat it in such a businesslike way and want to go to that extent, of course that puts it into a different ball game, but I think it is very unlikely that they would. I will say what my advisor would not say: They would be silly to do so. Senator BJELKE-PETERSEN(Queensland)(5.23) —My question does not concern the matter of people on properties but it concerns the harmful effects of the tax on the accommodation industry. I do not know whether this is the right place to make an inquiry about this. Senator Grimes —Have a go. Senator BJELKE-PETERSEN —I have received a long telex from the Chairman of the Mackay Holiday Regional Council, who is concerned about the harmful effects of the tax on the accommodation industry where people have to live in to look after accommodation such as motels, caravan parks or cruise vessels. The gentleman who sent me the telex, Mr Trevor Atherton, said that the fringe benefits tax, calculated at 46c in the dollar, could amount to as much as $1,656 weekly, so employees in holiday flats and caravan parks will have problems. The people in the accommodation industry maintain that the effect of this extra tax will have to be passed on to their guests or they will have to reduce the standard of service. They feel, and I agree with them, that the accommodation industry seems to be a special case. Everybody knows about the hospitality industry, but they have asked me to raise with the Government the concerns of the accommodation industry. Senator GRIMES(Tasmania-Minister for Community Services)(5.25) —This matter has been raised before. The situation is that if employees are being provided with a permanent home in a caravan park or motel as part of their salary, they will be liable for the fringe benefits tax. The difference with cruise vessels, I think, is that the people will be living away from home. That is a living away from home situation and I suspect that they would not be liable for the tax. Of course, that non-cash income will now become taxable and that will mean that there will be small extra costs in the running of a business. When one thinks of the size of a motel and the number of rooms in it, I do not believe that the cost of the one place that is usually provided would lead to the 10 per cent increase in costs which Senator Newman has mentioned it would be likely to be. Senator Newman —It is not just one place. You are completely in ignorance. Senator GRIMES —I would not compete with Senator Newman for ignorance any time. Our assertion is that the increase will not be to the extent people think it will be. There is another way around it; they could charge rental and pay an allowance, which is what people should have been doing in the first place. Senator WALTERS(Tasmania)(5.27) —The Minister for Community Services (Senator Grimes) was unable to give me an indication of how many principal farm houses will be affected by the fringe benefits tax. No doubt he could give me an indication-I am sure the figures are available-of how many non-family partnerships there are in the agriculture industry in Australia and how many family companies there are in the rural industry. I wonder whether he could give me those figures. Senator GRIMES(Tasmania-Minister for Community Services)(5.27) —As Senator Walters wants those figures, we can get them from the Australian Taxation Office. I am sorry that we do not have here a commodious file with all those figures in it, but I dare say those figures are available from the taxation statistics. I will see how quickly we can get them. Senator Walters —Would they be available after dinner? Senator GRIMES —I doubt it. Senator Walters —It is only a matter of a phone call. Senator GRIMES —It is not a matter of a phone call; it is a matter of going in and finding out detailed taxation statistics. I do not think it is fair to complain, on the second day of the debate on a piece of legislation which people have known has been coming up since last year, that we do not have a statistic of that type here with us. I will do my best, but there is a limit to the extent that Senator Walters can expect people to go diving around for statistics such as that which, if the past record has anything to do with it, Senator Walters probably will not use anyhow. Senator MACKLIN(Queensland)(5.28) —The matter I raise follows from the question asked by Senator Bjelke-Petersen with regard to the telex. The figure provided in the telex, in relation to a person who has accommodation in a hotel or motel, was calculated on the basis of the rental of a room in that hotel or motel. I understand the Minister for Community Services (Senator Grimes) to have said in response to that question that the tax will be calculated on that basis. It is my understanding that that is not the case and the tax will be calculated on the market value of the permanent accommodation. Senator GRIMES(Tasmania-Minister for Community Services)(5.29) —Senator Bjelke-Petersen did not quote that figure from the telex at all. I do not condemn her for that; she just gave me a general view of what was in the telex. If the telex suggests that the rental value will be calculated on the casual rent payable per night for a room in a hotel or motel, that is quite wrong. In fact, it is calculated on the market value of rental accommodation in that area. If that is the basis for the calculation made in Tasmania, that explains very well the 10 per cent increase referred to by Senator Newman. Senator NEWMAN(Tasmania)(5.30) —First, to deal with the final comment of the Minister for Community Services, it was not just Tasmania; it was Australia-wide. It was Flag Inns. Senator Grimes —If the basis is the rental being calculated on the cost of a motel unit, that is wrong. Senator NEWMAN —I cannot comment on that. But it had nothing to do with Tasmania. I want to raise now the question of organisations such as the Youth Hostels Association and the National Trust, which are not profit-making organisations. By the very nature of their work they require people to live on the premises as either wardens or caretakers. I am sure that the Government will have had representations from such bodies. I know that the Commissioner of Taxation was dead against their getting any assistance in this matter. Has the Government given it further consideration? Is the Government prepared either to exempt them from the fringe benefits tax on the basis that they are usually already tax free organisations in some form or another or, alternatively, to reimburse them by way of grants? Senator GRIMES(Tasmania-Minister for Community Services)(5.31) —The situation is that people in those circumstances are still getting a benefit, no matter who is giving it. To exclude them, one would need more compelling reasons than Senator Newman has given. It is my experience-I am not saying it is universal-that, in the case of the National Trust, although the buildings may be valuable, considerable and even at times extensive, the accommodation provided for the warden, the caretaker or whoever is fortunate enough to get that accommodation is considerably smaller. The calculation in these circumstances, as is the case in regard to motels, would not concern the rental value of the whole place-a place such as Entally House. It would concern the rental value of the few rooms in which the people live. In the case of youth hostels, they frequently have very sparse accommodation. In fact, in the couple of youth hostels that I know of, the people who look after them are not provided with accommodation; they live nearby in their own homes. The alternative for the organisations is to charge rent or to pay people an allowance for the accommodation that is provided. I am not sure what is the tax status of the National Trust, but it is probably getting some benefit in that regard. I think it is a tax exempt body, so it is probably getting a benefit in that way. I think it is unreasonable to single out the National Trust, of all organisations, as being an organisation which should be excluded. I think Senator Walsh answered that question last night. The Commissioner of Taxation and the Government do not intend, on the evidence given to us, to make the exemption that Senator Newman seeks. Senator CRICHTON-BROWNE(Western Australia)(5.33) —Did Senator Grimes say at the outset of his response to that question that the criterion for the fringe benefits tax in such circumstances is if there is a benefit to be received by somebody? As I recall, the legislation provides an exemption for certain aged people's homes where 24-hour service is required because of the fragility of the occupants or the mental and physical nature of the occupants, yet a benefit will accrue, presumably, to those who are undertaking that care. The same thing may well be said in respect of youth hostels, boarding schools and all sorts of other places. I wonder what is the distinction and criterion in such circumstances. That is the basis on which I read the legislation. I am sorry if I am wrong. Senator GRIMES(Tasmania-Minister for Community Services)(5.34) —There is a distinction. Clause 58 refers to exemptions where an employee is employed in duties consisting of caring for disadvantaged persons, disabled people or aged people of that type. I suggest that there is a distinction between someone who is living in and looking after people of that type and someone who is getting free accommodation as a side effect of living in a National Trust place or a motel on the basis of looking after it. Senator Crichton-Browne —What about a youth hostel? Senator GRIMES —Most people who stay in youth hostels are not disadvantaged people. Senator Newman —What about an orphanage? We could go on and on. Senator GRIMES —Orphanages are excluded. Senator Crichton-Browne —Senator Grimes, did you say that orphanages are excluded? Senator GRIMES —People looking after disadvantaged people in those circumstances are excluded. Senator Crichton-Browne —So it is not the frail and aged or those-- Senator GRIMES —It is the disadvantaged. Question put: That clauses 25 to 29 stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 36 Noes . . . . . . . . . . . 29 —— Majority . . . . . . . . . 7 —— Aulich, T. McIntosh, G. D. Black, J. R. McKiernan, J. P. Bolkus, N. Macklin, M. J. Button, J. N. Maguire, G. R. Chipp, D. L. Mason, C. V. J. Coates, J. Morris, J. Cook, P. F. S. Ray, RobertCooney, B. Reynolds, M. Crowley, R. A. Richardson, G. F. Devlin, R. Robertson, E. A. (Teller)Elstob, R. C. Ryan, S. M. Evans, Gareth Sanders, N. K. Foreman, D. J. Sibraa, K. W. Gietzelt, A. T. Siddons, J. R. Giles, P. J. Tate, M. C. Grimes, D. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. Zakharov, A. O. Alston, R. K. R. Lewis, A. W. R. Archer, B. R. MacGibbon, D. J. Baume, Peter Messner, A. J. Bjelke-Petersen, F. I. Newman, J. M. Boswell, R. L. D. Parer, W. R. Brownhill, D. G. C. Puplick, C. J. G. Carrick, Sir John Reid, M. E. (Teller)Chaney, F. M. Sheil, G. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Knowles, S. C. Coleman, R. N. Kilgariff, B. F. Childs, B. K. Jessop, D. S. Colston, M. A. Short, J. R. McClelland, Douglas Baume, Michael Question so resolved in the affirmative. Clauses 30 to 39-by leave-taken together. Senator MESSNER(South Australia)(5.43) —The question that arises in relation to this part of the Bill is two-fold: First there is the question of airline transport fringe benefits. I noticed recently that the group representing former airline employees on this matter had put forward an alternative suggestion to the Government about the way in which the tax might be calculated in order to save the airlines a considerable amount of administrative and clerical detailed work which, of course, is quite costly. I believe that the suggestion was that there should be a flat amount of $300 per person affected by this tax, payable to the Government directly without any further substantiation of the detail behind it. I wonder whether the Government has considered that because it appears to me to be a step in the right direction in terms of a sensible compromise in that the airlines would be saved from very considerable expense which would only add to community costs associated with this matter. Can the Minister give us some idea about the Government's attitude to that? While I am on my feet I mention the second point that concerns me in this general area. It falls under the heading of `board' and it concerns the effects upon contractors who are operating in remote areas and working according to firm tender prices. They provide accommodation benefits for their employees which would be subject to the fringe benefit tax. In many cases there are no nearby towns in which those employees can live and in those circumstances the tax would be payable by the contractor who, of course, is unable to renegotiate the price of that contract with the principal. The point is that this is an extra cost which is not recoverable by the contractor, and in that sense it represents a retrospective impost upon him. As such it puts him in a weaker position in terms of his employment capacity. Has the Government considered providing a means by which people in those circumstances can be relieved of the very severe burden that will obviously fall upon them because it must be recognised that the costs of providing services of the kind of which we are speaking in the most remote areas of the country are very high indeed. Senator NEWMAN(Tasmania)(5.46) —I also wish to speak about airline transport fringe benefits. It might be quite interesting for the Senate if I quoted from part of a speech that was made in the House of Representatives on 8 May. The speaker was Mr Mountford, the honourable member for Banks, and he was referring to the airline industry's fringe benefits. He said: The previous speaker said that airline employees would be affected. That, of course, is not the case. When first announced, airline employees justifiably feared the effects on their very generous travel concessions. I received many representations from airline employees within my electorate. Following talks with the Australian Council of Trade Unions, and the airline industry unions, the airlines have agreed to pay the full cost of the tax without threatening the existing travel concessions. This is yet another example of consensus in action. I draw the attention of the Senate to that last line: `This is yet another example of consensus in action'. If ever there was a case of holding the gun at the employers head, those negotiations must have been it. Of course many employers will look at this legislation with a view to seeing which fringe benefits they can withdraw, but the airlines have been compelled to continue to provide these fringe benefits and therefore pay the cost of the tax. That does not mean that the cost to the airlines will go away. It means that although the employees will still get their concessions, the airlines will still pay and guess who will pay the bill? Ansett Airlines of Australia estimates that these agreed rates of fringe benefits tax on the travel concessions of its employees alone-just the travel concessions-will be in the region of $2m to $4m. How will the Government prevent this flowing on to the airline costs of the average Australian traveller? Senator GRIMES(Tasmania-Minister for Community Services)(5.48) —It is typical that we should have this emotive sort of language from Senator Newman who talked about the airlines being forced by the unions to provide these concessions. The fact of the matter is-if Senator Newman reads the airlines' statement she will see this-that the airlines and the unions have agreed that the concessions will apply. If the honourable senator thinks that the airline operators in this country, particularly Sir Peter Abeles, Rupert Murdoch and others, will be stood over by unions in this way, she is indulging in her typical nonsense. Why should the 96 per cent of people in this country who do not fly have to pay, through higher taxes, for the very generous concessions given to employees in the airline industry? Senator Watson —That is not the point she is making. Senator GRIMES —That is the point. Senator Newman can come here and make emotional statements just as much as she likes because that does not faze me and does not affect anyone on this side of the House. Senator Newman —You are not answering my question. Senator GRIMES —I am answering it quite clearly now. Ansett Airlines of Australia says that it will cost a couple of million dollars extra a year, and that $2m will, of course, have to go into the costs of the airline industry. What is Senator Newman suggesting-that we exclude employees of the airline industry, that we let them get those generous tax concessions and that the rest of us pay, especially those in this country who do not fly? Senator Newman —No. Senator GRIMES —What is the honourable senator suggesting? Senator Newman —Mr Chairman, I am suggesting that the person who gets the benefit should pay the tax. The CHAIRMAN —Order! Senator Grimes has the call. Senator GRIMES —I will let her suggest. Good, now we know what Senator Newman is suggesting. She is suggesting that all those airline employees who get these benefits pay tax on them. Let Senator Newman tell the airline employees that. Okay, that is her view; we have heard it. The Government decided that that was not the sensible thing to do, and it is not doing it. Senator Newman has made her case quite clearly. I hope that the next time she goes on Ansett, or Trans Australia Airlines, if she should ever happen to fly with that airline, she says to the air hostess and to the pilot up the front-after the flight has landed, of course-`I believe that you should have to pay extra tax yourself on all these concessions you get. You should have to pay for it; it should come out of your tax'. I suggest that she go up the front and tell them that. Senator Sheil —That is what you are saying. Senator GRIMES —No, that is what Senator Newman is saying. We are saying, and this legislation provides, that the employer should do it. Senator Newman has quite clearly said, and Hansard will record that she said it, that the employees should pay it-or she is suggesting that that extra non-cash benefit should not be taxed at all. We are speaking of some of the most highly paid people in the community. Senator Newman is entitled to those views, but I hope that she does not tell the pilot about it just after the flight has taken off when I am on the plane. Still, that is fair enough. The mechanism in these clauses for the taxation was arrived at after considerable discussion between the airlines and the Treasury. There is, as Senator Messner says, a small group of people not associated with those bigger airlines who have suggested alternative methods. I understand that the Treasurer (Mr Keating) and the Treasury have looked at those alternative methods and, after consideration, have rejected them. Senator Messner —Was there any reason? Senator GRIMES —If the honourable senator wants details I will have to get some, but those consultations were gone into. As for the matter of board in outback areas, I think the cost of board is $2 a meal and $1 for kids. It is a very concessional calculation made by the Australian Taxation Office and the Government. We do not believe that anyone will go broke over that. We do not believe that any tenders will collapse as a result of that provision in the legislation. Senator NEWMAN(Tasmania)(5.53) —The Minister for Community Services (Senator Grimes), as he very well knows, has misrepresented me. Senator Grimes —I have not. Wait until you read Hansard. Senator NEWMAN —Yes, the Minister has misrepresented me. The whole point of my rising to speak on this subject is my concern at the costs that are being passed on, first, to business and, secondly, to the community. Senator Grimes may not be concerned about inflation in this community, but we on this side of the House are. Senator Robert Ray —Why pay any tax then? That is a ridiculous argument. Senator NEWMAN —It is a very clear case of this Government not understanding how costs to business affect the country. It intends to put more and more bureaucratic and financial costs on to business so that we will go down in the mire, and its economic figures show it. Senator Grimes should know better than that. Senator GRIMES(Tasmania-Minister for Community Services)(5.54) —This is an absolutely perfect example of what we have been talking about in this legislation all along. To carry the logic to its full extent, as Senator Robert Ray interjected, the honourable senator has put a very good argument for there being no taxes at all. This legislation is designed to introduce equity into the tax system. We have a ludicrous situation-- Senator Newman —Equity? Senator GRIMES —Absolutely. We have in this community a situation in which a person paid in cash pays tax on it and a person paid in kind does not pay tax on it. It is very simple. Senator Newman —Yes, that is right. It should be taxed. Senator GRIMES —Senator Newman has said it again: It should be taxed in the hands of the people who get it. She has never advocated that in the past. Senator Newman —This is no way to do it. Senator GRIMES —Of course it is the way to do it. She advocates our having no fringe benefits tax at all. That is what she advocates. We have it clear from Senator Newman at least-I am very pleased about this-that she believes that all these fringe benefits should be taxed in the hands of the receiver. Senator Robert Ray —Like John Valder. Senator GRIMES —She agrees with Mr Valder and she agrees with all those other people. Okay; that is fine. Now we at least have her view on the record. It is not the view of the good lady who sits in front of her. It might be the view of Senator Watson-he is a reasonable person-but it is certainly not the view of Senator Sheil and those other people who have spoken in this debate. When honourable senators opposite get their act together and know what they all stand for, we will take some notice of them. Senator NEWMAN(Tasmania)(5.55) —I object to the fact that Senator Grimes continues to misrepresent me. He is concerned about emotional speeches in this chamber, but he is a past master of such speeches and usually just rubbishes people as he goes. He is really doing his swan song. We know that he already has his name down at the Commonwealth Employment Service for another job. I refer Senator Grimes, and anybody else who might care to see what my views are, to the speech that I made yesterday afternoon in respect of the introductory clauses of this Bill. Senator Macklin —I have not read it. Senator NEWMAN —I suggest that Senator Macklin has a good read of it. Senator MESSNER(South Australia)(5.56) —Just for the record, I make the point that I rather loosely referred to the question of board when directing a question to the Minister for Community Services (Senator Grimes). I was also talking about the living away from home allowance. Question put. That clauses 30 to 39 stand as printed. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 35 Noes . . . . . . . . . . . 28 —— Majority . . . . . . . . . 