BRIEFING BOOK KEY ISSUES FOR THE 45TH PARLIAMENT © Commonwealth of 2016

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i PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Foreword by the Parliamentary Librarian

that were prominent during the election campaign or in the legislative agenda flagged by the Government. Others are chosen on the basis of milestones occurring during the early part of the parliament. Lastly, we have picked some longer term trends that may be of interest to Senators and Members.

We recognise the challenges that Senators and Members face in staying abreast of the deluge of information and opinion that flows into Parliament House. In a fast-moving political debate, a significant challenge is to keep track of the history of an issue—the events, reports, inquiries and Welcome to the 45th Parliament legislative amendments that have led to the current position. These briefings aim to The Library’s role is to provide high give this context in a succinct overview. quality information, analysis and advice to support you in your parliamentary In doing so, the Briefing Book also and representational roles. serves to highlight something of the breadth of specialist expertise among We offer a wide range of services and the Library’s researchers which is resources to help you navigate the myriad of available to parliamentarians. issues which you face as parliamentarians. This includes a dedicated research service You and your staff can also draw on the that is experienced in providing confidential, wide range of information services offered by impartial and authoritative responses to the Library, including news services, social your questions. We also publish a variety media analysis tools, and academic and of research papers on topical issues and technical journals. In this IT age, we also detailed analyses of legislation before the should not forget the Library’s print books, chambers, all written with your needs in mind. which are continually curated to ensure the collection remains up to date and relevant. As we do for each new parliament, the Library has prepared a volume providing The Parliamentary Library exists exclusively snapshots of issues expected to figure during to serve the Australian Parliament. We the Parliament’s first months. The articles do our utmost to deliver the information, give a high level perspective of key public analysis and advice that you need and policy issues, including relevant background, in the format you need it, to meet the context and legislative history as well as often difficult timeframes required by outlining some of the policy and legislative parliamentary business. I encourage you directions raised in the public debate. to discuss your needs with our staff and to explore what our services have to offer. The Briefing Book is organised in broad themes, covering the gamut of public policy issues, from schools funding to foreign Dr Dianne Heriot affairs. Many of the articles reflect issues Parliamentary Librarian

ii Contents

Foreword by the Parliamentary Librarian ii Introduction to the Parliamentary Library vi Library research contacts viii

The 45th Parliament 1 The 2016 federal election 2 Senate reform and the 2016 Senate election 6 at federal elections 10

Australia by numbers 13 Australia in pictures 14 Australia’s trade in figures 16 Trends in apprenticeships and traineeships 20 The Australian Government’s debt position 22 Employment in Australia 24

The national economy 29 Insolvency laws in Australia 30 Influencing decisions to retire 32 Influences on superannuation policy settings 34 Competition policy 36

Public finances 39 Tax expenditures 40 Paying for the National Disability Insurance Scheme 42 The Australian Public Service 44 Government procurement and free trade agreements 48

iii PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Australian society 51 The future of school funding 52 Early childhood education and care 55 Increasing participation in tertiary education 58 Aged care—reforming the aged care system 61 Medicare and health system challenges 63 A new way to address chronic disease in primary care 66 Migration—Australian migration flows and population 69 Migration—issues for Australia’s migration program 72 Immigration—issues for Australia’s humanitarian program 74 Welfare—what does it cost? 77 Welfare—where to for reform? 79 Gambling—a reprise for reform? 83 Housing affordability in Australia 86 Employment—Measuring and improving outcomes for young Australians 90 Closing the Gap 94

Australia’s environment 97 Climate change—a science overview 98 Climate Change—the international approach 102 Climate change—reducing Australia’s emissions 104 Commonwealth Environmental Regulation 108 Great Barrier Reef 110 Marine environment 113 Water management 117 Land and Forests 119

Infrastructure, energy and resources 123 Energy market challenges 124 Renewable energy policy: retreat, renewal and revitalisation? 128 National Broadband Network 131 Infrastructure decision making 133 Revenue from road use 135 Financing infrastructure by value capture 137 Unconventional gas 139 Radioactive waste management 142

iv Australia in the world 145 Australia and the South China Sea: debates and dilemmas 146 China’s ‘One Belt, One Road’ initiative 148 The 19th National Congress of China’s Communist Party 152 External powers in the Pacific: implications for Australia 154 Australia and Iran: post-nuclear agreement 156 United Nations: whither reform? 158 Iraq and Syria: far from simple 162 Defence capability 166 The current state of trade policies in Australia 168