7 —— Aulich, T. McKiernan, J. P. Black, J. R. Macklin, M. J. Bolkus, N. Maguire, G. R. Button, J. N. Mason, C. V. J. Chipp, D. L. Morris, J. Coates, J. Ray, RobertCook, P. F. S. Reynolds, M. Cooney, B. Richardson, G. F. Crowley, R. A. Robertson, E. A. (Teller)Devlin, R. Ryan, S. M. Elstob, R. C. Sanders, N. K. Evans, Gareth Sibraa, K. W. Foreman, D. J. Siddons, J. R. Giles, P. J. Tate, M. C. Grimes, D. J. Vigor, D. B. Haines, J. Walsh, P. A. Jones, G. N. Zakharov, A. O. McIntosh, G. D. Alston, R. K. R. Knowles, S. C. Archer, B. R. Lewis, A. W. R. Baume, Peter MacGibbon, D. J. Bjelke-Petersen, F. I. Messner, A. J. Boswell, R. L. D. Newman, J. M. Brownhill, D. G. C. Parer, W. R. Carrick, Sir John Puplick, C. J. G. Chaney, F. M. Reid, M. E. Collard, S. J. Sheil, G. (Teller)Crichton-Browne, N. A. Teague, B. C. Durack, P. D. Townley, M. Guilfoyle, Dame Margaret Vanstone, A. E. Hamer, D. J. Walters, M. S. Hill, R. Watson, J. O. W. Coleman, R. N. Kilgariff, B. F. Childs, B. K. Jessop, D. S. Colston, M. A. Short, J. R. Gietzelt, A. T. Baume, MichaelMcClelland, Douglas Withers, R. G. Question so resolved in the affirmative. Clauses 40 to 46-by leave-taken together, and agreed to. Clause 47 (Exempt residual benefits). Senator PETER BAUME(New South Wales)(6.02) —Clause 47 defines certain exemptions. We are seeking some advice regarding the exemptions in relation to work-based child care. I remind the Committee that page 35 of the Government's statement entitled `Reform of the Australian Taxation System' states: However, the provision of in-house child care facilities for the dependants of employees will not be taxed. I have raised this matter with the Minister for Community Services (Senator Grimes) before. The Opposition seeks to know whether or not adequate provision is made for exempt benefits in relation to work-based child care. I will take the Minister through our concern. If one turns to clause 47 (2) (b), at the top of page 39 of the Bill, there are some words relating to the provision of child care in a child care facility if that facility is located on the premises of the employer. On page 41, there is an amendment which the Government put in in the House of Representatives, which I acknowledge has helped because I think it provides in a very appropriate way an exemption for certain other kinds of provision of child care. There is only one remaining problem. I will explain it to the Minister in this way: A company in central Sydney owns a large building. It cannot establish a child care facility on those premises and have it registered but it can do so 200 yards away. I know of a company that was faced with that possibility. Reading clause 47 (2) (b) on page 39, as it has been drafted, child care provided in that facility which may not be a subsidised facility but is otherwise a work-based child care centre may not be an exempt benefit. I ask the Minister to explain to us what happens to people who are attempting to provide work-based child care in accordance with the spirit of what the Government is seeking to exempt. If they have to provide that facility in premises adjacent to or slightly away from their premises in order to meet the State licensing requirements, where will they be left in relation to the benefit exemption and how does that fit in with the provision of the Bill? Senator GRIMES(Tasmania-Minister for Community Services)(6.05) —Those people are exempt. I think one can safely say that the case that the honourable senator is talking about is that of Esso Australia Ltd in Sydney, which wants to establish a child care centre on the Rocks. Whether it leases, rents or owns the premises in which it is providing that child care centre, those premises will be its premises; they will be part of its business, and will be exempt. I think that is clear from the legislation. I cannot read anything in the legislation that that is not clear. It is certainly the intent of the legislation. Senator PETER BAUME(New South Wales)(6.06) —I thank the Minister for Community Services (Senator Grimes). That answer is sufficient for me. We have circulated an amendment to that clause. I think the Minister's assurance meets our objections and I do not wish to proceed further with the amendment. Senator CRICHTON-BROWNE(Western Australia)(6.07) —I draw the attention of the Minister for Community Services, by way of observation rather than asking a question, to the distinction between the treatment of a mining company which chooses to fly its employees in and out of a site and a mining company which provides housing. I am obviously referring to mines which come under the remote area definition. It seems to me that the mining company that provides housing whether it is on-sold or not, notwithstanding the discount which some might describe as generous and others as modest, would be considerably disadvantaged compared with the company that flies its employees in and out. That company would receive the full tax deduction applying to the cost, whereas the company providing accommodation would ultimately be left with a residual amount of fringe benefits taxation. What I find most disturbing about the proposal is that more and more mining projects such as the Argyle diamond prospect in the Kimberleys of Western Australia-where there is no decentralisation, no mining town, no infrastructure and where there are no suitable roads and no desirable attractions for the area to be opened up generally-will fly their employees in, provide them with very sparse accommodation and fly them back out again. As I said, there will not be the infrastructure which can attract people, as is the case with Mount Newman, Dampier, Karratha, Paraburdoo and Pannawonica. One can name a whole range of mining towns which have been built around mineral deposits. It seems to me that as a result of the provisions of this legislation mining companies will be encouraged, because of the benefits so accruing, to provide simple accommodation on site and to fly employees in and out. In my view, such a situation would begin to debase the very character of society and very much destroys the incentive to have a decentralised community. Senator HARRADINE(Tasmania)(6.09) —I apologise to the Minister for Community Services (Senator Grimes) because I have just come back into the building and he may have dealt with the question I wish to raise. I know that the Minister, in another capacity, is very keen on ensuring the principle of home and community care. I imagine that if a company makes some arrangement with a community-based child care facility that would be regarded as some sort of fringe benefit for the employee concerned. Would that fringe benefit come within the exemption under the clause with which we are dealing? Senator GRIMES(Tasmania-Minister for Community Services)(6.10) —The amendment in the House of Representatives covered the case of community-based child care. Commercial child care does not apply and I think everyone knows that. But community-based child care is excluded. Where companies such as IBM have contributed to community-based child care and have places in those child care facilities, that fringe benefit is exempted in line with our policy of encouraging private companies to provide child care for their employees where it is necessary. Senator BROWNHILL(New South Wales)(6.11) —In clause 47 (4) the tea and coffee making facilities are exempt. Is the teamaker exempt as well? Senator GRIMES(Tasmania-Minister for Community Services)(6.11) —There is no fringe benefit for making tea. Does that answer the question? Senator HARRADINE(Tasmania)(6.12) —I am sorry if I am a bit obtuse but I did not quite understand what the Minister said. As I understand it, the Government's policy in respect of child care seeks to encourage the provision of facilities which would be available to the community as a whole including, for example, mothers with kids who want to do some shopping and have some day care facility available. A number of companies may wish in some way to contribute to that facility and, by their contributing to that facility for a certain number of persons to be cared for, it becomes a fringe benefit. Is that benefit exempt? Senator GRIMES(Tasmania-Minister for Community Services)(6.12) —I am sorry that I was not clear. It is exempt. It was particularly put into the legislation to cover those cases where we have joint projects between the Commonwealth and private companies-a development that we are trying to encourage. They are specifically exempted. On page 41 of the legislation sub-clause (8) of clause 47 states: Where- . . . . the employer of the employee, or an associate of the employer, made a contribution, under the scheme administered by the Commonwealth and known as the Children's Services Program, to obtain that priority of access; That sub-clause was put into the legislation by the House of Representatives. Senator HARRADINE(Tasmania)(6.13) —I apologise to the Minister for not being completely au fait but it is due to circumstances beyond my control. If an employer provides an employee with an amount of money or, alternatively, pays somebody else to do the child caring in the employee's home, would that be regarded as a fringe benefit? Let us take the latter example. If the employer paid somebody to look after the employee's kids in the home of the employee, would that be regarded as a fringe benefit and would that be exempt under this legislation? Senator GRIMES(Tasmania-Minister for Community Services)(6.14) —If the employer gives the employee an allowance for that purpose it is taxable. If the employer pays the expenses on a commercial basis it is taxable, in the hands of the employer, as a fringe benefit. I think that is the situation. In the first case it is the situation which applies now and, in the second case, it is the situation which applies from now. Senator Harradine —I point out an anomaly in that. I think it is in accordance with the Government's general policy of caring for people in their home environment. Perhaps that might be looked at by the Government at some stage. Senator GRIMES —I accept that. It also adds a problem that, if we go down the track of providing non-taxable benefits in that way, we go down the track of providing tax deductions, for instance, for commercial child care. That has not only philosophical problems for some of us but also very big budgetary problems-$500m to $600m worth of budgetary problems for whoever is in government. Clause agreed to. Clauses 48 to 57-by leave-taken together, and agreed to. Proposed new clause 57a (Provision of benefits to employees of public benevolent institutions to be exempt). Senator PETER BAUME(New South Wales)(6.16) —I move: (2) Page 46, after clause 57, insert the following new clause: `Provision of benefits to employees of public benevolent institutions to be exempt `57a. Where a public benevolent institution provides a benefit to an employee of the institution, the benefit is an exempt benefit.'. From the moment that the fringe benefits tax was announced it became clear that its effect would fall upon charities. I am using the word `charities' in the sense that most of us understand that word-the great institutions that care for other Australians. It is quite clear that they would be caught by this Bill, that the application of the fringe benefits tax would mean that they would be paying tax where they pay no tax now and that that tax would have to be paid from moneys that would otherwise go to doing the charitable work for which they are responsible. Honourable senators have raised this matter a number of times over the last few months. We raised this matter with Senator Walsh in his ministerial capacity and we received answers which indicated that he had no sympathy for and little understanding of the effect which this application of the fringe benefits tax would have upon the great charities of Australia. Senator Puplick —You didn't expect Senator Walsh to be sympathetic to charities, did you? Senator PETER BAUME —I did expect Senator Walsh to be sympathetic to charities and I was very disappointed with the answers we got when he sought to belittle charities and the work that they did and he gave no indication at all that he would move to ease this impost or to ease their load. The Opposition parties announced early, following party and shadow Cabinet consideration, that we would move to try to exempt charities from the effect of this impost. We issued Press releases at the time and we have issued some subsequently. I must say that the Australian Democrats have also had a concern about the effect of this tax on charities and I understand that they have negotiated with the Government on their own. We determined that we would move an appropriate amendment. We hoped that, when the Bill was finally drafted and introduced, the Government, notwithstanding Senator Walsh's macho rhetoric, would have actually inserted some exemption for charities, but there was none. As far as the Australian Labor Party and the Government were concerned, the charities were to be taxed for any fringe benefits that they offered. Clearly, some of those fringe benefits were absolutely unavoidable. Others may not have been but many of them were unavoidable. It seems to us that all that would happen was that the work of the great charities of Australia-the Sydney City Mission, the St Vincent de Paul Society, the Salvation Army-would be adversely affected, so the Opposition prepared an amendment. I wish to indicate that Senator Haines has pointed out to me, with accuracy, that my understanding of the word `charity' and the legal meaning of the word are quite different. Let me acknowledge that it has been possible, working with the Australian Democrats, to develop a form of words which talk about the provision of benefits to employees of public benevolent institutions. The words `public benevolent institutions' have their own meaning in law but they cover the great charities of Australia. If this amendment is picked up it will ensure that, where these public benevolent institutions provide a benefit to an employee, that benefit is exempt. Senator Teague —They are the first ones we want exempted. Senator PETER BAUME —They are the first group that we want to be exempt because all the money that they receive goes into their charitable work. We want to make sure that as much as possible is available and that they do not start paying tax where none was payable previously. The reason I have mentioned the co-operation of the Australian Democrats is that we both came up with the same amendment. Senator Haines —You pincher. Senator PETER BAUME —Come on now. It was agreed that we would acknowledge that there had been some co-operation in the preparation of this amendment. Some charities and bodies representing the welfare sector have taken a keen interest in what is going on. If we can get this amendment agreed to it will be a pleasure to be able to tell them that the combined numbers of 33 Opposition senators and seven Australian Democrats have been able to achieve what the Labor Government and, in particular, what Senator Walsh were quite unwilling to offer. Senator HAINES(South Australia)(6.21) —I would like to go into this particular amendment in a little more detail. As Senator Peter Baume mentioned, this has been a cause for concern for most of us ever since the fringe benefits tax legislation was brought down. Certainly at the Australian Council for Rehabilitation of Disabled conference in Brisbane last year I made comments then about the unworkability of the Government's proposal to tax fringe benefits provided by charities and then to try to make up for this by some sort of compensatory grant. It seemed to me that that was the most complex and cumbersome way that the Government could have gone about it. It seemed to us to be a much simpler method simply to exempt charitable organisations. We had a number of discussions with the Treasurer (Mr Keating) on this matter last year and again earlier this year. In discussions with Senator Peter Baume we settled on a definition of charitable organisations that appears with respect to section 23 (e) of the Income Tax Assessment Act. To the lay person reading section 23 (e) and seeing the mention of charities and charitable organisations it would appear as if that was a perfectly appropriate lynchpin on which to hang an amendment to exempt those particular charitable organisations from this fringe benefits tax. Unfortunately, as Senator Peter Baume said, we entirely overlooked the tortuous minds of some members of the legal profession and some of the issues that from time to time over the years they have picked up and classified as being related to charitable organisations. In fact, the word `charitable' has a technical legal meaning which is completely different from the meaning that most people in the general public and I suggest most honourable senators have. Various Privy Council decisions and other legal decisions have led to some fairly extraordinary cases being picked up as charitable organisations which we in this place would not wish to be classified as such. Indeed, the Statute of Elizabeth is taken in by the legal profession and hence by the courts as defining what the charitable institutions are. These include some fairly extraordinary ones. Senator Puplick —You do mean Elizabeth I? Senator HAINES —Indeed, I mean Elizabeth I. The objects enumerated in the preamble to the Statute of Elizabeth are as follows: The relief of aged, impotent and poor people; the maintenance of sick and maimed soldiers and mariners; schools of learning and free schools and scholars of universities; the repair of bridges, ports, havens, causeways, churches, sea banks and highways-- Senator Walters —Does that include the National Trust? Senator HAINES —I do not really think so in this case, unless they are going around improving havens, ports and bridges. It continues: the education and preferment of orphans . . . marriages of poor maids;-- Senator Peter Baume —This is charities, not public benevolent institutions. Senator HAINES —This is charities, not public benevolent institutions. Senator Puplick —You aren't going to declare an interest in this, are you? Senator HAINES —I do not need any help, Senator Puplick. It continues: supportation, aid, and help of young tradesmen, handicraftsmen, and persons decayed-- this may or may not apply to some people in this chamber or in another place-- the relief or redemption of prisoners or captives; the aid or ease of any poor inhabitants concerning payment of fifteens;-- whatever that may be-- setting out of soldiers, and other taxes. Indeed, what has occurred as a result of this is that everything from vegetarian societies to homes for lost dogs has been classified by the courts as a charitable organisation along with, of course, the things that we would more normally classify as charitable organisations such as the Royal Blind Society and so on. Included, I might add, in this list of extraordinary things which are qualified as charitable organisations by the courts has been the reduction of the national debt. I do not know exactly how the Government could use that to its own deficit benefit, but maybe it could well do so. Having been met with that extraordinary list of things that were likely to be suddenly exempt from fringe benefits tax if the original proposal classifying charitable organisations under section 23 (e) were taken up, we then went looking amongst the murky depths of legal history for something that defines public benevolent institutions. In fact, an organisation is legally defined as a public benevolent institution if it satisfies the following tests: its object is the relief of poverty, sickness, suffering, distress, misfortune, destitution or helplessness; it is carried on without purpose of private gain for particular persons; it is established for the benefit of a section or class of the public; and relief is available without discrimination to every member of that section of the public which the organisation aims to benefit. Quite clearly that definition of what is legally known as a public benevolent institution is the word that we, in this place, and most people in the community would regard as applying to what we would normally call a charitable organisation. So people who have been concerned, for example, that the Church of England has been exempt through the religious exemption, but the Brotherhood of St Laurence has not, will now be satisfied that picking up public benevolent institutions and exempting them will mean the Brotherhood of St Laurence, St Vincent de Paul, ACROD and the Blind Society of New South Wales and the Sydney City Mission provide a service. Senator Grimes —ACROD? Senator HAINES —It provides a service. It is a charitable organisation. I understand that the Australian Council of Social Service does not fall into this category because it is a service organisation umbrella, but I understand that ACROD, in fact, does. Senator Peter Baume —ACOSS is not sympathetic anyhow. Senator HAINES —No, that is true. However, one problem has been raised with the wording of the amendment. We support the principle of it, and I understand the Government will support the principle of it; indeed, it will support the amendment when we finally get it right. Senator Grimes —When we get to it. Senator HAINES —We are dealing with it now. It reads: Where a public benevolent institution provides a benefit to an employee of the institution, the benefit is an exempt benefit. There seems to be some concern that it is not made specific that the fringe benefit is supplied to the employee of the institution in respect of the employment of the employee by the employer, not with respect to the employee in some other area. I do not know how that can be sorted out. Perhaps the insertion of a few words would make it clear. Senator Peter Baume —Is there really a problem? Senator HAINES —It has been suggested by minds that are more legal and tortured even than mine that it would be possible for the benevolent institution to provide a benefit to an employee of the institution in some other means than as a result of the employment of the employee by that institution. It is a possibility. It is a concern that could well be raised. As I say, better minds than mine, including Senator Peter Baume's, I am sure, can answer that adequately or else we are simply going to have to clarify this by inserting a few other words. Senator GRIMES(Tasmania-Minister for Community Services)(6.29) —What Senator Haines has just said will happen as sure as night follows day. This amendment will make things clearer for St Vincent de Paul and all the great organisations in this country. As sure as eggs the money that is contributed by donors to organisations in this community will be used to provide, say, a car for private use for the manager of a sheltered workshop in this community. It will be done over and over again. We do not oppose the amendment because, firstly, we can count and, secondly, we have some concern for simplicity. In this case simplicity runs across equity and in a year or two we will be back amending the legislation again. Progress reported. Sitting suspended from 6.31 to 8 p.m. Debate resumed from 8 May, on motion by Senator Button: That the Bill be now read a second time. The DEPUTY PRESIDENT —Is it the wish of the Senate to have a cognate debate on the Industry Research and Development Bill 1986 and the Income Tax Assessment Amendment (Research and Development) Bill 1986? There being no objection, it is so ordered. Senator PUPLICK(New South Wales)(8.01) —The Senate is debating cognately the Industry Research and Development Bill 1986 and the Income Tax Assessment Amendment (Research and Development) Bill 1986. It is my pleasure to lead on behalf of the Opposition on these two pieces of legislation, and to indicate that the Opposition will be supporting both of these pieces of legislation, although we have a number of matters to raise by way of query with the Minister for Industry, Technology and Commerce (Senator Button). I indicate that we have had some discussion with the Australian Democrats and when we come to the Committee stage we are likely to be supporting some of the Democrat amendments which I understand have also been discussed with the Government. These two Bills are part of an overall package which may be considered to have been developed over the last few years in terms of providing a structure for financial support for research and development to take place within Australia. Apart from these two pieces of legislation which are before us, one needs to bear in mind that they are supported by a number of other initiatives including the successful development over the last couple of years of the management and investment companies system and the development of the second boards, whereby a number of companies, particularly those in the high tech and venture capital area, have been able to get themselves listed on Australian stock exchanges and to raise funds for research and development under that particular method. As I said, the two Bills before us, which are measures to support industrial research and development by the provision of direct government financial assistance, are assisted by the MICs and the second boards. It is very encouraging to note in the 1984-85 annual report of the Management and Investment Companies Licensing Board that the number of eligible business entities, as far as that operation is concerned, rose in recent years from one to 36. It should also be said that the scheme, which underlies the Income Tax Assessment Amendment (Research and Development) Bill, for the provision of a 150 per cent tax concession for eligible research and development work undertaken, was one which has bipartisan support. It was, in fact, provided as part of the policy of the Liberal and National parties going into the last election that we would give a 50 per cent tax incentive over and above eligible expenditure which is exactly the same as the Government's provision for the 150 per cent subsidy being provided here. It is also important, when we are looking at research and development in its overall sense, to understand that it cannot simply be provided by measures of financial assistance. There is a whole raft of areas, particularly those which come within the portfolio of the Minister for Industry, Technology and Commerce which also need to be borne in mind. I mention just a couple of these. The first is the development of an effective offsets policy. The Minister has been very diligent in attempting to develop a more comprehensive and intelligent approach to offsets policy, but there is still a degree of reluctance within the Australian Government to support Australian industry by a more positive buying Australian campaign. There is, for instance, a letter in the 30 May edition of Business Review Weekly from David Reid, headed `R and D misses out' which makes the point that Telecom Australia is purchasing about $1m worth of local area network equipment, but that it is purchasing it from overseas. There was an article in the journal Australian Society in October 1985 under the heading `Government won't buy Australian' in which it said that the Government, which is responsible for purchases of approximately 40 per cent of the material purchased within the information technology market nevertheless continues to pursue a policy of not positively buying Australian and making a contribution in that regard. For instance, we have a Bill on the Notice Paper, the Customs Tariff Amendment Bill. One of the things that that Bill attempts to do is to increase the tariff on the importation of optical fibres from the minimum 2 per cent which it stands at at the moment, up to a 20 per cent figure. We cannot see how, in terms of the development of an integrated approach to support Australian research and development, all of these policies are properly co-ordinated. One of the things which this legislation will do will be to go some way to redressing the imbalance of expenditure undertaken by the Labor Government-both this Government and the previous Labor Government-which has not been good news for science. I look, for instance, in the Budget papers. Going back to the 1981 Budget, if one looks at the Department of Science, at the Commonwealth Scientific and Industrial Research Organisation, or at the Antarctic Division-the three areas which I have extracted-one can see that in the period of Liberal administrations there were substantial increases in the budgetary allocations, and that in the period of Labor administrations there have been substantial real decreases. My colleague the shadow Minister for Science, Senator Archer, in terms of an analysis of the three years of funding provided to research and development in Australia by the Labor Party, has produced a balance sheet which shows the extent to which science and technology have not fared as well under this administration as might have otherwise been the case. I seek leave to incorporate in Hansard the figures and statements to which I have just referred. Leave granted. The documents read as follows- SENATOR BRIAN R. ARCHER SENATOR FOR TASMANIA A MAJOR STATEMENT FROM THE SHADOW MINISTER FOR SCIENCE LABOR'S THREE YEAR SCIENCE REPORT CARD-A FAILURE Shadow Minister for Science Shadow Special Minister of State Opposition Spokesman on Tasmanian Affairs The Federal Labor Government has been a disaster for the scientific development of Australia. Over the last three years, science has consistently been accorded an extremely low priority resulting in a crisis of confidence within the scientific community and an ever increasing drain of our best scientists and innovators to overseas commercial and research institutions. Clearly the Labor Government has failed to understand the link between scientific and technological advance and long-term economic development. The Labor Government's catalogue of anti-science decisions includes: Allowed Government funding of medical research to become the second lowest in the western world (after Italy) while hundreds of millions of dollars are wasted on the ALP's ideological binge-Medicare. As a result, Australia's immense technical talent in the area of bio-technology and the vast commercial potential offered in this area will be wasted. Broken its promise to increase expenditure on scientific research in Antarctica by 300 per cent in its first three years. Drastically reduced the funding of Australia's premier scientific and industrial organisation CSIRO despite promises to the contrary. Has pursued an incoherent policy towards the CSIRO often penalising those divisions of most benefit to the economy, e.g. the cuts to the Division of Tropical Crops and Pastures may cost Australia millions in lost export earnings. Has failed to provide any response to the ASTEC Inquiry into the future direction of the CSIRO, including the recommendations for greater flexibility in employment practices. Ditched the National Technology Strategy casting aside two and a half years of preparation and almost 250 submissions from industry, government and community groups. The strategy, which was to provide a detailed blueprint for government technology policy, now represents only a vague framework for policy. Refused a request from N.A.S.A. to provide night-time landing facilities for N.A.S.A.'s Kuiper Airborne Observatory which was to study Halley's Comet utilising Australia's technical and geographic advantage. As a result, Australia's credibility as the leading technologically developed nation in the southern hemisphere has been severely damaged and NASA has been forced to relocate its experiment to New Zealand. May prohibit Australian scientists, companies, and research institutions from participating in a range of commercial and technological opportunities offered by co-operation with the USA on research relating to the Strategic Defence Initiative. Presided over the disastrous failure of the `Sunrise Industries Scheme' ignoring the potential of applying new technologies to existing enterprises. On November 25 1985, the Secretary of the Department of Science admitted-`While sunrise industries had a gee-whizz appeal to a large number of people in the populace, the hard-headed businessmen saw they weren't the way to go. I think he (Minister Barry Jones) has come to realise that but unfortunately it's too late'. Has placed in serious doubt, the future of the Australian Research Grants Scheme. The A.R.G.S has been targeted by the Expenditure Review Committee which recommends a halving of its funding. This is in direct contrast to Labor's promise in March 1983, that it would increase ARGS funds by 10 per cent more than inflation in its first three years. That promise has been utterly broken. Eliminated commencement grants to new and small businesses initiating technology-based research as well as abolishing public interest grants which produced such international breakthroughs as the bionic ear and the new malaria vaccine. Excluded individuals, new and small businesses investing in industrial research and development from benefiting from the 150 per cent tax incentive scheme. Bungled the attraction of sponsorship for the proposed Bicentennial National Science Centre necessitating an injection of an extra $10m of government funds to underwrite the project. Failed to respond to the Industrial Property Advisory Committee inquiry into the Australian Patents, Trademarks and Designs Office completed in mid 1984. Failed to respond to the Madigan Committee report `A Space Policy for Australia' published almost ten months ago. Presided over the continued deterioration of basic weather services, a situation which led forecasters to issue disclaimers with their forecasts. Labor has failed to fund the Bureau of Meteorology's re-equipment programme at a level recommended at ASTEC. Has failed to promote private sector investment in research and development by failing to contract out its strategic research and development to industry. The Australian Government contracts out only 2% of its R&D expenditure whilst the U.S.A. and Japan contract out almost 50% of their expenditure to industry. Split the portfolios of Science and Technology setting adrift two inextricably related functions of government innovation policy. Signalled the introduction of a capital gains tax at marginal and company income tax rates, thus destabilising the high risk/high return delicate balance for new and entrepreneurial high-technology companies and discouraging the flow of investment funds to high risk activities. The Hawke Labor Government must be judged by its record-as it has been demonstrated-and it stands condemned. Australia's relative position in the scientific world has been falling rapidly, and as the entire future economic progress of the nation is so inextricably tied to our innovativeness, initiative and scientific development, the actions of the Government have already prejudiced our future. As the Liberal and National Parties continue to develop their Science and Technology policies this serious state of affairs will be taken into account. For further information and interviews: Senator Brian Archer (004) 315111 (004) 451164 A.H. Further information: Brendan Pearson (062) 726185. April 4, 1986. CANBERRA. COMMONWEALTH FUNDING OF SCIENCE 1980-86 Ministry of science Real increase or decrease 1980-81-$314.5 million 1981-82-$393.6 million +25.15%... +14.75% 1982-83-$425.7 million + 8.15%... - 3.35% 1983-84-$453.3 million + 6.48%... - 1.42% 1984-85-$458.3 million + 1.10%... - 4.70% 1985-86-$479.9 million + 4.71%... - 4.49% C.S.I.R.O 1980-81-$228.4 million 1981-82-$293.5 million +28.5%... +18.10% 1982-83-$312.7 million + 6.54%... - 4.96% 1983-84-$331.6 million + 6.04%... - 1.86% 1984-85-$324.9 million - 2.02%... - 7.82% 1985-86-$336.7 million + 3.63%... - 5.57% Antarctic Division 1980-81-$23.4 million 1981-82-$21.8 million - 6.83%... -17.23% 1982-83-$33.6 million +54.12%... +42.62% 1983-84-$35.4 million + 5.35%... - 2.55% 1984-85-$37.5 million + 5.93%... + 0.13% 1985-86-$39.9 million + 6.04%... - 2.80% Source: Budget Papers. Senator PUPLICK —This is not something new for the Labor Party. If one looks at an article by K. C. Westfold in the August-September 1985 journal Search, which is the journal of Australian and New Zealand Association for the Advancement of Science, under the heading `Research funding-the Whitlam Debacle' it states: In the last days of the Whitlam Government it brought down a budget in which the 1976 allocation for the ARGC was reduced by 66 per cent and that for the NH&MRC by 42 per cent, notwithstanding an election commitment ` . . . to expand research work in the Universities'. The impact of those cuts on the research community and its limited success in recovering the situation are recalled, in the context of the most recent ARGS allocation. One can look for instance at the very glossy publication-goodness knows how much it would have cost-entitled `Living by Our Wits, a selection of speeches by the Honourable Barry O. Jones Minister for Science' in which we are treated to the collective thoughts of the Minister for Science (Mr Barry Jones) on this matter. If one looks for instance at the sort of ideological underpinning of science policy as it has been developed by this Government in his essay `New Paradigms for Old' it states: The major influences on my thinking in writing Sleepers-- that is an abbreviated form of Mr Jones's magnum opus on the question- were Karl Marx, especially in his Grundrisse, the three dedicatees, Lewis Mumford, author of The Myth of the Machine and The pentagon of Power, Simon Nora, the French civil servant who prepared the major report L'informatisation de la societe . . . Hugh Stretton of Adelaide University, author of Capitalism, Socialism and the Environment, the Japanese economist Yoneji Masuda, and Professor Joseph Weizenbaum of MIT, author of Computer Power and Human Reason. That might all be very interesting as far as the intellectual development of the Minister for Science is concerned, but the record of the Minister in providing funding for research and development is better understood if one looks at the annual report of the Australian research grants scheme. The 1984 report stated: The funds available to the Committee were appreciably less than the amount required to maintain an adequate level of support under the Scheme and limited its capacity to provide proper support for its projects . . . The 1985 report stated: This increase was grossly insufficient to support the number of worthy projects that the Committee considered should be funded. Fortunately, a large part of Australia's research and development policy has now passed into the control of the Minister for Industry, Technology and Commerce. There has been an appreciable increase in the significance given to the funding of research and development since Senator Button took this into his portfolio. We have two Bills before us this evening: The Income Tax Assessment Amendment (Research and Development) Bill 1986, the purpose of which is to provide a 150 per cent tax concession for eligible expenditure in research and development, and the Industry Research and Development Bill 1986. The first Bill is primarily a Bill which will benefit companies whose expenditure on research and development is $50,000 or more. It is true that companies which spend $20,000 will get a phased-in tax concession between $20,000 and $50,000 which will be of benefit to them. If they spend less than $20,000 by contracting out the expenditure to an approved research institution, they will benefit fully from the 150 per cent taxation concession. This scheme was criticised for not providing sufficient incentive and assistance for small and start up research and development companies. The Industry Research and Development Bill, however, picks up the area of small companies and innovative new companies and provides them with financial assistance along reasonably similar but not identical lines. As I have said, the Income Tax Assessment Amendment (Research and Development) Bill provides for financial assistance to companies which undertake approved expenditure. That expenditure is to be judged in a number of ways. The legislation defines research and development activities as those which include the systematic investigative or experimental activities that are carried on in Australia or in an external Territory; those which involve innovation or technical risk and are carried on for the purpose of acquiring new knowledge, whether or not that knowledge will have a specific practical application; or those which create new or improved materials, products, devices, processes or services; and those which are for certain other related activities. I think it is important to understand that this Bill provides some assistance for developmental activities. It allows the company concerned to contract its work to approved institutions. Those institutions are as approved under section 73a of the Income Tax Assessment Act. They include the CSIRO, a large number of government departments, educational institutions, overseas institutions, museums and certain other general research activities. I seek leave to have incorporated in Hansard a list of those approved research institutions. Leave granted. The list read as follows- SECTION 73a: INCOME TAX ASSESSMENT ACT RESEARCH INSTITUTES APPROVED BY CSIRO (at 15.8.85) A number of other institutions are currently seeking registration. Government: Commonwealth and State CSIRO Departments of Agriculture: South Australia; Tasmania; Victoria; Western Australia; New South Wales. Queensland Department of Primary Industry: (Departments of Agriculture and Stock) Forestry and Timber Bureau (Commonwealth) Departments of Lands and Survey, Victoria (Vermin and Noxious Weeds Branch) Botanic Gardens Branch of Crown Lands Departments, Victoria Fisheries and Wildlife Department, Victoria Zoological Board of Victoria The State Rivers and Water Supply Commission (including Water Research Institute) Victoria National Parks and Wildlife Service of N.S.W. State Electricity Commission of Victoria-The Herman Central Scientific Laboratory Western Australian Wildlife Authority/Fauna Conservation Trust Fund Victorian Brown Coal Council Tasmanian Fisheries Development Authority Educational Institutions: Universities, CAEs, Institutes (in some instances, only certain departments of institution approved) University of Adelaide University of Melbourne University of Sydney University of Queensland University of Tasmania University of Western Australia University of New South Wales Macquarie University Murdoch University University of New England University of New England Exploration Society Royal Melbourne Institute of Technology (Melbourne Technical College) Sydney Technical College Hawkesbury Agricultural College School of Mines and Industries, Ballarat Bonython Research Laboratory: SA School of Mines & Industries Overseas Institutions Factice Research and Development Association Nominations by Royal Australasian College of Physicians University of Oxford University of Cambridge University of Manchester University of Edinburgh Wellcome Research Institute, London Lister Institute, London National Institute of Medical Research, London Liverpool School of Tropical Medicine, University of Liverpool London Hospital Middlesex Hospital St Mary's Hospital Postgraduate Medical School, Hammersmith Nominations by Royal Australasian College of Surgeons Laboratories of Anatomy, Physiology, Pharmacology and Pathology Research Departments in Ophthalmology Buckston Browne Farm (All Royal College of Surgeons, England) Battelle Memorial Institute Museums The National Museum of Victoria The South Australian Museum The Australian Museum, Sydney The Museum of Applied Arts and Sciences, Sydney General Adelaide Botanic Gardens Apace Research Limited Appropriate Technology and Community Environment Astronomical Association of Queensland Astronomical Society of N.S.W. Astronomical Society of W.A. Inc. Australian Cassava Products Pty Ltd Australian Coal Industry Research Laboratories (formerly Australian Coal Research Association) Australian Conservation Foundation Australian Development Research Foundation Australian Equine Research Foundation Australian Farm Fuels Research Association Australian Flora Foundation Australian Forensic Sciences, Research Foundation Australian Gas Turbine Research Committee Australian Institute for Maritime Archaeology Australian Institute of Urban Studies Australian Mineral Development Laboratories Australian Mohair Research Foundation Australian National Research Council Australian Nomads Research Foundation Australian Orchid Foundation Australian Pastoral Research Trust Australian Plastics Research Association Australian Road Research Board Australian Submarine Pre-history Research, Foundation Australian Welding Research Association Australian Wine Research Institute Biocontrol Research Trust Bread Research Institute of Australia Chromosome Research Foundation Earthwatch (Aust) Energy Research Foundation Gippsland Institute Professional Services Office Heron Island Research Station Board Hunter Valley Research Foundation Hydrocarbon Research Inc, USA Indo-Pacific Society-Oceanic Research Foundation Industrial Research Institute of SA Inc. Insearch Limited Institute of Molecular-Applied Microbiology WA Pty Ltd International Union of Geological Sciences Irrigation Research and Extension Committee James F Lincoln Arc Welding Foundation Kerang Agricultural Research Farm Linnean Society of NSW M D Research Company Pty Ltd Manning District Agricultural Research Council McCaughey Memorial Institute Medical Instrument Co Pty Ltd Melbourne Oceanarium and Research Foundation Mitchellsearch Limited New Guinea Biological Foundation North Australian Foundation (Melbourne) North Australia Research Foundation (NSW) Plant Sciences Foundation Queensland Equine Research Foundation Raine Island Corporation Royal Australian Chemical Institute Royal Australian Ornithologists Union Royal Botanic Gardens and National Herbarium, Sydney Social Science Research Council of Australia Soil Fertility Trust Fund Solar Energy Research Institute, Western Australia South Australian Barley Improvement Advisory Committee South Indian Ocean Expedition to Heard Island Sugar Research Institute Swan Hill Irrigation Research Farm Taronga Zoological Park, Sydney Techsearch Ltd University of Newcastle Research Associations Ltd Victorian Institute of Marine Sciences Victorian Wheat Research Foundation W B Pascoe Research Foundation WA Naturalists Club Field Station WA Sandalwood Research Institute WA Weather Research Association Water Research Foundation of Australia Wheat Research Trust Account Senator PUPLICK —I thank the Senate. Proposed new section 73B (2) provides certain exclusions for expenditure. It provides that things such as market research, quality control, petroleum or natural gas prospecting, the making of cosmetic modifications to products, management studies, social science, arts or humanities research and the development of computer software other than for the purposes of sale, rent, licence, hire or lease or the making of donations are not to be