Law, justice and national security 171 Countering terrorism and violent extremism 172 National security and counter-terrorism laws 176 National security—cybersecurity 179 Money laundering and terrorism financing 181 Corruption and integrity issues 184 Same-sex marriage 188 The Commonwealth’s role in animal welfare 190 Regulating live exports 192 Family law reform and family violence 194

v PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Introduction to the Parliamentary Library

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vii PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Library research contacts

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viii ix PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT THE 45TH PARLIAMENT

Image ID: 415631944, Copyright: FiledIMAGE, Image ID: 1239126, Copyright: Christopher Meder 1 The 2016 federal election Dr Damon Muller, Politics and Public Administration

and Canning. It was calculated to be a fairly safe notional Liberal Party seat. Key Issue In NSW the division of Hunter was The 2016 federal election was the first abolished, with Charlton being renamed election in almost Hunter. The division of Throsby was 30 years. renamed Whitlam, in honour of the late former Prime Minister Gough Whitlam. The election was called due to industrial relations legislation, however In the ACT the division of Fraser (not Medicare emerged as the most named after the late former Prime Minister prominent issue in the campaign. Malcolm Fraser) was renamed Fenner, allowing the name Fraser to be assigned The Government was returned with to another division in the future in honour a reduced majority of 76 of the 150 of former Prime Minister Fraser. House of Representatives seats, losing 14 seats, and with a two party preferred count of 50.36 per cent. Timeline On Sunday 8 May Prime Minister Turnbull announced that the 2016 federal election The 2016 federal election returned the would be held on 2 July 2016. government with a much reduced majority of, at the time of writing, 76 seats Both Houses of Parliament were dissolved in the 150 seat House of Representatives. on 9 May, and writs for the election were issued one week later, due to be returned on 8 August 2016. Polling day Redistributions was 2 July 2016, and the first House of A number of electoral redistributions fell Representatives seat was declared one due in the 44th Parliament, including New week later on 9 July. The first Senate results, South Wales (NSW), (WA), for the NT, were announced on 25 July. and the Australian Capital Territory (ACT). Redistributions were also due for the Northern Electoral participation Territory (NT) and Tasmania, but were deferred due to the proximity of the election. Due to the length of the election period, the writs were issued a week after dissolving the The Electoral Commissioner’s November Parliament. As the close of rolls is fixed atone 2014 entitlement determination found week after the writs are issued, this allowed that population change in NSW and WA an extended period for voters to be enrolled resulted in NSW losing one seat and after the announcement of the election. WA gaining one seat, with no change in the overall total of 150 seats. Perhaps partly due to the longer than usual close of rolls period, but also partly due to The new Western Australian seat of Burt the Australian Electoral Commission’s (AEC’s) was created out of parts of the existing direct enrolment programs, the number of divisions of Swan, Tangney, Hasluck people enrolled for the 2016 federal election

2 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT reached over 15.6 million, an increase of election. In a double dissolution the Senate almost a million voters since the 2013 federal is also dissolved, and all 76 senators for election. The AEC reported that 95 per cent of the states and territories face election. For eligible Australians were enrolled, compared more details about the effect of the double to 92.4 per cent at the 2013 election. dissolution on the Senate election, see the related Briefing Book article ‘The new Senate One consequence of this increase in voting system and the Senate result’. the enrolment rate was a corresponding decrease in the turnout rate (the proportion The ‘triggers’ of enrolled people who voted). At just under 91 per cent, the turnout rate was the The specific ‘trigger’ bills that led to the lowest since the introduction of compulsory 2016 double dissolution election related voting in 1924. The turnout rate at the to industrial relations. The three bills that 2013 election was 93.23 per cent. were listed in the proclamation dissolving both Houses of Parliament were the: While the turnout rate was down, the higher enrolment rate meant that a  Building and Construction Industry slightly higher proportion of the eligible (Consequential and Transitional Provisions) population voted (Parliamentary Library Bill 2013 calculations indicate 86.27 per cent in 2016  Building and Construction Industry compared to 86.19 per cent in 2013). (Improving Productivity) Bill 2013 and the  Fair Work (Registered Organisations) The double dissolution Amendment Bill 2014

The 2016 federal election was the first The Constitution requires that a double double dissolution election in 29 years, and dissolution be held at least six months only the seventh since Federation. Previous before the expiry of the term of the House of double dissolution elections were held in Representatives, meaning that the dissolution 1914, 1951, 1974, 1975, 1983 and 1987. had to occur prior to 11 May 2016.

A double dissolution is a mechanism set out Proroguing the Parliament in section 57 of the Australian Constitution to resolve fundamental disagreements On 21 March 2016 the Prime Minister advised over legislation between the House of the Governor-General to prorogue the Representatives and the Senate. Parliament; the Governor-General accordingly prorogued the 44th Parliament and ended its Legislation becomes a ‘trigger’ for a double first session on 15 April. The Parliament was dissolution election under section 57 if the summoned to meet again to commence its Senate twice rejects, fails to pass, or passes second session on 18 April 2016. This was the the legislation with amendments unacceptable first prorogation and commencement of a new to the House of Representatives, with more session prior to an election in almost 40 years. than three months between the first and second introduction in the . The Senate considered the Prime Minister’s nominated Bills amongst its first pieces of At a normal election only the House of business when it returned on 18 April 2016, Representatives is dissolved, with all negating both the Australian Building and members of the House of Representatives, Construction Commission (ABCC) Bills the two senators for each of the territories, that day. The next day the Prime Minister and half of the senators for each state, facing announced that he would be seeking a

3 double dissolution of the Parliament from elector’s own division—once again made the Governor-General, and nominated his up the largest proportion of early votes. preferred election date of 2 July 2016. Figure 1: Pre-poll voting by day, 2013 and The campaign 2016 federal election There were 55 days between the Prime Minister announcing the election and polling day, and no single issue dominated the lengthy campaign. Some topics (for example milk prices) were topical early in the campaign, but had faded by polling day. Other issues that arose during the campaign included penalty rates, economic management, marriage equality, negative gearing and housing affordability, and asylum seekers.

The topic that had the most resonance Source: Parliamentary Library based on AEC data. by the end of the campaign was the ’s (ALP’s) claim that a returned Coalition government would privatise Medicare, which became While pre-poll ordinary votes draw most of known as the ‘Mediscare’ campaign. the attention, the long-established In his election night speech, the Prime institution of postal voting also continued Minister labelled the Mediscare campaign to see a rise in numbers. The 2016 federal ‘some of the most systematic, well- election saw 1.2 million postal votes, up funded lies ever peddled in Australia’. from 1.1 million in 2013, with over 8.5 per cent of the votes cast being postal votes. The subject of the ABCC—the Prime Minister’s nominated legislative impetus Postal votes can be received and entered into behind the election—was not a major the count up until 13 days after polling day. topic of debate in the campaign. Postal votes require a much more involved scrutiny process before the vote can be entered into the count, unlike ordinary pre- Early voting poll votes which are entered into the count like an ordinary vote taken on election day The continued rise of pre-poll voting and are usually all counted on election night. The 2016 federal election continued the trend seen in the past several elections The steady increase in postal voting is a of increasing numbers of voters choosing significant contributor to the delay in declaring to cast their vote early with 31 per cent the result of the election particularly given that of the votes were cast before polling postal votes were essential to the final result. day in 2016 around 4.5 million votes, according to Parliamentary Library As the ordinary votes, which are counted calculations. This compares to 26 per sooner, and the postal votes, which are cent, or 3.6 million, votes in 2013. counted later, tend to favour different parties in different ways, the high number Pre-poll ordinary votes—those early votes of postal votes was largely responsible cast at a pre-poll voting centre in the for early fears of a hung parliament.

4 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 2: Early voting over recent federal elections

Source: Parliamentary Library based on AEC data

The results (Denison, Tas.) retained their seats. The Palmer United Party (PUP) lost its single seat In the House of Representatives, the final (Fairfax, Qld) to the Liberal National Party. saw the Liberal National Coalition win a total of 76 House of Representatives seats, While not the finalised result, the Coalition down from 90 seats at the 2013 election. received a national two-party preferred vote of Ten of those 76 seats were won by The 50.36 per cent, a swing against it of 3.13 per Nationals, an increase of one since 2013. cent, and the ALP received 49.64 per cent.

Due to the close margin of the original Nationally, NXT achieved a vote of 1.85 per count of only 8 votes, the AEC ordered cent in its first outing as a party contesting a re-count in the division of Herbert. federal lower house seats. The Greens After the recount Herbert was won by received a national swing towards them the ALP by a margin of 37 votes. of 1.58 per cent and PUP experienced a 5.49 per cent swing against it. Including Herbert, the ALP won 69 seats, up from 55 at the 2013 election. The Greens At the time of publication, there were not retained their one seat (Melbourne, Vic.), as enough complete Senate results to include. did Katter’s Australia Party (Kennedy, Qld).

The Nick Xenophon Team (NXT) won one seat in the lower house from the Liberal Party (Mayo, SA), and the independents Cathy McGowan (Indi, Vic.) and Andrew Wilkie

5 Senate voting reform and the 2016 Senate election Dr Damon Muller, Politics and Public Administration

‘micro-parties’ on very small primary votes. This result was perceived by some as a Key Issue perverse outcome of the Senate voting system. From 1984 parties had been able The Senate voting system was to submit group voting tickets, and voters changed shortly before the 2016 could elect to use a party’s to distribute election to allow optional preferential their preferences by voting ‘1’ for that voting above and below the line. party above the line on the paper.