taken as being eligible expenditure under the Act. I would be grateful if the Minister would address himself to a number of questions I wish to raise. I refer firstly to the question of patenting. As I understand it, this Bill will provide that a patent which is taken out in the course of a research and development activity in order to lead on to the next step of actual research and development is to be an allowable expenditure under the Act. However, the patent which is taken out at the end of the research and development phase, and prior to the moving into the commercial exploitation phase, is not to be taken as an allowable expenditure under the terms of the principal Act. I would be grateful, firstly, if the Minister would confirm whether my understanding is correct in terms of expenditure being allowable in respect of a mid-way patent which leads to further development but being excluded in respect of the final patent which leads on to development. If that is a correct understanding, will the Minister tell me why the Government has decided that the first patent should be an allowable expenditure and the final patent should not be? The other point which I make is that the board which will be established under the Industry Research and Development Bill is going to have certain powers. Those powers include advising the Commissioner of Taxation as to whether in fact an expenditure should be regarded as an expenditure which falls within the definitions provided in the principal Act. It is interesting to note that clause 35 of the legislation provides that once the board has given that advice to the Commissioner, the Commissioner is in fact bound to accept that advice and therefore does not have a separate and independent discretion as far as that is concerned. I think it is interesting that there are very few other examples where the Commissioner's personal or independent power of discretion is taken away. Only two instances have been drawn to my attention-one in relation to assistance to the film industry in Division 10ba of the Income Tax Assessment Act, and the other in relation to the certification of manning levels of coastal ships which is determined by the Department of Transport under what I think is section 57am of the Income Tax Assessment Act. Nevertheless the board has the power to make certain determinations. This potentially leads to a slightly confusing situation in that if the claimant for assistance is unhappy with a decision of the Commissioner, he must pursue his appeals through the normal process of the Income Tax Assessment Act. If, however, he is unhappy with the determination made by the board established under the industry research and development legislation, he must pursue his appeals, as I understand it, through the Administrative Decisions (Judicial Review) Act. I think there could be some confusion arising in the minds of claimants as to the course of action which they would have to follow if they were seeking an appeal against a determination that certain expenditure was not to be allowed as a deductible item. The other point I want to raise in relation to the Income Tax Assessment Amendment (Research and Development) Bill is that it is interesting that the section 73b (2) exclusion of cosmetic modifications or stylistic changes to products is somewhat at variance with the way in which the Government was prepared to provide funding for the automotive industry. If one looks at the Automotive Industry Authority Amendment Bill, which we passed last year, one will see that under that legislation certain cosmetic and stylistic changes to the motor car industry are allowable deductions. So there again is a slight difference, depending on the particular field in which one is operating. The Industry Research and Development Bill allows the Government to provide financial assistance. Essentially, this will be done through a board which is to be established. Classes of grant will be made available so that industry research and development can be undertaken. The first of these are discretionary grants in which the Minister may essentially declare an activity to be an eligible activity for the purpose of receiving financial support and assistance. Secondly, there are generic technology grants. The Minister may declare an area of technology to be one of generic technology and assistance may be provided under that heading. Thirdly, national interest agreements are to be established. The board, which may in fact be required to act on the direction of the Minister, will be allowed to enter into agreements with individual researchers, or presumably with research institutions, to undertake research into an area which is regarded as being of significant national interest. As part of this whole process the old Australian Industrial Research and Development Incentives Board scheme is being wound up. There are transitional provisions to allow grants made under the old AIRDIB scheme to continue in place and many of the areas of AIRDIB funding are being transferred, in effect, into the discretionary generic technology and national interest agreements as provided in the Industry Research and Development Bill. The Minister may care to advise me as to why it is that under the guidelines which were published by the Minister in relation to this legislation, once again the cost of patenting appears to be excluded as a matter which may be taken into account in working out the expenditure to be provided for companies receiving some sort of assistance under the provisions of this legislation. I am slightly concerned about the extremely wide discretion given in the legislation to the Minister to give directions to the Board. He may give directions to the Board about what is or is not a generic technology. We know that from time to time Ministers will take markedly different approaches as to what constitutes a generic technology. I think there would be wide agreement in the chamber that things such as biotechnology, electronics and information technology are clearly part and parcel of the emerging frontiers of science and technology which ought to be assisted, but from time to time undoubtedly favourites will be played by Ministers, depending on what they happen to be particularly excited about at that time. I would not like to see a situation in which some degree of uncertainty was introduced, depending on whether a particular generic technology was fashionable or not. We know that scientific disciplines and scientific areas come and go as areas of high fashion, depending on a number of circumstances, very few of which have anything to do with the intrinsic merits or otherwise of the technology concerned. The Minister has power under clause 26 of the legislation to declare `eligible activities'. He has power under clause 30 to declare what are generic technologies. He has power under clause 33 (2) to request the Board to consider entering into national interest agreements in respect of projects of research and development which the Minister specifies. So the Minister is put in a very powerful position to direct the nature of funding towards particular areas of research and development. We are not proposing by way of amendment any attempt to curtail the Minister's power in this regard. However, we indicate that it is a matter we will be looking at and observing with some degree of caution over the years. As this is the first opportunity on which this particular situation has arisen, I cannot let pass clause 4 (7) of the Industry Research and Development Bill. It is the first occasion on which I have has an opportunity to talk about the construction of boards under this Government. The Board is to consist of a chairperson and certain other persons. The Bill then goes on to provide: For the purposes of this Act- (a) the Chairperson may be referred to as the Chairman or the Chairwoman, as the case requires; Frankly, the cluttering up of legislation with such absolutely pathetic nonsense as `chairman or chairwoman as the case requires' really is indicative of the extent to which we are bedevilled with this distorting of the English language which is going on at the moment. As to whether the case requires some objective test of whether the person should be referred to as chairman or chairwoman really boggles the mind. Undoubtedly the Minister will be able to give appropriate directions in appropriate cases. Senator Button —You ought to be grateful that it does not tell you how to conduct the test. Senator PUPLICK —If the Minister is minded to provoke me on this matter, there will be even further trouble about it. The other point I make is a general point about funding of research and development. I put it clearly on the record that I believe we have swung too far away from the funding of basic and fundamental research in this country. I understand the enormous drive which is being made for relevant research to be funded-research which will yield an immediate technological fix, economic fix or scientific fix. I understand the very lengthy debates which have taken place over a number of years about the relevance of scientific research, but I think we have now taken that to extremes. We have moved away from the funding of absolutely basic and fundamental research to altogether too great an extent. I look at an article by Leon Lederman in the Scientific American in November 1984 which indicates that, while the American taxpayers spend only about 5 per cent of the cost of applied research and development on fundamental technology, that is where most of the real innovations and developments originate. I look at an article in the Australian Financial Review in November 1984, headed `Japan downgrades development, beefs up basic research'. I look to the seminal research paper in the Journal of Political Economy in 1959 by Nelson, entitled `The Simple Economics of Basic Scientific Research'; an article in the November 1984 issue of the New Scientist by Martin, Irvine and Turner, entitled `The Writing on the Wall for British Science'; and an article in the Economic Review of March 1986 by Stoneman, entitled `Research and Development Policy in the United Kingdom'. All of those articles make the point very basically that unless we are prepared to spend sufficient funds on fundamental and basic research, all the applied technology, important as it may be, nevertheless will eventually wither and die. The failure to invest in basic research, in particular the failure to invest in technology transfer as an underpinning of development and research in Australia-we will have the opportunity to discuss this by way of an amendment to the legislation in due course-seems to me to be a matter of very great significance. Finally, I would like to put on the record a number of paragraphs in an article by Donald E. Lewis from the Department of Economics of the University of Wollongong in the autumn 1986 issue of the Australian Quarterly, entitled `Sweden's manufacturing sector-a modern success story'. Certain paragraphs on pages 26 and 27 make the point about the Swedish Government funding of basic research and a table indicates the expenditure on research and development in Sweden compared with a number of other Organisation for Economic Co- operation and Development countries. I seek leave to incorporate that material in Hansard. Leave granted. The document read as follows- The Swedish engineering sector has always been prepared to make substantial investment in research and development. Both the historical and contemporary Swedish economy, especially the engineering industries, can be characterised by high levels of investment in research and development. `Almost half of Sweden's exports now consist of products from the engineering industry which, moreover has largely focused on high technology and a high level of research'.10 In this sector `about 4-5 per cent of sales value goes towards research and development each year'.11 As shown in Table 8 Sweden has one of the highest per capita expenditures of R & D in the OECD, exceeded only by the USA, Switzerland and West Germany. Swedish expenditure per capita is more than double that of Australia (194 verses 92 US$). Furthermore, Sweden was the only OECD `country where R & D spending grew more rapidly in the 1970s than in the preceding decade'.1. Total expenditure on R & D in Sweden is small by world standards. It ranks ninth amongst OECD countries and accounts for only about 1 per cent of world expenditure on R & D. Nevertheless, it invests 36 per cent more in R & D than Australia. Table 8 EXPENDITURE ON RESEARCH AND DEVELOPMENT, 1979 Gross Expenditures in...Per capita Expenditures in millions of U.S. dollars...U.S. dollars Country Rank in OECD Amount Country Govt. Civilian Total Rank in OECD USA... 1 56,560 USA 64 188 252 1 Japan... 2 18,285 Switzerland 8 215 223 2 Sweden... 9 1,608 Sweden 17 177 194 4 Australia... 11 1,183 Australia 8 84 92 12 Source: Young, A. 1983 `Science and Technology Indicators', OECD Observer, 121, 34-38. Substantial expenditures on R & D is an important reason why Sweden has been able to specialise in medium to high level technological based products. Entrepreneurs, scientists and engineers are very knowledgeable of industrial and engineering developments (widespread knowledge of foreign languages is a big help) and like the Japanese, they are quick to imitate and utilise overseas innovations. The newly emerging robot industry illustrates the rewards of substantial investment in R & D. In 1982 Sweden was the fourth largest user of robots (behind Japan, USA and West Germany), the third largest producers of robots (accounting for 24 per cent of the European market and 7 per cent of the American market) and was the most intensive user on a per capita employment basis in the world.13 ASEA is the major, Swedish producers and has already established assembly plants in Spain, France and production facilities in Japan. Investment in R & D is continuing and $40 million (Australia) has been allocated to research on robotics, computer aided design and computer aided manufacturing during 1980/81 to 1984/85. Senator PUPLICK —I thank the Senate. I conclude by saying that within the overall raft of measures being brought forward for the support of research and development in Australia, the Opposition welcomes these two pieces of legislation. We note the latest Australian Bureau of Statistics figures, 27 May 1986, indicating that there had been a significant increase in the private sector activity in research and development. We know that the best part of 1,000 firms so far have registered-as a firm must register under this scheme-to be participants in this financial venture. We are encouraged by that. I believe that Australian industry as a whole has been encouraged by the lead it has been given by the Minister. It would be churlish to refer at too great a length to the criticisms made by the Standing Committee for the Scrutiny of Bills about the delays in the presentation of this taxation legislation, which was first announced a year and three days ago, I think, and which has only just seen the light of day. A number of people have been confused as to exactly what the provisions of this legislation would be and there is really very little excuse for a piece of taxation legislation to take more than a year to move from the ministerial announcement to the final form in which the Parliament is able to debate and consider it. Nevertheless, we welcome these two pieces of legislation. We believe that they will make a significant contribution to Australian research and development in the years ahead. The Opposition will be pleased to vote for them and to accord them a speedy passage in the Senate. Senator McKIERNAN(Western Australia)(8.30) —I will not delay the Senate over long in my contribution to the discussion on these two very important Bills-the Industry Research and Development Bill 1986 and the Income Tax Assessment Amendment (Research and Development) Bill 1986. My involvement in this area is a continuing one. In fact, apart from my swearing-in as a senator, my first official words in the Senate were contained in a question to the Minister for Industry, Technology and Commerce, Senator Button, in regard to research and development in Australian industry. Because of the time restriction that I am placing on my speech, I will refrain from picking up many of the arguments which Senator Puplick, who preceded me in this debate, put forward. It was a very well thought out contribution. It contained a little nitpicking, but many positive parts as well. I do not know whether we can attribute all of that to what he has read, but he did quote from one excellent piece of material which is doing the rounds at the moment-a book by Barry Jones called Living By Our Wits. Hopefully, he will recommend it to his colleagues and put some more pressure on those who sit on the Opposition front bench. The two pieces of legislation on industry research and development that are before us tonight should provide a much needed shot in the arm for Australian industry. Although it has had a very great shot in the arm in recent years, particularly in regard to the 30 per cent devaluation, many of the captains of industry-some of whom are very vocal at the moment in regard to the other major debate on the fringe benefits tax legislation-have apparently been sitting on their rears and doing very little in looking at the future. They have been whingeing, whining and complaining bitterly because their lurks and perks will be taxed, but they have not been getting off their bums to undertake a little more investment, which is needed in the long term interests of this country. The legislation, as Senator Puplick mentioned, has been discussed for quite a period. A number of industry sectors have welcomed it. I dare say that other representatives of industry in the very near future will castigate it. Another point Senator Puplick mentioned very early in his contribution was the question of buying Australian products. I also take up that point very briefly and relate it to some of the discussions that took place in the Senate last night. I refer honourable senators to the arguments that the Minister for Finance, Senator Walsh, used in defence of the tax on perks. Nobody was able to explain to him why some captains of industry use Rolls-Royces and Mercedes-Benz and not Australian built motor vehicles. I hope Senator Puplick will join the buy Australian campaign. We should show that we have confidence in Australian industry and that our products are good enough for our captains of industry. The two pieces of legislation are aimed ostensibly at private enterprise, because private enterprise investment in research and development is at a very low level when compared with the levels in other Organisation for Economic Co-operation and Development countries. We are from time to time reminded of other statistics in regard to OECD countries. In regard to interest rates, we are continually reminded of the comparison between other OECD countries and Australia. In the area of private investment in research and development, the comparisons between Australia and other countries are also noteworthy. Private spending on research and development in Australia amounts to 0.3 per cent of the gross domestic product, compared with an average figure of over three times that amount-0.98 per cent to be precise-in other OECD countries. Between the years 1973-74 and 1981-82 that represents a decline in real terms of 40 per cent. Recent statistics show that the figures have picked up in recent months and years, but they have not yet picked up enough. The two pieces of legislation that are before us this evening-I hope that, with the agreement of both sides of the chamber, they will be passed-will provide that much needed and necessary shot in the arm. Of course, other areas of research and development must be addressed. I refer to the direct area in which governments become involved. The Industry Research and Development Bill 1986 addresses the areas of the Commonwealth Scientific and Industrial Research Organisation and the tertiary side. Much needed drive and assistance has been provided in that area which hopefully will be in the long term interests of Australia. If this country is not to decline-and I do not like to use the term, but it has been used-into a banana republic, we will have to take some long term investment decisions. The Government is showing that it is willing to make those long term decisions, decisions that show confidence in the future of the nation. It is now up to private enterprise to join us and show what can be done in a consensus atmosphere. The events of last weekend in one of the rural towns show that consensus is not yet dead. I commend both pieces of legislation to the Senate. Senator VIGOR(South Australia)(8.36) —We are debating a very important issue for Australia's future. The two Bills that we are debating tonight-the Industry Research and Development Bill and the Income Tax Assessment Amendment (Research and Development) Bill-will offer an incentive to private industry to get into the act in terms of doing research in Australia. I will cite some figures which show that we are not very good in this area of doing research in industry. Currently there is world-wide recognition of the need for research and development, particularly in the high technology areas. Japan has a number of high priority programs, handled by its Ministry for Technology, which give priority to specific types of technology. This legislation is the first in Australia actually to recognise specialised technologies. Japan has a program to deal with highly parallel computers. We have no programs for developing computers in Australia. We do not offer any real help to people who are trying to develop systems. These Bills may give a boost to some of our local industries which currently have been dependent on programs which have been quite good, such as the management and investment companies and venture capital programs, and programs which have been developed within specialised organisations such as the Commonwealth Scientific and Industrial Research Organisation and the universities. But Japan has gone a lot further than us. It is actually looking at developing 14 science cities or technopolies. These areas will bring together people who are interested in general research and who will be able to work together to develop new products. I join Senator Puplick in making a call to the Government not to be blinded by the practicalities of technology and to take heed of the need for fundamental research if we are to produce practical and practicable technologies and practical products which are innovative enough to be able to attract world markets. Australia currently has a considerable problem due to the neglect of this area over the years. I will not dwell on the trade balance which is currently in a desperate situation. The rural commodity markets need to be developed with a lot more value added products, both in farming and in mining where we could process some of our minerals and energy to develop products which could be directly marketed in both developing and developed countries. We are just not doing enough in this area and I am not certain that these two Bills go far enough in terms of recognising the stages which must be gone through from taking a product from a glint in the eye of the inventor through to something which can be sold on