The new voting system was Originally introduced to reduce the rate of unsuccessfully challenged informal voting in the Senate, the group in the High Court. voting tickets were increasingly used to trade preferences between groups of parties in a The Tasmanian Senate count has way that was largely opaque to voters. It has resulted in the unprecedented been argued that this pooling of preferences election of a senator on the between small parties led to results which basis of below the line votes. did not best represent the will of the voters.

During its post-2013 election inquiry the Joint Standing Committee on Electoral Matters The 2016 Senate election was (JSCEM) released an interim report in May distinctive in a number of ways: 2014 that recommended substantial changes to the Senate voting system. Significant  the election was the first to be held after recommendations included abolishing reforms to the Senate voting system— group voting tickets and implementing legislated only months before the election optional preferential voting both above and was called—that abolished group below the line on the Senate ballot paper. voting tickets and introduced optional preferential voting to the ballot paper In February 2016 the Government introduced  the election was the first federal election legislation to amend the Commonwealth where computerised ballot paper Electoral Act 1918 (the CEA)—the scanning was an essential part of Commonwealth Electoral Amendment Bill counting the ballot papers and 2016. Following the longest continuous  the 2016 election was the first double sitting of the Senate (at almost 29 hours dissolution since 1987 and only the straight), the Bill passed both Houses with seventh double dissolution election— a number of amendments on 18 March where all 12 senators from each state 2016 and was assented to on 21 March. were elected—since Federation. The most significant element of the Senate reform Commonwealth Electoral Amendment Act 2016 is to implement optional preferential A notable outcome of the 2013 election voting both above and below the line was the election of a number of previously on the Senate ballot paper. Voters are unknown candidates to the Senate from now instructed to complete at least six

6 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT preferences above the line or at least 12 different methods of voting. Section 9 of the below the line; saving provisions would allow Australian Constitution requires the voting votes that expressed fewer preferences to ‘method … be uniform for all the States’. be counted. In a unanimous judgement delivered on The effect of this is that the preferences of 12 May 2016 the High Court dismissed voters who vote above the line now only the case. apply to the groups that voters express explicit preferences for, leaving voters in control of how far their preferences flow. Counting the Senate ballot papers Group voting tickets no longer apply. The implications for counting the Senate ballot papers are substantial. Under the The amending Act also provides for former system in place the inclusion of party logos alongside from 1984 to 2013, most voters (96 per the party name on ballot papers. This cent in 2013) voted 1 above the line. appears to be in response to suggestions some voters were confused by party To count the votes, the number of first names in the 2013 election. preference above the line votes each group received was recorded first. The ballot The introduction of these significant reforms papers that contained below the line votes only three months before the announcement (around 470,000 in 2013) were then sent of the election led to concerns about the to a central location in each state where ability of the Australian Electoral Commission all of the preferences were entered into a (AEC) to successfully implement the changes computer. Once the below the line votes and conduct the election. These concerns were entered the computer then applied followed the overturned 2013 Western the group voting tickets to the above the election where it was found line votes, combined this with the below that security and logistical failures may have the line votes, and conducted the count. contributed to the loss of ballot papers. In contrast, under the new Senate voting The High Court challenge system each of the roughly 15 million ballot papers requires at least six (for Following the passage of the Senate above the line) or 12 (for below the line) voting reforms through the Parliament, votes to be entered into the computer. South Australian Family First Senator Bob Day lodged a High Court The AEC has elected to electronically challenge against the changes. scan the ballot papers to assist with the 2016 Senate election count, due to the Senator Day argued that the changes to time it would take to manually enter all of the CEA were unconstitutional for a number the preferences. According to the AEC: of reasons, including that voters would be disenfranchised if their votes exhausted The AEC is using a semi-automated (when there are no more preferences on process to conduct the Senate count, a ballot paper for candidates remaining in scanning Senate ballot papers and the count, and the ballot paper is removed using optical character recognition from the count) because they had not technology to capture preferences. preferenced a winning candidate, and that Once captured, these preferences are above and below the line voting constituted then verified by a human operator.

7 The double dissolution election according to the Senate vote count in each state being awarded the long terms, In a double dissolution election there are and the remainder the short terms. two important differences for the Senate as compared to a ‘standard’ half-Senate election. In 1983 the CEA was amended to insert Firstly, in a normal half-Senate election only section 282, which requires the AEC to half of the senators from each state, and conduct an additional recount following a the territory senators, face election and the double dissolution election. This recount Senate as a chamber continues. In a double only includes those candidates who were dissolution, the Senate is dissolved and all 76 successful at being elected to the Senate, senators face election. At the commencement and uses a half-Senate election quota of the new Parliament in 2016, the Senate will to select six of the twelve successful be only the eighth Senate since Federation. candidates. It has been argued that the section 282 recount provides the Senate Secondly, the Senate electoral system with a fairer method for determining operates by requiring candidates to exceed the long and short-term senators. a quota of votes, either with primary votes or surplus votes transferred from other Following the 1987 double dissolution candidates. The quota equals the number election (until 2016 the only such of formal votes divided by one more than election since section 282 was inserted the number of vacancies. In a normal half- into the CEA), the Senate resolved to Senate election the quota is about 14 per use the order of election method. cent of the vote. In a double dissolution it is about 7.7 per cent of the vote. As a result, the threshold for election to the Senate is On 29 June 1998 the Senate agreed to much lower in a double dissolution election. a motion by then Labor Senator John Faulkner supporting the use of section 282 following any future double dissolutions. The double dissolution and the On 22 June 2010 the Senate agreed to an resulting election are covered in further identical motion put by the then Special detail in the Briefing Book article: Minister of State, Liberal Senator Michael ‘The 2016 federal election’. Ronaldson. The Senate is not bound by either of these motions, however. Selecting long- and short-term senators Section 13 of the Constitution also requires that the terms of senators be back-dated Following a double dissolution election, to 1 July before the preceding election. section 13 of the Constitution requires Accordingly, the three-year senators’ terms the 12 incoming senators for each of the will end on 30 June 2019, requiring a states to be broken into two groups (or half-Senate election within one year prior classes) of six. One group of senators is to this. Under section 43 of the CEA the awarded a full six-year term, and the other two senators for each of the territories group is awarded a half (three-year) term. serve the same terms as the members of the House of Representatives. The Constitution gives the Senate the power to determine who will be awarded the long and short terms. Traditionally this The outcome of the election has been determined by order of election, At the time of publication only the results with the first six senators elected from the and Tasmanian Senate elections had been declared.

8 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Influence of below the line votes the line with a correspondingly high rate of vote exhaustion (this was a key element Prior to the 2016 reforms, voters who of Senator Day’s High Court challenge). elected to vote below the line, not using a party’s group voting ticket, were required to preference every candidate on the Although not necessarily representative of ballot paper. In the case of NSW in the the larger states, analysis of the Tasmanian 2013 Senate election, this meant they results reveal that only 2.8 per cent of votes had to complete 110 preferences. Under exhausted (compared to 0.1 per cent in the reforms, however, voters who vote 2013), and around 85 per cent of those below the line are only required to number who voted above the line preferenced 1 at least 12 preferences, substantially to 6 as instructed on the ballot paper. reducing the burden for this type of vote. Tasmanian Senate voters also largely chose Australian Labor Party (ALP) senator Lisa to ignore preference recommendations Singh, a shadow from ‘How To Vote’ cards, even from the and former Tasmanian state government major parties. Less than 10 per cent of minister, was preselected by the ALP into Liberal voters, and ever fewer Labor voters, sixth position on its Tasmanian Senate preferenced above the line according to ticket, widely expected to be an unwinnable How To Vote cards. However, this may position. Liberal Tourism Minister Senator not be typical of Senate voting in other Richard Colbeck, the only Tasmanian in the states, particularly given that Tasmanian Turnbull ministry, was preselected by his voters are accustomed to voting using party to the fifth place on the Liberal ticket. the Hare-Clark system in state elections, which is similar to below the line voting. Both Singh and Colbeck were supported by grassroots campaigns in Tasmania encouraging their supporters to vote for Further reading them below the line. As a result, both Singh and Colbeck received substantial Australian Electoral Commission below the line votes—in Singh’s case (AEC), Federal election 2016 Central roughly equal to one quarter of the ALP’s Senate Scrutiny: frequently asked above the line vote in Tasmania. questions, AEC, Canberra, 2016.