world markets. Australia has a declining share of world trade, particularly in the manufacturing and high tech areas, and I hope that if sufficient money is pushed into these areas these Bills will have the effect of building up our credibility. In 1981-82 Australian firms imported more than 98 per cent of their technical know-how, 75 per cent of this being payments to overseas parent companies or subsidiary companies for patent rights. These were transfers of technology, the research being done overseas, not in Australia, and then being applied as a production process here. This does not produce a good employment climate and currently we have around 10 per cent unemployment on average with very high spots in certain areas. In the manufacturing industry we are losing around 15,000 jobs a year which, I hope, this type of program will allow us to regain. In the Organisation for Economic Co-operation and Development examiners' report of 1983 on Australia's research and development problems, the examiners pointed out that there was a relatively poor investment in privately funded research and development. In fact, our investment was less than a quarter of that of similar OECD countries. Indeed, in those countries with similar populations an average of 0.93 per cent of gross domestic product was invested in private research and development. In 1968-69 Australian private investment was 0.48 per cent and this fell to 0.21 per cent in 1981-82-in fact that was just a quarter of the 0.93 per cent of comparable countries. It was also noted that Australia's publicly funded research had declined from 1.3 per cent of GDP in 1968-69 to 0.8 per cent in 1981-82. However, the interesting aspect was that this compared favourably with the average of similar OECD countries, which had an average of 0.76 per cent. So it was mainly in the area of private investment-which these two Bills address-that we had a considerable shortfall. From this report, which made quite far reaching recommendations on directions of Australian research and development, the Government has instituted a review of publicly funded research, looking at the Commonwealth Scientific and Industrial Research Organisation, which is one of our most effective research organisations and also at industry-based R and D. Through the reorganisation of those bodies, we are actually turning the corner, I hope. However, I must reiterate what Senator Puplick said and beg the Government not to throw out the baby with the bathwater. I urge the Government not to try to get CSIRO to produce small individual products. It is extremely important that we continue with fundamental research because that research gives us a language with which we can absorb ideas from overseas. It also allows us to bring technology into Australia effectively and gives us a group of people who can effectively answer questions for people in industry. I also believe that we must look very closely at co-ordinating our research in Australia in these areas, particularly research being carried out through rural bodies and funded by industry levies, and shift some of the funds in those areas towards market research because we are failing to produce products that are attractive to the world. We must develop from our primary produce high value derivative products which are of a very high quality and hence much in demand in the developed world. We need a manufacturing industry which understands the market it is addressing and we need to go out aggressively to export to that market. This program must be matched with a sensible program of export incentives. The export marketing development grants system is not adequate to complement this program. In this area there is a need for specialised technology export programs. I wish to look at the different stages of research because they will be relevant to amendments I shall move to both these Bills. The OECD examiner's report recognises seven stages of research. Firstly, they look at educational experiments which are basically repeating results from overseas, part learning and part technology transfer. We need to have that funded and the Government seems to have totally ignored it in terms of the funding available in these Bills. We will move an amendment to make technology transfer a part of the processes which can be funded and which are regarded as allowable activities. The second item is the pure or basic research which is driven by curiosity and the goal of which is to increase knowledge and understanding. Generally that is carried out in universities or places of that type in a society such as ours. Thirdly, there is policy driven research directed by specific needs or areas which the Government specifies and also by industrial development which specifies the areas in which we concentrate. This legislation is relevant to grants and deductions for generic technology, national interest projects and specialised projects. This area is handled very effectively by CSIRO and other applied research organisations. We then move to applied research which is the discovery of ideas and which starts the search for practical applications as well as for problems which need solutions. This is an area which is well covered by the Government's legislation. Then we move to engineering and design of a product. The Government wants to cut out much of this area because it is also cutting out market studies to find out what type of product we want to handle. We will move an amendment to include the interrelation between the market study and the development of the product. Another item is production and process engineering, which the Government has recognised, and that is well handled. There is also need for the marketing and service follow-up, which this legislation does not address. I will move amendments to both of the Bills during the Committee stage, and will comment further on the reasons for these amendments at that time. Senator WATSON(Tasmania)(8.50) —The two Bills before the Senate-the Industry Research and Development Bill 1986 and the Income Tax Assessment Amendment (Research and Development) Bill 1986-have the support of the Opposition. May I describe them as typical Liberal Party initiatives to industry. I believe the incentives offered to research and development will go some way in encouraging both investment and innovation. The key word is really innovation, because research is not really enough. Dr Whitton, Director of the Commonwealth Scientific and Industrial Research Organisation Institute of Industrial Technology, in a paper to the Australian Academy of Science, pointed out with regard to innovation: . . . the whole sequence of steps from research through development, design, construction and production, to marketing. Especially, it involved the commercial exploitation of technology. It is only by the completion of the innovation sequence, that research can lead to generation of wealth; if we only do research, we will not produce wealth. Dr Whitton went on to say: Britain had concentrated on research, and not on innovation; its record of converting research results into commercial use is poor. He said that was why the position of Britain in world trade was falling. In the past the situation in Australia has not been much different. Australia has achieved world-wide recognition in many areas of science. Our universities are held in high regard and we have a wealth of internationally regarded researchers and scientists in universities and government laboratories. Unfortunately, many have left this country because there is not enough scope or money for future development and achievement. There is surprisingly little transfer of technology from laboratory to full scale production in this country. Australia and Sweden make about the same level of contribution to world scientific publications; yet Sweden produces four times the number of patents and it is regarded as a leader amongst those who have a share in the world's technological property. Too often research of great significance is made known to the world instead of being protected by patents. As a result, Australian industry loses its competitive edge. Sir Frank Espie has also pointed out that the lack of venture capital and the widespread lack of management skills and commercial experience amongst entrepreneurs in existing enterprises are the two major constraints in the creation of viable new high technology enterprises in Australia. Thus, while I commend the Government's proposal to introduce the 150 per cent tax concession as a means of encouraging research and development and its attempt through the Income Tax Assessment Amendment (Research and Development) Bill to make research funds available to suitable projects that would not be eligible for a tax concession, I am concerned that more must be done to ensure that research is carried through to production and the marketing stage. It is only by completion of the whole sequence that research can lead to generation of wealth. In other words, the Government must take action to ensure that more results from local research are worth exploiting and that industry has the skills, the finance and the motivation to take such research through to full commercial utilisation. Because my time is limited, I wish to raise another issue. I find it rather difficult to reconcile the Government's position, especially in relation to these two Bills which I commend. The Minister for Industry, Technology and Commerce, Senator Button, appears rather determined to run the Australian textile manufacturers out of the country insofar as he is foreshadowing a move away from quotas. Since mid-1980 over $570m has been invested in the textile, clothing and footwear industries in upgrading buildings and introducing `state of the art' technology in machinery. The clothing, textile and footwear manufacturers have done everything that was expected of them under the plan due to expire in 1988; yet their future is now in jeopardy. Not only is their share of the market declining under the plan but also imports are expected to increase to 28 per cent over the two-year period from 1985 to 1987 on the basis of maximum utilisation of quota. My concern is that we must ensure that any change is a controlled change. The emphasis must be on change. A tariff only regime is difficult to police because, for example, there are valuation problems. Everyone knows that business people in Singapore and elsewhere are prepared to give a receipt for any value that the importer likes to nominate. Another problem is that Australia's spending on the clothing, textile and footwear industry has declined quite markedly to only 6.5c in the dollar. Furthermore, locally-produced textiles as a category command only 30 per cent of the total Australian market. On a 50 per cent tariff rate theory it is estimated that 50,000 jobs will be lost. The Industries Assistance Commission suggests that it will be only 20,000. I believe, and the industry believes, that this is a gross under-estimation. In fact, there will be massive social and economic dislocation, particularly in non-metropolitan towns. Change is acknowledged, but a predictable rate is also needed. Australian manufacturing must be given the opportunity to be internationally competitive, while consumers also must be given the opportunity of purchasing a wide range of goods at competitive prices. I am making these comments in the context of these Bills because I believe that by the 1990s technological innovations will be in place in Australia which will enable Australian industry to compete with the present low labour cost industries of Asia. But we must at least have an industry left in Australia to implement this new technology that is expected to be around by the 1990s. I remind the Senate that while the Prime Minister (Mr Hawke) views the Australian textile, clothing and footwear manufacturing market as one area for increased Chinese participation, Chinese products already dominate most of the clothing categories, and their share is increasing quite markedly. Are we prepared to sacrifice Australian jobs? I will cite one simple statistic which I would like every member of the Senate to think of. A single worker in an Australian manufacturing operation receives more when he goes on holidays each year than his counterpart in China receives over a full five-year period. That is the difference. Australian industry is vulnerable to disruptive trade practices. The United States of America and the European Economic Community both maintain quantitative restraints. If we move away from the present regimes, as has been foreshadowed by the Minister, Australia will run into the problem of a loss of industry. I believe the Government will encounter the current dilemma that President Reagan faces. He has open conflict within the Congress and the Senate because on one hand the international community is demanding greater access to the American market, causing conflict with America's international trading aspirations, and on the other hand the domestic economy is unable to adapt to those sorts of changes. I made a commitment that I would speak for no longer than ten minutes. I will stick to that commitment. The Bills have our support, and I wish them a speedy passage. Senator SHEIL(Queensland)(8.59) —The Industry Research and Development Bill 1986 and the Income Tax Assessment Amendment (Research and Development) Bill 1986 are designed to give incentives to investment, and to encourage innovation in research and development. It is an old axiom that anything a government wants more of it subsidises and anything it wants less of it taxes. These Bills are designed to provide less tax and cause a distortion, taking investment into research and development away from economic realities and commercial considerations. Even though we are not opposing these Bills they are inconsistent with the policies that have been followed for some time by the Government in a couple of areas. One area I cite is the pharmaceutical industry, which has been the subject of such stringent policies by successive governments over the years that virtually all research and development in the pharmaceutical field has been driven out of Australia. I will not belabour the point because of the ecumenicalism that exists in the Senate at the moment. The other area of inconsistency that I point to is the film industry. Any investment in the film industry has attracted an enormous taxation advantage over many years, yet here we have Bills which restrict a taxation deduction merely to companies. In other words, anyone else who wants to invest in research and development, such as single people, partnerships or sole traders, will not attract this taxation deduction. That is a point that I would like the Minister for Industry, Technology and Commerce (Senator Button) to answer in the interests of shortening the debate, as we have a restricted time in which to speak. The sole trader, the partnership and the single person would not be the only ones who would be disadvantaged. A small company may have a chance of doing research and development in an area for which it does not have the finance and it may wish to attract that finance from a rich uncle or somebody else, but only the company would attract the taxation advantage. The individual who gave the money to that company would not attract the deduction. I think we should be able to do as much for commercial research and development in Australia in the areas of industry and medicine and in all the other areas as we do for our films. I think this could generate a whole area of industrial and medical research that would be of as much advantage to Australia as Crocodile Dundee and all the other marvellous films that have been mentioned here tonight. Senator Siddons —Hear, hear! Senator SHEIL —Good heavens, there must be something wrong with what I am saying as the Australian Democrats agree with me. I do not think I have had that before; it is very rare. I ask the Minister to answer this question: Why has the taxation concession been granted solely to companies and not to individuals, sole traders and partnerships? Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.03) —I thank honourable senators for their warm support for this legislation. I do not think I have to digress down every path which was followed in the course of the debate. Three specific things were put to me. Senator Puplick asked whether patent fees paid in the course of a research and development project were covered by the scheme. The answer is yes. If there is a patenting process at the end of a program of research and development, he is right in saying that those patenting costs would not be allowable. The reason for that is that in legislation of this kind one has to confine the parameters of research and development. I think Senator Puplick is concerned about a general problem relating to patenting and patenting costs. I understand that; I agree with that. It is a distinct problem as far as we are concerned. Senator Vigor-I think we will come to it in the Committee stage of this debate-has a number of proposals which, however desirable from the point of view of a personal feeling of warmth, would cause this scheme to be immensely costly by extensions of that kind. I think it is important that we confine the research and development process to what it is and not extend it beyond the process, the patenting at the end of the process being a step in the commercialisation of a research and development process. I think the only other point that Senator Puplick was concerned about was a warning about the apparent wide discretion given to the Minister in respect of designating generic technologies in particular and a warning about fashionableness and all those things. I accept all that. Some discretion is given to the Minister. I suppose one only substitutes the degree of fashion of the populous as represented in the Senate for the degree of fashion prescribed by the Minister. I do not know whether that produces very effective results but I concede that it is a wide discretion. Senator Sheil, the authentic voice of the National Party of Australia in the chamber tonight, had a couple of comments to make about this legislation. As I understand it, he was concerned particularly as to why the tax incentive applies only to companies. Senator Sheil —It is inconsistent with past policies. Senator BUTTON —That does not make it wrong. Senator Walters —It probably makes it right. Senator BUTTON —I thank the honourable senator. That is the warmest endorsement that I have ever had from the honourable senator in the whole of my political career and I appreciate it. If one looks at the area of research and development one sees that governments spent a lot of money on it right throughout the 1970s and all that happened to private sector research and development was that it went down and down, and that is because the incentives were wrong. The incentives in this legislation are applied, as the honourable senator has said, only to companies and that is because we do not want this scheme to be discredited by the other side of the coin which we had in the 1970s. As research and development went down tax avoidance and creative accounting went up. Maybe those two industries-tax avoidance and creative accounting-have an endearing charm for the honourable senator; I do not know. But that is what we have to be very careful about in respect of this legislation. That is why we have provided for a system of registration of companies which seek the benefit of the tax concession and that is why we have excluded sole traders and partnerships. I do not think it is much to the detriment of the genuine research and development community in Australia. I know that 100 flowers might bloom out there but so might 100 tax avoidance schemes and we want to be very careful about that. I do not have much more to say about the honourable senator's view of the matter. I suppose that our priorities are different. I thank honourable senators for their support of the legislation. Question resolved in the affirmative. Bill read a second time. Clauses 1 to 3-by leave-taken together, and agreed to. Clause 4 (Interpretation). Senator VIGOR(South Australia)(9.09) —I move: (1) Page 2, sub-clause 4 (1), definition of `eligible activity', after paragraph (e), add the following new paragraph: `(f) the development of systems and processes in relation to an activity referred to in paragraph (a), (b), (c), (d) or (e);'. The Industry Research and Development Bill has a definition of `eligible activity' which is fairly limited. Our particular concern in this area of definition is that of systems and processes which are a potential area for export of high technology and have, in fact, been ignored by the Government. We believe that it is extremely important that help should be given to people who wish to develop systems and processes within the ambit of this Bill. The first Bill we are dealing with, the Industry Research and Development Bill or the Government's industry research and development scheme, is complementary to the 150 per cent tax legislation, and a lot of the definitions are complementary one with the other. However, in the GIRD scheme the Government has said that the only companies which will be eligible to receive the benefits of these grants are in fact companies which are involved in the manufacture of goods, mining operations or operations for recovery of naturally occurring petroleum and natural gas, construction operations relating to building or works, the production of software for computers or for similar equipment, or activities in respect of which a declaration under section 26, which is a ministerial declaration, are eligible activities. Only companies which carry on these eligible activities will be able to claim a grant under this scheme. We believe that there is a need for us to recognise that a number of Australian companies, such as Kimberley Seeds in Western Australia, export systems for reclaiming land and for growing trees. A number of people install factories and have very innovative ways of doing so. We would like to see those people covered. People who are developing systems, say for manufacturing or systems for robotics or processes for chemical production of goods will be covered by this Act if the amendment which I have moved is accepted. Amendment agreed to. Senator VIGOR(South Australia)(9.13) —I move: (2) Page 3, sub-clause 4 (1), definition of `research and development activities', paragraph (a), line 13, after `innovation', insert: `, technology transfer into Australia'. This amendment deals with the definition of research and development activities and involves a slightly different problem. It relates to systematic investigation or experimentation activities that involve innovation or technical risk. I have some problems with the meaning of `technical risk'. I would be very grateful if the Minister would elucidate this so that I and anybody else can understand what he is talking about. I have an idea of what `technical risk' means, but I would like him to cover that so that it is on the public record. My amendment adds the words `technology transfer into Australia' onto the end of those research activities. The `technology transfer into Australia', is relevant to people who are actually trying to set up the initial stages of a research program or who are investigating a technology which is available overseas. They can claim the cost involved in getting that set up. The rest of the clause is acceptable. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.16) —the amendment is not acceptable. First of all Senator Vigor asked me what `technical risk' means. I suppose it means participating in a creative process, which research and development is. Let me explain what it does not mean. If a person decides to rechrome a saucepan, that is not considered a technical risk. Senator Macklin —Oh! Senator BUTTON —I wanted a simple example for the honourable senator. No technical risk is involved. Senator Macklin —We know about chroming. Senator Siddons has filled us in on that. Senator BUTTON —It is not a research and development process. Insofar as Senator Vigor puts his argument about technology transfer into Australia, if there is a technology transfer of information, methodology, or something of that kind which is intrinsic to a research and development process carried out under this legislation, then that is covered. When a person applies to the Industrial Research and Development Board and explains his research and development project to members of the Board they would say: `Look, this element of the proposed piece of research and development arises from a technology transfer from the United States and is part of our cost of doing the complete piece of research and development'. That is covered by the scheme and this amendment is not necessary. We oppose it for that reason. Senator PUPLICK(New South Wales)(9.18) —I am not satisfied with the explanation given by the Minister for Industry, Technology and Commerce as to whether technology transfer costs are properly comprehended within the definition of research and development activities. I believe that the case for investment of public funds in technology transfer is absolutely overwhelming. When one looks at a number of the fields of very high technology and high technology development it will always be the case that 95 per cent, 96 per cent or 97 per cent of critical research is carried out overseas and that the transfer back into Australia and into the Australian manufacturing sector of research and development results which are achieved overseas will be absolutely fundamental to the growth and development of Australian science and technology and research and development in particular. Those who were privileged to hear Sir Gustav Nosal address the forum that was arranged here last week will have heard Sir Gustav at length on the question of technology transfer. I believe that the case that has been made out for the inclusion of technology transfer as a research and development activity is a powerful one. I am certainly inclined to accept the amendment put forward by Senator Vigor, as far as that is concerned. I am a little unclear as to the way in which the clause would read, simply as a result of the way in which the amendment is drawn. If I am correct, it would mean that it would read: `research and development activities' means systematic investigation or experimentation activities- (a) that involve innovation, technology transfer into Australia, or technical risk. If my understanding of the way in which that clause would read is correct, perhaps I may say, on behalf of the Opposition, that we would be inclined to accept that amendment. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.20) —I would caution Senator Puplick against that course. Looking at the definition as a whole-`research and development activities' means systematic investigation or experimentation activities that involve certain things; `innovation or technical risk . . . the object of which is new knowledge' et cetera-if one includes there after `innovation' the words, `technology transfer into Australia', it must be understood that the process of research and development activity inevitably, as I would read the current definition, contains an element of technology transfer. If one puts a scientist on the staff of the company, that involves an element of technology transfer. If one brings in a piece of knowledge from outside, it involves an element of technology transfer. But if one were to rejig this definition so that technology transfer into Australia were seen as an integral part, and an important, spelt out part, of the process of research and development, I think that one would run grave risks of abuse of the legislation, because one would run the risk that people would have an enormously significant piece of research and development done overseas, which is precisely where one does not want it done, and technologically transferred into Australia under the provisions of the expanded definition. We are very cautious about that, and I think, with respect, the Committee ought to be, as well. Senator VIGOR(South Australia)(9.22) —I am convinced by some aspects of what the Minister has said. Our major problem is that this legislation has been presented to us at very short notice, and we have been trying to solve the problems at that short notice. I still feel that some type of acknowledgment of the technology transfer process should be included. We should not accept that research carried out overseas can be brought in holus-bolus at the full price of that research. It is a matter of definition. I would be very pleased to hear Senator Puplick's response to the Minister's statement. Senator PUPLICK(New South Wales)(9.23) —I am not in the process of taking on the run whether Senator Vigor is or is not withdrawing his amendment. In terms of amendments being put forward, there comes a stage at which, acting in the best of goodwill and good faith, my inclination is to continue to support the inclusion of the words proposed in Senator Vigor's amendment. However, I am not prepared to stand around for the rest of the night on shifting sands as far as Australian Democrats amendments are concerned. Nevertheless, to address the points that Senator Button has raised, if there is, indeed, an inevitability of technology transfer in any research and development program-I accept that there is-I am not persuaded that simply saying that in the legislation makes the position qualitatively different, one way or the other. If Senator Button's problem is that a large scale cost will be involved in terms of the transfer of major pieces of technology or major costs of technology transfer into Australia, I am not persuaded that that is, in fact, a major problem, because of the Minister's discretionary powers under the legislation, particularly under clause 20 (1). That sub-section states: The Minister may, from time to time, by notice in writing delivered to the Chairperson and expressed to be given under this section, give directions to the Board with respect to the policies and practices to be followed by the Board in the performance of its functions, and the exercise of its powers, under this Act (including, but without limiting the generality of the foregoing, the policies and practices to be followed by the Board with respect to the entering into by the Board of discretionary grant agreements, generic technology agreements or national interest agreements and the provisions to be included in such agreements), and the Board shall comply with any such directions that are in force. I believe, therefore, that under the whole of clause 20, which is headed `Guidelines for policies and practices of Board', the Minister has sufficient power to prevent abuses of the legislation, and I am inclined to persist with support of Senator Vigor's amendment-if, indeed, it remains Senator Vigor's amendment in the circumstances. Senator VIGOR(South Australia)(9.26) —The Minister has sufficient discretion under the Bill. He has a very large amount of discretion in terms of being able to set up guidelines and to specify exactly what are acceptable eligible activities, and what are new research and development activities. He can specify almost anything. The Bill is completely general. If the Minister finds that there is a problem with wholesale technology transfer, he would be able to act. I wish to stand with the amendment, and we shall divide the Committee if necessary. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.27) —This is a rather important issue. First, in my view, it is not correct to say about a piece of legislation that it does not matter how bad it is so long as the Minister, under clause 20 or some other clause, has some discretion to fix it up. All the speeches in the world are made in this place about giving Ministers discretion to do certain things. What if we had a less than diligent Minister who did not exercise his discretion to fix it up? Senator Macklin —We don't have one. Senator BUTTON —I know that, but Senator Macklin must understand that something might happen to me. I might die of boredom after a few more of his interjections, and then he would have another Minister, and that Minister might not be as diligent as I am in exercising such discretion. With respect, it is not a good argument from a legislative point of view. Senator Vigor wants to include the same amendment in the 150 per cent tax incentive Bill, the Income Tax Assessment Amendment (Research and Development) Bill 1986. He is so concerned about what multinationals might do to this country. Imagine the operation of that provision under the tax incentive Bill. That Bill is market led. Matters are very much within the control of the company concerned. The honourable senator has given us a serve tonight about the evils of the multinationals. They could bring in massive amounts of transferred technology under that legislation, sell it within Australia, and make a squillion out of it, largely at the Australian taxpayers' expense. Is that what Senator Vigor wants? That would be the effect of his amendment to the other legislation and he says that he would make this amendment here in the interests of consistency. I had discussions with Senator Vigor about his amendments, as he well knows, and I agreed to two of them. I agreed to two of them because I thought that they were thoughtful and intelligent amendments. But I appeal to the honourable senator to realise that these other amendments will make this legislation look like a dog's breakfast. That does not reverberate to the credit of anybody in this chamber including the mover of the amendments. One does not want that said about the legislation after it is ultimately passed. There is an inconsistency in what the honourable senator is seeking to do and the arguments he is advancing in support of it. The industrial research and development legislation, I concede, is very tight. It is designed to be pretty specific about the directions of research and development under grants from that Board. We are not in the business of social welfare here, and none of us ought to be, in terms of research and development done in Australia. We are in the business of providing an efficient, well directed scheme. If we make it sloppy around the edges we might get some comfort over a drink with some accountant on a pleasant Friday night, but we would not get any comfort from the research and development community in Australia. I sincerely put it to the honourable senator that this amendment is misdirected in that sense. I ask the honourable senator what he will say about this amendment when the Income Tax Assessment Amendment (Research and Development) Bill reaches the Committee stage. I think that the best way of achieving consistency between the two pieces of legislation is for neither amendment to be moved. Senator VIGOR(South Australia)(9.32) —I accept the Minister's statement about the problems with the Income Tax Assessment Amendment (Research and Development) Bill. In this case it is a granting process which is under the control of the Department of Industry, Technology and Commerce and under very close supervision. In the tax case we do not have this close supervision and I am willing to look at not moving this provision in the case of the tax Bill. I believe that, even though we have this argument for consistency between the two Bills, consistency is not mandatory. Here the final response is under the Minister's control, whereas in the case of the tax Bill we do not have technical people in the Australian Taxation Office who will be able to assess relevance. Under the Income Tax Assessment Amendment (Research and Development) Bill. The person has only to be registered with the granting body as a proper recipient. There is much more control in the Industry Research and Development Bill through the eligible activities than there is in the tax Bill. I will not move this amendment to the tax Bill, but I will to the Industrial Research and Development Bill. Senator PUPLICK(New South Wales)(9.33) —I am interested to have it indicated to me that Senator Vigor is not pursuing the matter in the Income Tax Assessment Amendment (Research and Development) Bill. I suppose that taking these things on the run is part of the fun of the game. Nevertheless, the point which has to be made about the Industry Research and Development Bill is that it seems to have largely grown out of the criticisms which were made of the original 150 per cent tax concession legislation that there was insufficient provision being made for the position of small business and for small innovative companies. Therefore, it seems to me that, since they are the principal beneficiaries of the grants for industry research and development scheme, one of the areas in which they should be encouraged is in the significant area of technology transfer. I am totally unimpressed with the Minister's dire warning-apres moi le deluge-that there will never be another significant, consistent, intelligent and alert Minister for Industry, Technology and Commerce, and that it is all downhill from here on in. If that were the case when we came to matters such as telephone tapping, it would be interesting to see whether Senator Button pursued that argument with the same degree of vigour and the same degree of enthusiasm as he will doubtless bring to the trust me syndrome which will occur. I am minded to continue the support for Senator Vigor's amendment as far as this Bill is concerned, but I can put the Minister's mind at ease on the other Bill since it was not my intention to support Senator Vigor's amendment on that other Bill at any stage. Question put: That the words proposed to be inserted (Senator Vigor's amendment) be inserted. The Committee divided. (The Chairman-Senator D. J. Hamer) Ayes . . . . . . . . . . . 31 Noes . . . . . . . . . . . 26 —— Majority . . . . . . . . . 5 —— Alston, R. K. R. MacGibbon, D. J. Archer, B. R. Messner, A. J. Baume, Peter Newman, J. M. Bjelke-Petersen, F. I. Parer, W. R. Boswell, R. L. D. Puplick, C. J. G. Brownhill, D. G. C. Sanders, N. K. Carrick, Sir John Sheil, G. (Teller)Chipp, D. L. Siddons, J. R. Collard, S. J. Teague, B. C. Crichton-Browne, N. A. Townley, M. Durack, P. D. Vanstone, A. E. Guilfoyle, Dame Margaret Vigor, D. B. Haines, J. Walters, M. S. Hamer, D. J. Watson, J. O. W. Hill, R. Withers, R. G. Lewis, A. W. R Aulich, T. Grimes, D. J. Black, J. R. McClelland, DouglasBolkus, N. McIntosh, G. D. Button, J. N. McKiernan, J. P. Coates, J. Maguire, G. R. Cook, P. F. S. Morris, J. Cooney, B. Reynolds, M. Crowley, R. A. Robertson, E. A. (Teller)Devlin, R. Ryan, S. M. Elstob, R. C. Sibraa, K. W. Evans, Gareth Tate, M. C. Foreman, D. J. Walsh, P. A. Giles, P. J. Zakharov, A. O. Kilgariff, B. F. Coleman, R. N. Jessop, D. S. Childs, B. K. Short, J. R. Colston, M. A. Baume, Michael Gietzelt, A. T. Knowles, S. C. Richardson, G. F. Chaney, F. M. Ray, RobertReid, M. E. Jones, G. N. Question so resolved in the affirmative. Clause, as amended, agreed to. Clause 5 (Extension of Act to external Territories). Senator VIGOR(South Australia)(9.41) —I move: Page 4, clause 5, lines 14 and 15, leave out the clause, insert the following clause: `5. This Act extends to every external Territory.'. This is not a particularly important amendment. However, there does not seem to be any reason why the legislation should be worded in such a way as to enable the Minister to declare the external territories to which the legislation will apply. I ask the Minister to explain why the legislation should be worded in that way. The amendment is aimed at simplifying the wording by extending the legislation to every external territory rather than leaving that decision open for some type of ministerial declaration. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.42) —I apologise to the Committee but I will be circulating an amendment in a minute which will have the same effect as Senator Vigor's amendment but which does not include Norfolk Island. The reason for that is quite simple. The Government of the Territory of Norfolk Island does not like this Commonwealth Parliament imposing bits of legislation on it. It does not want this legislation to apply to the island. As I said, I will be circulating an amendment in a minute. Perhaps Senator Vigor will withdraw his amendment. Senator PUPLICK(New South Wales)(9.43) —The Opposition will be happy to support the amendment that the Minister for Industry, Technology and Commerce (Senator Button) is going to move. However, I am not prepared to allow the opportunity to pass without indicating just how inconsistent the Minister is in coming to us and, on the one hand, saying that the Government of Norfolk Island does not like this legislation and, on the other hand, being prepared to cast aside the clear opposition of the Norfolk Island Assembly in regard to the amendment to apply the Bill of Rights to Norfolk Island as being inconsequential. I think the Minister has some difficulty in explaining the consistency in his sensitivity to the Government of Norfolk Island. He is perfectly prepared to be sensitive on the question of industry research and development grants and he is perfectly prepared to be insensitive in regard to the Bill of Rights. However, on the basis that he is now on the right track as far as Norfolk Island is concerned, we are perfectly prepared to support the amendment which the Minister intends to move. Senator VIGOR(South Australia)(9.44) —I am willing to withdraw my amendment. Amendment-by leave-withdrawn. Consideration of clause 5 postponed. Clauses 6 to 25-by leave-taken together. Senator MACKLIN(Queensland)(9.45) —I have a question to ask of the Minister for Industry, Technology and Commerce in regard to clause 7 (8). I understand that there has been a communication between the Cattle Council of Australia and the Minister with regard to the ability to establish joint ventures with the Australian Meat and Live-Stock Research and Development Corporation. I am informed that the initial approach to the Government was negative-that is, it was not possible to enter into those joint ventures inasmuch as the Australian Meat and Live-Stock Research and Development Corporation is 50 per cent funded by government funds and hence was outlawed because of the proviso that research and development activities funded by government grants are excluded from the concession contained in this Bill. Following further discussions between the Cattle Council and the Minister for Primary Industry (Mr Kerin) and Senator Button, as the Minister responsible for this area, the Cattle Council was given to understand that it was not the case that the Corporation was excluded from those joint ventures. In fact, the Department of Primary Industry specifically wants these types of ventures to take place. There seems to be some confusion on this matter. I think it would be useful in the Committee stage if the Minister could give an answer as to whether or not in this specific case the Australian Meat and Live-Stock Research and Development Corporation might be included in the scope of the Bill. Can the Minister advise me whether or not similar corporations might find themselves in a similar situation? Is this a specific problem which affects this Corporation? Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.48) —I am not able to go into great detail on this but I am advised that the latter proposition put by the Cattle Council of Australia and put to us by the Department of Primary Industry can be accepted on the basis of joint funding and joint benefits. My Department has had discussions with the Department of Primary Industry about how that might be done and we believe it is quite in order. Senator Macklin —It is acceptable under the Bill? Senator BUTTON —Yes. Clauses agreed to. Clause 26 (Eligible activities). Senator VIGOR(South Australia)(9.49) —I move: Page 12, clause 26, line 4, leave out `The Minister may, by notice in writing published in the Gazette,' insert: `The regulations may'. The Australian Democrats are following the general principle of examining the process of parliamentary review of administrative action or delegated legislation in all Bills that we consider. Basically this amendment is aimed at decreasing in this one case only the Minister's discretion to change the legislation without reference to the Parliament. The Minister can determine what is an eligible company. However, we believe that the Parliament should have the right to disallow that determination. The amendment is to make that activity of declaring an eligible activity into a prescribed process and to set it up by regulation. I understand from the Minister for Industry, Technology and Commerce (Senator Button), that he is not happy about this, but I seek from him reasons why he would not want such a very central activity in the Bill to come back to the Parliament for possible disallowance. All the rest of the clauses under which the Minister can declare something in the Commonwealth of Australia Gazette have been agreed to; there is absolutely no objection from the Australian Democrats to those. Senator PUPLICK(New South Wales)(9.51) —The Opposition will not be supporting the amendment moved by Senator Vigor. There is a major inconsistency in attempting to do this in clause 26 but not attempting to do it so in clause 30 and relating it only to discretionary grants and not to generic technology grants. There is a major problem in attempting to have the Parliament make a series of decisions on the question of what is or what is not an eligible activity to be declared for the purposes of this legislation. I do not believe that the Parliament is giving away oversight of a significant power. The Minister has to have the discretion to decide from time to time what is or is not an eligible activity within the discretionary grants part of the legislation. We will have plenty of opportunity, if the matter is gazetted, to debate it. It ought to be debated. Under those circumstances, I do not think that this matter should have to come backwards and forwards every time by method of legislation. The fact that this amendment will put the Minister's power in discretionary grants and the Minister's power in generic technology grants on an entirely different footing is sufficient to persuade the Opposition not to support this amendment. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.52) —The Government does not support the amendment, I suppose in some ways for the reasons Senator Puplick has identified. The gazettal process provides a balance, in the Government's view, between flexibility and accountability and it is consistent with the general provisions of this Bill. The amendment is not supported. Amendment negatived. Clause agreed to. Clauses 27 to 45-by leave-taken together, and agreed to. Clause 46 (Annual Report). Senator VIGOR(South Australia)(9.53) —I move: (5) Page 19, 46 (2) (a), line 3, after `Act' (second occurring), insert: `, being an analysis that deals separately with discretionary grants agreements, generic technology grant agreements and national interest grant agreements'. The idea of this amendment is to improve the reporting facilities under this Bill, to make certain that in reporting the success or otherwise of the program there will be a breakdown of the figures on cost effectiveness and amounts of grants. The grants should be broken down separately into three different categories-discretionary grant agreements, generic technology grant agreements and national interest grant agreements-so that it will be possible to assess separately the effectiveness and the amount of money that is being spent in each of those areas. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.54) —The amendment is acceptable, for the reasons outlined. Amendment agreed to. Clause, as amended, agreed to. Clauses 4 and postponed Clause 5-by leave-reconsidered. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.55) —by leave-I move: (1) Page 3, clause 4 (2) (a) and (b), lines 29 to 32, leave out the paragraphs, insert the following paragraphs: `(a) an external Territory to which this Act extends; and (b) such areas of the sea or seabed adjacent to Australia or to an external Territory to which this Act extends as are prescribed,'. (2) Page 4, clause 5, lines 14 and 15, leave out the clause, insert the following clause: `5. (1) This Act extends to all the external Territories, other than Norfolk Island. (2) If, and so long as, the regulations so prescribe, this Act extends to Norfolk Island.'. I have foreshadowed the Government's view about this matter. I think Senator Puplick agreed with it, but gave me a bit of a chiding on some other peripheral issues, which I think will go away given time. Amendments agreed to. Clauses, as amended, agreed to. Bill reported with amendments; report adopted. Bill (on motion by Senator Button) read a third time. Consideration resumed from 8 May, on motion by Senator Button: That the Bill be now read a second time. Question resolved in the affirmative. Bill read a second time. The Bill. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(9.58) —I tabled an explanatory memorandum relating to the Income Tax Assessment Amendment (Research and Development) Bill 1986. I seek leave to move together the amendments on behalf of the Government. Leave granted. Senator BUTTON —I move: (1) Page 4, clause 7, proposed new sub-section 73b (1), definition of `contracted expenditure', line 25, after institute (first occurring), insert `or the Coal Research Trust Account'. (2) Page 4, clause 7, proposed new sub-section 73b (1), definition of `contracted expenditure', line 25, after `performing', insert `or that trust account'. (3) Page 11, clause 7, proposed new sub-section 73b (21), line 31, after `deduction', insert `for depreciation'. (4) Page 11, clause 7, proposed new sub-section 73b (21), line 32, leave out `under a provision of this Act other than this section'. (5) Page 12, clause 7, proposed new sub-section 73b (21) (b) (ii), line 6, leave out `other', insert `first-mentioned'. (6) Page 12, clause 7, proposed new sub-section 73b (22), line 11, after `deduction', insert `for depreciation'. (7) Page 12, clause 7, proposed new sub-section 73b (22), line 12, leave out `under a provision of this Act other than this section'. I seek leave to incorporate in Hansard a short speech which explains the purpose of these amendments. Leave granted. The speech read as follows- Clause 7 of the Bill as introduced will insert provisions into the income tax law to provide special deductions of up to 150 per cent for certain expenditure incurred by Australian companies in respect of research and development activities carried on in Australia. The first 2 amendments being moved will provide for contributions by eligible companies to the coal research trust account for the funding of R&D activities on the companies' behalf to attract deductions at the rate of 150 per cent, regardless of the level of a company's R&D expenditure in a year of income. Under the provisions of the Bill as it stands, such contributions would attract that rate of deductions only where a company's R&D expenditure for the year of income was $50,000 or more. The other amendments being moved relate to those provisions of the Bill that allow 2 exceptions to the general position that expenditure in respect of which the special deductions have been allowed, or may become allowable, cannot also be allowed as deductions under any other provisions of the income tax law. The first exception is where plant ceases to be used exclusively for R&D activities before its cost is written-off under the concession provided by the Bill. In such a case, the balance may be eligible for deduction under other provisions of the law. The second exception relates to the excess, if any, over the first $10 million of the cost of pilot plant. Where that first $10 million has been written-off under the concession, the balance may attract any other relevant deductions. The amendments will provide for depreciation deductions only to be allowed in the foregoing circumstances in respect of plant expenditure not written-off under the concession. This will ensure certainty in the application of the law in the particular circumstances and will generally be to the advantage of eligible companies. But for the amendments, it would be open to question as to which other provisions may apply. Also, if, for example, the general mining provisions of the income tax law were applied, write-off of the plant would be over the lesser of 10 years of the life of the mine, instead of over a maximum of 5 years under the accelerated depreciation provisions of the law. The amendments will also ensure that, where plant is used for other than research and development activities and is eligible for depreciation deductions, those deductions will become available from the time the R&D concession would otherwise have applied in respect of the plant. I commend the amendments to the committee. Amendments agreed to. Senator VIGOR(South Australia)(10.00) —I move: (1) Page 4, clause 7, proposed new sub-section 73b (1), definition of `deduction acceleration factor', (a) leave out `$20,000', insert: `$2,000'; and (b) leave out paragraphs (a) and (b), insert: `1.5'. This amendment is to clause 7 of the Bill. Basically, my concern is that the Government has a requirement that before people shall get the 150 per cent tax rebate, they shall invest more than $50,000, if the research is done on their own premises, on research activities or research related activities. There is a formula which phases in that amount from $20,000 to $50,000. We feel that small organisations should be given the benefit of doing research on their own premises without subcontracting that research to an external body, which is allowed under another clause of the Bill. We propose that the starting point for being able to claim the 1.5 per cent be from $2,000 upwards, as we believe that this will cover a number of quite small projects and would not place too much of a burden on the Commissioner of Taxation or on the registering body. Senator PUPLICK(New South Wales)(10.02) —The Opposition will not accept the amendment moved by Senator Vigor. I do not believe that research and development to the amount of $2,000 is likely to be carried out on the premises of some company. The deduction which is available to any small company which undertakes research under the value of $20,000 is, in our opinion, adequately provided for by reading proposed new section 73b (13), regarding contracted expenditure, with section 73a (6), of the principal Act. Expenditure under $20,000, in terms of expenditure by small and start-up companies, is deductible-if it is done in an approved research institution and contracted out-at the rate of 150 per cent. We therefore do not regard this as an appropriate amendment. I am conscious of the time constraints and of the Minister's problem in getting this legislation to the House of Representatives. Apart from a couple of matters which I am sure Senator Vigor will want to raise regarding amendment No. 5 which he has circulated, I indicate at this stage that, of the 11 amendments circulated in the name of the Australian Democrats, it is not the intention of the Opposition to support any of them. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(10.04) —The amendment is not acceptable to the Government for reasons of prevention of wastefulness, abuse and all sorts of things like that. The Australian Science and Technology Council, for example, took the view that the figure should be higher than the figure of $20,000 prescribed in the legislation. In respect of registered companies, 25 per cent of research and development expenditure will be by companies with less than 100 employees-that is, small companies. We think the figure proposed in the amendment is ridiculously low. Amendment negatived. Senator VIGOR(South Australia)(10.05) —by leave-I move: (2) Page 5, clause 7, proposed new sub-section 73B (1), definition of `pilot plant', (b), lines 10 to 14, leave out the definition, insert the following definition: ` ``pilot plant'' means an experimental model of plant for use primarily in research and development activities;'. (3) Page 5, clause 7, proposed new sub-section 73B (1), definition of `plant expenditure', line 23, leave out `exclusively'. (4) Page 5, clause 7, proposed new sub-paragraph 73B (1) (a) (ii), definition of `research and development activities', line 29, after `innovation', insert `, technology transfer into Australia'; and (5) Page 5 clause 7, proposed new sub-sub-paragraph 73b (1) (a) (iii) (b), definition of `research and development activities', line 35, after `processes' insert `, systems'. (6) Page 10, clause 7, proposed new sub-section 73B (14) (b), lines 21 and 22, leave out the paragraph. (7) Page 10, clause 7, proposed new paragraph 73B (15), (a) and (b), lines 32 to 38, leave out the paragraphs insert `one-third of the amount of that qualifying plant expenditure'. (8) Page 12, clause 7, proposed new sub-paragraph 73B (23) (e) (i) and (ii), lines 35 to 45, leave out the sub-paragraph insert `the amount ascertained by multiplying the amount by which that written-down value exceeds that consideration receivable by the deduction acceleration factor in relation to the company in relation to the year of income'. (9) Page 17, clause 7, proposed new paragraph 73B (31) (a) line 38, after `exclusively', insert `or in part'. (10) Page 18, clause 7, proposed new paragraph 73B (31) (d), insert the following new paragraph: `(da) the extent to which the plant, building or extension is used for research and development activities; and'. (11) Page 18, clause 7, proposed new paragraphs 73B (33) (a) and (b), lines 41 and 42, leave out the paragraphs, insert `in a manner that is for the benefit of the Australian economy.'. Basically, all of these amendments are aimed, in our view, at improving the nature of the definitions within the Bill and also allowing for plant expenditure to be partially assigned to research rather than exclusively assigned to research. I have decided that I will not pursue amendment No. 4. Most of the proposals contained in amendment Nos 6 and 8 are consequential upon amendment No. 1, which has been defeated. So I will not be pursuing those amendments. I am, however, concerned about amendment No. 11. I want to make a point about that amendment and I seek an undertaking from the Government. My major concern is that the Australian people should benefit from this legislation and the grants which come under it. At page 18 of the Bill, clause 7 in relation to products being sold states: (a) On normal commercial terms; or (b) in a manner that is for the benefit of the Australian economy. I see no reason why one should have in the clause `in the course of normal commercial activity'. I believe that any of the activities that should be carried out should be for the benefit of the Australian economy, if grants or tax allowances are to be given to these people. I seek an undertaking from the Minister on this matter. There are three matters involved. One has to do with partial use of the plant and people getting a partial benefit as a result of partial use of a plant; there is the Australian benefit; and there is the problem of a better definition of what a pilot plant can be used for. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(10.08) —We do not agree that it is a better definition of what a pilot plant can be used for. The Government does not accept any of the amendments. In regard to amendment No. 11 I make the point that Senator Vigor supported this amendment on the basis that the Government, as he put it, would be handing out grants to people and they ought to be for the benefit of the Australian community. He is referring to the wrong piece of legislation. This is the tax incentives legislation. There is no handing out of anything by the Government. It is a market led scheme. I think the honourable senator is referring to the wrong piece of legislation. So the commercial criterion is of the utmost importance. None of the amendments are acceptable. Amendments negatived. Senator VIGOR(South Australia)(10.09) —by leave-I move: Page 8, clause 7, proposed new paragraph 73B (2) (a), line 3, leave out `market research, market testing or market development, or'. Page 8, clause 7, proposed new paragraph 73B (2) (b), line 5, leave out the paragraph. Page 8, clause 7, proposed new paragraph 73B (2) (d), lines 9 and 10, leave out `or stylistic changes' and `processes or production methods'. Page 8, clause 7, proposed new paragraph 73B (2) (e), line 11, leave out the paragraph. Page 8, clause 7, proposed new paragraph 73B (2) (g), lines 13 and 14, leave out the paragraph. The Government has tried to exclude a large number of activities which I believe to be associated with research and which are an integral part of research activities. In particular, it is very important, if we are to produce proper products for overseas markets which are relevant to those markets, and if we are to carry out research to develop those products, that we should carry out proper market research, market testing and market development. I do not wish market research, testing and development to be specifically excluded from the ambit of this Bill. It is also very important that we produce quality products and, if we are doing research into quality control, I believe that that quality control should be able to be claimed as a deductible expense for tax purposes. I am not talking about quality control at the production stage, but quality control during the research stage and the setting up of quality control procedures. We also have here a statement that cosmetic and stylistic changes to process or production methods should not be allowed. As Senator Puplick has pointed out, this seems to be in contradiction to some of the attitudes that the Government has taken in the car industry in terms of grants in that area. It seems to me that a considerable amount of research can be done in terms of better ergonomic suitability of the products we have and that is probably one of the major things that will determine whether our products will be successful in foreign markets. One of the final two paragraphs relates to computer software. I believe that if people develop computer programs or software in the course of research programs for either monitoring or recording information associated with the research, that should be a claimable expense under this scheme. I seek the Minister's views on this subject. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(10.12) —I will state my views very briefly. If honourable senators want a wall to wall system of industry assistance at the taxpayers' expense they will vote for Senator Vigor's amendment because there would be nothing that most thoughtful companies in Australia do that would not be covered by the research and development tax incentive scheme. Marketing, market research, testing, market development, stylistic changes-all those are things which any company worth its salt would do in the normal course of its business. Research and development is not necessarily something which any company would do in the normal course of business; it is something to be encouraged by this legislation. The distinction between research and development and marketing and so on is very important in that regard. The costs of this scheme would be prohibitive if Senator Vigor's words were included. The amendment would be of benefit to some companies but of great detriment to the amount of research and development done in Australia. The same applies to paragraph (d). The Government could not accept this amendment. Senator PUPLICK(New South Wales)(10.13) —I indicate that the Opposition agrees with the analysis that the Minister for Industry, Technology and Commerce has just made of the amendment. We do not support it. In particular, paragraph (d) would be primarily of benefit in areas such as the automotive industry but I believe that section 5 of the Automotive Industry Authority Amendment Act 1985 adequately provides for that particular matter. Therefore I indicate that we would not support the Democrats' amendment. However, we hope that the Minister will continue to keep the question of patents under notice. I hope he will be particularly conscious of the comments made about the operation of the Australian Patent, Trade Marks and Designs Office in the report of Estimates Committee A to the Senate this year. I hope that the Minister will be good enough at some stage to take the control of the Australian Patent Office away from the Department of Science and put it into the Department of Industry, Technology and Commerce where it properly belongs. Perhaps then someone can make sure that it operates efficiently. Senator BUTTON(Victoria-Minister for Industry, Technology and Commerce)(10.15) —I am sorry that I did not respond to that suggestion in Senator Puplick's speech on the second reading of this Bill. I share his concern about the patent process in Australia. With regard to his ultimate suggestion, we will have a look at that. Amendment negatived. Bill, as amended, agreed to. Bill reported with amendments; report adopted. Bill (on motion by Senator Button) read a third time. Consideration resumed. FRINGE BENEFITS TAX ASSESSMENT BILL 1986 Proposed new clause 57a (Provision of Benefits to employees of public benevolent institutions to be exempt). Senator PETER BAUME(New South Wales)(10.17) —Before the Committee rose for the dinner break we were considering an amendment I had proposed to which Senator Haines had suggested some words might need to be added. Senator Haines —I raised a concern about any possibility of people using the amendment in the manner which you suggested to avoid the system. Senator PETER BAUME —Yes, and I undertook to take some advice. I spoke to the officers who are advising the Minister and they indicated that the amendment which I had presented was slightly different in form to that proposed by the Australian Democrats. They said that the form in which we had presented the amendment was more narrowly drawn and, having listened to the arguments, they were not convinced that we needed to add the extra words. I am quite relaxed about that. Senator Haines —If the Treasury is quite happy that this will not cause a flood of pseudo fringe benefits, who am I to argue? Senator PETER BAUME —Yes, I asked the officers that question and that is the advice I obtained. I think the Minister should assure us of that. Senator GRIMES(Tasmania-Minister for Community Services)(10.18) —The Opposition's amendment is as good or as bad as the Australian Democrats' amendment and we do not oppose it. Senator Haines —Good hearted people, to a person. Senator GRIMES —No, we are not good hearted at all. Had I known that the Australian Council for Rehabilitation of Disabled was a registered benevolent organisation, I may have had harsher, more terrible things to say. I think that that organisation is a very good example of what I am talking about. Under this amendment ACROD could-and I dare say it would-provide its executive secretary with a car which he or she could use 24 hours a day for his or her own personal use and be exempt from the fringe benefits tax. Arrangements could be made, and I predict would be made, whereby through a so-called benevolent institution a person could provide individuals in the community with cars-I use this example of cars over and over again-24 hours a day, seven days a week for his own personal use and that would be okay. I think the people who donate to so-called benevolent institutions should know that from now on as a result of this amendment their donations can be used and will be used for that purpose. I am not concerned about the Salvation Army, the St Vincent de Paul Society and those reputable organisations which have always done the right thing in this area. This amendment will open a loophole. I can understand the concern of the Opposition and the Democrats and that they were not happy about what they regarded as protections for what they saw as charitable organisations. I think it is very significant that the place where this was a big issue and a populist issue was at the ACROD conference on the Gold Coast last year. As I said earlier, we will probably come back in a year or two years and have a look at this amendment. We do not oppose it. Honorable senators opposite have all done the right thing. They have all made themselves big people in the eyes of what they see as charitable or benevolent organisations, but they have left a hole big enough for a Mack truck to drive through. We will close it later. Senator WALTERS(Tasmania)(10.21) —Senator Grimes is now venting his spleen, I suppose, against losing the vote on the amendment put by the Opposition and the Australian Democrats. He picked on one organisation and said that it would abuse the system. I am quite sure that it is not beyond the wit of the Government to be able to close any loopholes that could be used by the organisation that Senator Grimes accused it of being able to use. He has to realise that the groups of people we are particularly concerned about are those who work for small salaries and for long hours. Senator Grimes is aware of so many organisations whose members do this. Those were the sorts of organisations that the Government was also getting into its fringe benefits net. Senator Grimes —No. Senator WALTERS —Yes, it was. It is those organisations that we were particularly concerned about. I do not believe that it is beyond the wit of the Australian Taxation Office to be able to close any loopholes and pick up any organisations that are abusing the system. We have heard Senator Walsh in the Senate accuse charities of ripping off the tax system. He did not name just one organisation; he lumped all charities together. I believe that it is that sort of rhetoric that causes the various charities to get their backs up. Senator Grimes should send the Minister for Finance out of the chamber. That would probably be a very good idea. To say that we will be accused by the people making donations of allowing an abuse of the system is a ridiculous statement, because