While Colbeck was ultimately unsuccessful, R Lundie, ‘Double dissolution Singh was the tenth candidate elected election: implications for the of 12, preventing the election of the ALP Senate’, FlagPost, Parliamentary candidate above her on the ticket. There Library blog, 29 January 2016. are no comparable examples of a candidate winning a Senate election from sixth position A Green, ‘How long and short against the preference direction of their party. Senate terms are allocated after a double dissolution’, Antony Green’s Use of the new Senate voting system Election Blog, 25 April 2016. At the time of the introduction of the new Senate voting system there was considerable concern that the reforms would lead to many people continuing to just vote 1 above

9 Electronic voting at federal elections Rob Lundie, Politics and Public Administration

… this is something we must look at. [It’s] been a passion of mine, or Key Issue an interest of mine for a long time. Following the 2016 federal election both the Prime Minister and the What is meant by electronic voting? Leader raised the Electronic voting covers the technology possibility of introducing electronic used to facilitate the act of casting a ballot voting at future elections. and to support the electoral process overall. In relation to casting a ballot, Electronic voting promises benefits electronic voting technologies include: such as speed and secure ballot- handling, but has also identified  electronically-assisted voting that enables concerns such as safety and cost. visually impaired voters to complete a ballot paper with the help of an operator or through audio prompts on the phone, or via an electronic On 10 July 2016, eight days after the federal election, Opposition Leader Bill Shorten  isolated static electronic voting where conceded defeat. Five seats were still in voters cast their votes at polling stations doubt and 80 per cent of the votes had on a stand-alone computer or a local been counted. Mr Shorten also expressed area network without an Internet frustration over the time taken for the election connection and result to be finalised and to confirm which  internet voting through various methods party would form government. He called for including: static voting at polling places electronic voting to be introduced, saying: via dedicated computers or networks; mobile internet voting using devices …it shouldn't be taking 8 days to find carried by visiting polling officials; and out who has won and who has lost. I remote internet voting where voters use actually think that it is long overdue to any device with an Internet connection. look at electronic voting in this country. I think that we should, in a bipartisan Technologies used to support the fashion set the ground work for electronic electoral process more broadly include: voting. We can't afford to have our nation drift for 8 days after an election.  electronic electoral rolls that enable voters to enrol and update their enrolment online Prime Minister Malcolm Turnbull also  electronically certified lists (ECLs) that indicated that he had been ‘an advocate of enable voters to be marked off more electronic voting for a long time’ adding: accurately (and in real-time) at the polling booth, and that also allow for declaration …I would commend you to the work votes to be dealt with more quickly and of the Electoral  electronic scanning and counting of Commission which has been more ballot papers. enthusiastic than its Federal counterpart.

10 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Recent use of electronic voting At the 2015 NSW election, people who are technology in federal elections vision-impaired, people with a disability, people who live more than 20 kilometres At the 2007 federal election, the Australian from their nearest , or those Electoral Commission (AEC) trialled electronic who were interstate or overseas on voting for groups such as blind and low- election day, were able to register their vision voters. This evolved into the current vote using a web browser. The iVote method of telephone voting for this group of system replaced in-person voting for all voters. At the 2007 election, the AEC also voters outside NSW on election day. trialled access to a secure computer network through which Australian Defence Force Some 283,669 electors cast their vote personnel serving overseas could vote. through the iVote system, but it was not without its problems. Two parties were At the 2013 federal election, the AEC omitted from the above-the-line section piloted the use of ECLs in select of the electronic ballot paper for the NSW locations to introduce efficiencies into Legislative Council; there was reportedly a the process of finding and marking greater donkey vote than that revealed on voters off the electoral roll. the paper ballot, and two academics claimed they had found a security flaw in the system. At the 2016 federal election, the AEC deployed up to 1,500 ECLs that were used The NSW Electoral Commission has in high-volume early (pre-poll) voting centres; indicated that iVote will continue to at large polling places on election day; and replace postal voting, interstate voting by remote mobile voting teams in over 40 and overseas venues, and may be used electoral divisions throughout Australia. ECLs in the future to take absent votes at all are currently also being used in all electoral pre-polls and select high-volume polling divisions to more efficiently process the places. However, it is not envisaged that necessary checks against the electoral roll for iVote will replace normal voting at polling voters who cast declaration votes. The AEC places and pre-polls using paper . also scanned millions of Senate ballot papers and recorded voter preferences electronically. Arguments for and against electronic voting Electronic voting in other jurisdictions As noted by the Joint Standing Committee Several countries (for example, Brazil on Electoral Matters (JSCEM) in a 2014 and Estonia) have either introduced report on electronic voting, the main benefits or trialled electronic voting in its of electronic voting for Australia are: various forms—but no internationally- agreed standards have evolved.  provision of a for blind and low-vision voters Overall, the Australian states and territories  easier delivery of remote voting have not embraced electronic voting to services and any great degree. Since 2001, the ACT has enabled voting on locally-connected  secure ballot-handling. computers in some polling places, and NSW has used its iVote system since 2011, which enables remote voting over the Internet or by telephone at NSW state elections.