that can be covered by the Taxation Office. Senator GRIMES(Tasmania-Minister for Community Services)(10.24) —I just want to reply very briefly to what Senator Walters was saying. I think she is being quite unfair and I am not venting my spleen on anyone. Under the arrangements that we had before, benevolent institutions which provided cars or accommodation for anyone in the course of their duty in providing a service to the community were exempt from this tax. The people we were worried about were people such as executives who were provided 24 hours a day, seven days a week, with cars to drive around in. The Treasurer (Mr Keating) said previously that we would look at compensating organisations for the services provided in the course of their duties, but we did not believe that charities in the community should be able to provide these sorts of things tax free any more than anyone else. We are accepting the amendment. This amendment gives people carte blanche in that area. If honourable senators opposite are right, if no one abuses the system and if everything is okay, fair enough; it will not affect anybody. I think every honourable senator sitting opposite knows quite well that people will grasp at any opportunity to get over this. I find it very difficult to understand how the Australian Council for Rehabilitation of Disabled qualifies under the amendment and how the Australian Council of Social Service or the Australian Council on the Aging do not. Senator Haines —Ask Treasury. Senator GRIMES —The honourable senator brought it up and took it up at the ACROD conference. She waved her flag and away she went on her white horse, and this is where she has ended up. It was a great populist cause. All sorts of umbrella organisations will be claiming the same sorts of privileges in the future. If we were to decide that ACROD was not a charitable or benevolent organisation and if we were to knock it off, the honourable senator would be the first one to say that that was a terrible thing. I understand that, and we will not do that, because we are political realists, amongst other things. I am not opposed to small charitable organisations. I believe that voluntary organisations and organisations of the type that we are talking about are absolutely crucial to the sensible delivery of services and of social welfare in this community. I just do not like to see them abused and used as tax lurks in the way they have been used in the past. I think this amendment leaves a hole in the legislation where they can do it again. But, if I am wrong, I am wrong. Senator SIDDONS(Victoria)(10.26) —The comments of the Minister upset me a little also in the sense that I am bound to say that in the discussions and negotiations we had with the Government late last year, a firm undertaking was given that existing genuine charitable organisations would not be seriously disadvantaged. There was very little of that in the legislation that the Government brought down. I believe that it did not honour its original undertaking. If this amendment is a little looser than the Government would have liked, it has only itself to blame. It should have paid attention to this question at the time of preparing the legislation. Question resolved in the affirmative. Proposed new clause agreed to. Proposed new clause 57B (Provision of benefits to employees of scientific, charitable or public educational institutions to be exempt). Senator PETER BAUME(New South Wales)(10.27) —I move: Page 46, after new clause 57A, insert the following new clause: ``Provision of benefits to employees of scientific, charitable or public educational institutions to be exempt ``57B. (1) Where a scientific, charitable or public educational institution provides a benefit to an employee of the institution, the benefit is an exempt benefit. ``(2) For the purposes of sub-section (1), `scientific, charitable or public educational institution' has the same meaning as it has in paragraph 23 (e) of the Income Tax Assessment Act 1936, but does not include a body the income of which is exempt from income tax by reason of any other paragraph of that section.''. Earlier Senator Haines drew attention to the problems associated with section 23 (e) of the Income Tax Assessment Act 1936 and to the variety of organisations which are covered under the definition of charities. We are very concerned about the situation which may face certain schools. I wish to mention the problem. In any one town in a remote area we may have two schools-a government school and a non-government school. For example, subsidised housing may be available at both schools. We are concerned with regard not only to the question of housing but also the other things that may be regarded as fringe benefits for which there may be a penalty which may fall upon the providers of non-government education. They operate as non-profit organisations. Senator Haines —Like Timbertop. Senator PETER BAUME —The honourable senator interjects, but I remind her that in the case of non-government education in Australia, seven students out of eight are in the Catholic education system. If we are talking about non-government education, to be fair, in the case of 87 per cent of those involved we are talking about Catholic education. The problems I am talking about will fall upon the Catholic education systems. Two weeks ago in Western Australia I talked to members of the staff at the Catholic Education Office. They are concerned about the effect of the fringe benefits tax upon the operation of their system. We have therefore moved this second amendment to pick up a number of organisations, not least of which are the Catholic schools of Australia and, indeed, the other non-government schools. I also believe that there are other charitable organisations, and I listened to the list that Senator Haines read out. While it ranged widely I thought most of them were organisations with merit and most of them were organisations which we would not want to see penalised. The amendment which we have proposed seeks to cover scientific organisations, charitable organisations and public educational institutions. Consideration interrupted. The CHAIRMAN —Order! It being 10.30 p.m., under sessional order I put the question: That I do now leave the chair and report to the Senate. Question resolved in the affirmative. The Chairman having reported accordingly- The PRESIDENT —The question is: That the Senate do now adjourn. Senator VANSTONE(South Australia)(10.31) —Tonight I wish to raise the matter of appointments to public office. Many people wish to make points with respect to appointments to public office. The last time I recall such comments being made in this chamber they referred to the Constitutional Commission and the failure of the Government to take the opportunity to appoint a significant number of women to that Commission. I do not believe that all appointments to public office in statutory authorities and commissions should be political neuters. I quite accept that there are occasions when people who have acquired political skills from either side should have the skills that they have acquired used in some other area to serve the community. In the United Kingdom such appointments are very common but in the halls surrounding this chamber-referred to by some as the corridors of power but which might otherwise be referred to as the whirlpools of rumour-rumours have started to fly. The question has been raised of impending government appointments and who will go where. In particular, rumours relate to the person whom some describe as the arch priest of spontaneous moral indignation. This person is also sometimes referred to as the expert of predetermined moral outrage. This person, who took 20 years to decide he was in the wrong Party, is none other than Senator Chipp. Senator Chipp coined the phrase: `We should keep the bastards honest'. Speculation is now mounting that Senator Chipp is about to sell, or has already sold, his birthright in that respect. Rumour has it that his time has come and that, within six or 12 months-honourable senators can place various bets depending on the period that they put on it-Senator Chipp will retire. I raise the matter of rumours in the Senate because I think Senator Chipp should know that these rumours are circulating about him, and, accordingly, he will then have an opportunity publicly to clear the air with respect to these rumours and to put the situation straight. I think he should be telling us whether he wants to retire, and he should be telling us when. Will he retire before the next election or will he wait until after the next election in the hope that he gets back; retire a month, two months or six months after that and have a casual vacancy that ensures that we have an Australian Democrat in the Senate for just a little longer than most of us would like to see? I am sure that Senator Chipp will take the opportunity to respond to these comments at a later stage. But having heard the rumours I turned my mind to exactly what sort of position he may be interested in. Of course, he would not be interested in political patronage because back in 1983 he made a very nice speech about the Australian Broadcasting Corporation and indicated that he did not want to return to the bad old days of jobs for the boys. Some other people have been so unkind as to suggest that he will do endorsements for private companies. The one that has been suggested to me is the Wrigley's chewing gum company because, as his behaviour in this place indicates, he must be a very good customer. Other suggestions have been that Sir Nicholas Shehadie's appointment is coming to a close and that Senator Chipp might like to move off to the Special Broadcasting Service. Perhaps he would like a position on the Board of Qantas Airways Ltd or Trans Australia Airlines or the National Library of Australia. Perhaps when the Human Rights and Equal Opportunity Commission is formed-if it is-Senator Chipp would like a position there. There are numerous positions that Senator Chipp could have: I am sure that he would be interested in a position on the Film Censorship Board or on the Australian Science and Technology Council. All these areas that I mention relate to areas of Senator Chipp's interest. Perhaps he would like a position on the Commonwealth Scientific and Industrial Research Organisation or its advisory council. Perhaps the Commission for the Future would provide an interesting sideline. It is pointless to go on and speculate through the whole list of government appointments that could come up in the relatively near future and which Senator Chipp could accept were the offer to be made. If a deal has been done between Senator Chipp and the Government for a particular appointment some would say that it makes what is referred to as the Gair affair and the night of the long prawns spring back into the minds of all Australians. We all know that some, if not all, of the other Democrats are hovering around the Democrats' throne; so presumably they are keen to see him go. I take this opportunity to air these rumours-namely, that Senator Chipp is about to be bought off by the Government with a plush job-- The PRESIDENT —Order! The honourable senator is casting aspersions against a member of the Senate. Under standing order 418 that phrase is highly improper and I ask the honourable senator to withdraw. Senator VANSTONE —I withdraw that phrase. Perhaps I will put it this way: There are rumours around that Senator Chipp is about to be offered a plush job and that he is seriously considering accepting that job. I raise this matter in the Senate tonight so that the rumours can be aired publicly and on the record and to give Senator Chipp an opportunity at a later stage to come and tell the Senate and to put on the record exactly what is his position. Senator NEWMAN(Tasmania)(10.36) —I rise to speak tonight on a matter of concern to my electorate-namely, the threat to the airline services to the Bass Strait islands. The Minister for Aviation (Mr Peter Morris) announced recently the adoption by government of an aviation cost recovery policy plan to apply from 1 July 1986 for the use of aviation facilities and services provided by the Federal Government. Airlines of Tasmania Pty Ltd, which flies regularly to the Bass Strait islands and the west coast and north west of Tasmania, is facing a huge increase as a result of Federal Government action which it can ill afford. This airline is a small commuter airline which carried approximately 38,000 passengers in 1984-85 and a modest profit has been expected for the first time this year. The airline already pays $60,000 per annum for the use of airports, registration of planes, et cetera. As a consequence of the Minister's decision the charges for this little airline will go from $60,000 to over $150,000 in the first year. This amount of $150,000 is the amount which will be due after allowance of a $2m subsidy package to help country commuter airlines during the transition to the new charging arrangements. Airlines of Tasmania will expect to receive its share of the $2m which is to be distributed between 29 commuter airlines in Australia; that is an average of only $68,000 each. In 1987, therefore, it will be expected to pay approximately $150,000. In 1988, with the temporary assistance removed, the charges will go to $340,000. Let us survey that situation again. Airlines of Tasmania is being expected to move from $60,000 to $340,000 in just two years. That is a jump of 466.6 per cent in charges over two years. Only a government without any understanding of small business would impose such sudden increases in governmental charges on small businesses. I am talking about a business with an annual turnover of less than $3m. The company has claimed that it is becoming a tax collection agency for the Government. I remind the Government that it is not just the little airline that will suffer from this sudden huge imposition of extra charges. The people of Flinders and King Islands have no other alternative means of transport off the islands but air. The people of Flinders Island are totally dependent on Airlines of Tasmania Pty Ltd for regular transport to hospital, the doctor, the dentist, schools, stock and station agents, shops et cetera. The telephone calls to the Tasmanian mainland are subscriber trunk dialling calls and it is interesting to note that even Launceston Airport in the meteorological report which was released today is described as an isolated provincial airport. How much more isolated are the people of the Bass Strait islands? They will obviously have to face increased fares in the region of 5 per cent to 7 per cent. The Independent Air Fares Committee which sets fares is duty bound to include these costs in its calculations. There is no possibility that they can be absorbed by the airline. If numbers of passengers drop as a result of the increase in air fares, so too will the frequency of services have to be reduced, thus increasing the isolation of the islanders. As if the increase in costs is not bad enough, the islanders need their only airstrip upgraded. It is ironic that in my first visit to Flinders Island since becoming a senator a few weeks ago, one of the primary concerns of the islanders was the need for the upgrading and night lighting of the airstrip at Whitemark. These people are entirely dependent upon air travel, but have been trying in vain to have their runway resheeted. They need night lighting which now is possible since the introduction of hydro-electric power to the island which would enable the local hills to be lit at night. Night lighting would be invaluable in enabling existing services to be more flexible and to enable better utilisation of the flying hours and the available aircraft. It goes without saying that it would assist greatly in the constant air-sea rescues which take place in Bass Strait and also in the service of the Flying Doctor. The local hospital on the island covers cases of small emergencies and medical cases. All maternity cases and serious casualties are evacuated to the Tasmanian mainland. Considerable amounts of freight are taken by small commuter airlines to and from the islands. The freight will also be required to carry the increased charges generated by the Government. Speedy carriage of perishables for consumption on the island and freight of seafoods away from the islands is imperative. I remind the Government that these increases come on the heels of the withdrawal last year of the 10 per cent subsidy on air fares from Tasmania to the mainland. The islanders can thus justifiably claim to have been doubly disadvantaged. While I can applaud attempts to reduce the costs of government expenditure and trust that the Government will make serious attempts to reduce the size of its deficit, I call on the Government to reconsider the means by which these charges will be implemented. Bearing in mind the isolation of the islanders and their dependence on air transport, I ask the Government to look once again at the speed at which these new impositions will be placed on the very small commuter airlines in isolated areas. Senator REID(Australian Capital Territory)(10.45) —I wish to refer tonight to the plight of many in the Australian Public Service who are in the category of being redeployed and the difficulties they face in obtaining other employment. I am not for one minute suggesting that it is an easy problem for management in the Public Service, but I want to stress the problems of those who find themselves in this situation. It has happened to a large number of people in recent times. It covers a number of departments that I know of. As I said, I am not suggesting that the departments are not trying to solve the problem. I ask that the Minister responsible for the Public Service take up the matter with the Public Service Board and perhaps work out some guidelines and some principles which would operate to assist those who find themselves in the category of being redeployed and without a meaningful job. There are two men in the Department of Territories in particular whom I thought I would use by way of example. I think both of them were invalided out of the remand centre. That is a particularly stressful place for them to have been employed. One man was then offered and accepted a Third Division status position as a clerk class 2/3 in the Department of Sport, Recreation and Tourism. He held this position for some time until he was told he was incorrectly placed and was reverted to a base grade clerk. He said: This position was quite unsuitable and I was informed that I would not be able to work in that type of environment. He did some courses at the Reid technical and further education college to occupy himself and to give him additional interest. As a result he lost about $7,000 in salary. The Department also stopped his first aid allowance as he was no longer in a permanent position. He said: All I have ever asked for is a suitable permanent position and to retain pay similar to my income whilst working at the Remand Centre. I have had nothing but good references from each section of the Department that has used my services. It is a fact that as a Redeployed Officer I am disadvantaged and cannot be given higher duties although I have seen others within the system rise rapidly through the ranks. It seems that while a person is in a status of being redeployed it is almost impossible to apply for another position and get any form of advancement. The problem is that after a period people feel that nobody cares about them. That may not, in fact, be the case, it may be that the Department is unable to do anything. These men feel that they are just on the scrapheap of humanity and there is nothing left for them. It is frustrating, it causes additional stress and I think it has an impact on their families as well. It is often suggested that they go back to the Commonwealth Medical Officer, get a sick note to cover being away, or all sorts of devices to, in a sense, almost fill in time. Again, this man refers to the frustration of applying for positions. He has served with the Scout organisation for a very long time in a number of countries before coming to the Australian Capital Territory and he has a record of service in sporting fields. He has not bludged along on the system. He says that all he wants is a meaningful job. The other case history I have is similar. It concerns a man of 55 years of age. In many respects it is perhaps worse for a man at that age to find himself without a permanent position, unattached and to be redeployed. He said to me that under the system redeployees have no chance. That is the pity of it. They really feel that there is very little left to live for. He also said that to be redeployed makes working life totally meaningless. I am not blaming the departments because perhaps they do not have a meaningful job to offer. I think it is a matter of looking at the policy that governs the situation of redeployment and trying to find a system which can make life meaningful for those in the Public Service who find themselves in that category. It may only be that they cannot work in a particular type of employment. Many have repetitive strain injuries. A number of bus drivers have been stressed and have been told not to drive buses any more. I think greater effort needs to be made to make life meaningful for these people so that they avoid the frustration and stress of being redeployed and feeling that they have been left behind. Senator RYAN(Australian Capital Territory-Minister for Education)(10.48) —Senator Reid has raised matters concerning the Australian Public Service and redeployment. I will refer that to the relevant Minister. Senator Newman has raised matters concerning airline charges. I will also refer that to the relevant Minister. Senator Vanstone raised matters concerning the alleged motives of Senator Chipp in a number of matters. I am a little distressed that Senator Vanstone has raised those matters. In the absence of Senator Chipp or any representatives of his Party, obviously I can make no comment on them, but I hope that Senator Chipp will have the opportunity to respond to what seemed to me to be fairly serious allegations and perhaps allegations that should not have been raised in the absence of Australian Democrat senators. Question resolved in the affirmative. Senate adjourned at 10.49 p.m. The following papers were tabled: Administrative Decisions (Judicial Review) Act-Regulation-Statutory Rules 1986 No. 108. Bounty (Penicillin) Act-Regulations-Statutory Rules 1986 No. 115. Commonwealth Employees (Redeployment and Retirement) Act-Regulation-Statutory Rules 1986 No. 114. Commonwealth Serum Laboratories Act-Regulations-Statutory Rules 1986 No. 112. International Organizations (Privileges and Immunities) Act-Regulation-Statutory Rules 1986 No. 111. Long Service Leave (Commonwealth Employees) Act-Regulations- Statutory Rules 1986 No. 113. Overseas Telecommunications Act-Regulation-Statutory Rules 1986 No. 109. Satellite Communications Act-Regulations-Statutory Rules 1986 No. 110. Seat of Government (Administration) Act- Ordinances 1986- No. 8-Registration of Births, Deaths and Marriages (Amendment). No. 9-Co-operative Societies (Amendment). No. 10-Co-operative Societies (Amendment) (No. 2). No. 11-Remuneration (Amendment). Regulations 1986- No. 1-(Co-operative Societies Ordinance). No. 2-(Co-operative Societies Ordinance).