11 In 2013, the House of Representatives JSCEM inquiries following the 2004 and 2007 Standing Committee on Regional federal elections also highlighted concerns Australia recommended electronic that cost and security issues outweigh the voting for ‘fly-in-fly-out’ workers as benefits of internet voting. The JSCEM an aid to accessing the ballot. report on the 2004 election also noted the contribution to Australia’s democracy of The main concerns associated with electronic attending a polling place, and expressed voting as identified by the JSCEM are: concern that this would be removed by widespread remote electronic voting.  safety, including the security, integrity and transparency of the system A 2013 paper on internet voting by the Electoral Council of Australia and New  cost and Zealand recommended that any move  desirability, including the capacity to towards its implementation should have maintain the secrecy of the vote and the ‘strong and informed public and political effect on voter behaviour and confidence consensus in favour of such a move’. in the electoral system.

Recent consideration of electronic voting Further reading P Hamilton, ‘Voting online? Don’t In its inquiry into the 2013 federal count on it’, FlagPost, Parliamentary election, the JSCEM undertook an Library blog, 25 November 2014. assessment of electronic voting options. The Committee identified: Joint Standing Committee on Electoral Matters, Second interim …significant questions over the capacity report on the inquiry into the conduct of an electronic voting solution to be of the 2013 federal election: An both cost-effective and protect the assessment of electronic voting security and sanctity of the ballot in options, Canberra, November 2014. the Australian context’, and concluded that ‘there can be no widespread introduction of electronic voting in Electoral Council of Australia the near term without massive costs and New Zealand, Internet and unacceptable security risks. voting in Australian electoral systems, 10 September 2013. The JSCEM also expressed concern over the potential for electronic voting D McKeown, New South Wales to ‘further disengage the community’ state election 2015, Research paper from the political process. series, 2015–16, Parliamentary Library, Canberra, 2016, pp. 11–12. The JSCEM recommended measures adopted by the AEC in relation to D Muller, ‘iVote, therefore I aiding vision-impaired voters, and am’, FlagPost, Parliamentary called for an expansion of the assisted Library blog, 16 March 2015. telephone voting system to include voters with mobility or access issues.

12 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT AUSTRALIA BY NUMBERS

Image ID: 207192547, Copyright: vinnstock, Image ID: 329666909, Copyright: Arthimedes 13 Australia in pictures Sue Johnson, Statistics and Mapping

Estimated resident population by state and territory: 1985, 2005 and 2015

Source: Australian Bureau of Statistics (ABS), Australian Demographic Statistics, December 2015, cat. no. 3101.0. Between 1985 and 2015, the proportion of Australians living in (Qld) and Western Australia (WA) increased, while the Northern Territory (NT) and the Australian Capital Territory (ACT) maintained their share of population. Over the thirty year period, Qld and WA recorded average annual growth of 2.1% and 2.0% respectively, compared with the Australian average of 1.4%.

Estimated resident population by age: 1985 and 2015

Source: ABS, Australian Demographic Statistics, December 2015, cat. no. 3101.0.

Over the 30 years to 2015, Australia’s population has aged. The proportion aged under 15 years has fallen from 23.8% to 18.8%, and the proportion aged 65 years and over has increased from 10.3% to 15.0%.

14 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Australia’s overseas born population by country of birth: 1981 and 2011

1981 2011 % of all overseas % of all overseas Country No. Country No. born born United Kingdom 1,086,625 36.5 United Kingdom 1,101,082 20.8 Italy 275,883 9.3 New Zealand 483,397 9.1 New Zealand 176,713 5.9 China (excl. SARs 318,969 6.0 and Taiwan) Yugoslavia 149,335 5.0 India 295,362 5.6 Greece 146,625 4.9 Italy 185,403 3.5 Germany 110,758 3.7 Vietnam 185,036 3.5 Netherlands 96,044 3.2 Philippines 171,234 3.2 Poland 59,441 2.0 South Africa 145,682 2.8 Malta 57,001 1.9 Malaysia 116,196 2.2 Lebanon 49,623 1.7 Germany 108,001 2.0

Source: ABS, Census of Population and Housing, 1981 and Census of Population and Housing (Tablebuilder), 2011, cat. no. 2103.0.

The proportion of Australians born overseas increased from 16.8% in 1981 to 24.6% in 2011. Over this period, there has been a shift away from the United Kingdom and Europe, and growth in migration from Asia.

Employment by business size: 2014–15

Source: ABS, Australian Industry, 2014–15, cat. no. 8155.0. Small businesses employed 4.8 million people, or 44.8% of all those employed in 2014–15. This was followed by large businesses, which employed 31.7% (3.4 million people), while medium size businesses employed 23.5% (2.5 million people).

15 Australia’s trade in figures Gregory O’Brien, Statistics and Mapping

easing-off to average around 21 per cent of GDP. This means that around a fifth of Key Issue all goods and services (by value) produced in Australia are traded internationally. Trade has been a key issue since the first Federal Parliament saw the While Australia is often thought of as a in government trading nation, this proportion is low by faced with an opposition with a international standards as our lack of strong contingent of Free Traders. land borders reduces the amount of local Trade continues to be central to international trade compared with other the Australian economy and has countries. Figure 2 shows exports, imports grown as a proportion of national and trade balances as a proportion of GDP income in recent years as transport, for a selection of G20 members. Trade is communications technologies a larger proportion of GDP for Australia and rising living standards in than the large economies of the United Asia have increased regional States and Japan, but is lower than most markets for Australian exports. other countries, particularly European countries and export-focused economies such as Germany and South Korea.

This article provides a brief overview of Figure 2 also shows the relative trade the importance of trade to the Australian balances of these countries. In 2014, economy, key export markets for Australia had a trade deficit of 1.4 per cent Australian goods and services, and the of GDP, much less than the US and Japan main exports produced by Australia. which both ran trade deficits over 3 per cent. It also contrasts with trade surplus Trade as a share of GDP countries such as Germany, which had a 6.7 per cent surplus and South Korea, One way of visualising the importance of which had a 5.4 per cent surplus. trade to the Australian economy over time is by looking at the proportion of Gross It is important to note while looking at Domestic Product (GDP) represented by cross-country comparisons that while trade trade. Figure 1 shows exports and imports balances must offset each other globally, on a Balance of Payments basis since for any single country, trade balances 1959 and Australia’s trade balance over the can persist over many years or decades. period (the difference between Australian For example, Australia has persistently exports and imports in a quarter). run trade deficits over the long-term, as shown in Figure 1. This can occur as trade It shows that despite some volatility, trade imbalances can be offset by contrasting represented a reasonably steady proportion balances in international income transfers, of GDP throughout the 1960s and 1970s, or financial or capital account transactions increasing as a share of GDP since the within the Balance of Payments. 1980s and peaking in 2008 at around 23 per cent. The last few years have seen a slight

16 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 1: Australian exports, imports and trade balance as a proportion of GDP

Source: Australian Bureau of Statistics (ABS), Australian national accounts, cat. no. 5206.0, ABS, Canberra, March 2016.

Figure 2: Exports, imports and trade balance as a proportion of GDP in select G20 economies

Source: OECD, Trade in goods and services (indicator), 29 July 2016.

17 Table 1: Australia’s top export markets

Rank Country 2000 2007 2015 2015 5 year growth trend A$m A$m A$m % share of total % 1 China 6 868 27 659 91 297 28.8 8.1 2 Japan 25 342 34 715 42 355 13.4 –1.5 3 United States 16 725 15 609 22 114 7.0 8.4 4 South Korea 9 869 15 418 20 014 6.3 –2.7 5 India 2 298 11 265 13 574 4.3 –9.3 6 New Zealand 9 254 12 891 12 577 4.0 2.7 7 Singapore 7 954 7 308 11 044 3.5 7.3 8 United Kingdom 7 609 11 812 8 815 2.8 –7.8 9 Malaysia 3 261 4 464 7 966 2.5 9.1 10 Taiwan 6 022 6 446 7 479 2.4 –4.3 11 Indonesia 3 928 4 751 6 804 2.1 3.6 12 Hong Kong (SAR of China) 4 731 4 361 5 591 1.8 3.0 13 Thailand 2 496 5 206 5 331 1.7 –5.2 14 Vietnam 622 1 764 4 696 1.5 14.0 15 United Arab Emirates 1 165 3 548 4 020 1.3 9.4 Total goods & services exports 145 086 218 004 316 590 100.0 2.1

Source: Department of Foreign Affairs and Trade (DFAT), Australia’s trade in goods and services 2015, DFAT, Canberra, March 2016.

Table 2: Australia’s top 15 export products

Rank Commodity 2013 2014 2015 2015 5 year growth trend % share A$m A$m A$m % of total 1 Iron ores & concentrates 69 492 66 008 49 060 15.5 0.9 2 Coal 39 805 37 999 37 031 11.7 –3.9 3 Education-related travel services 15 010 17 037 18 801 5.9 3.3 4 Natural gas 14 602 17 743 16 456 5.2 13.0 5 Personal travel (excl. education) services 13 171 14 187 15 943 5.0 6.2 6 Gold 13 898 13 460 14 500 4.6 –1.2 7 Beef, f.c.f. (fresh, chilled or frozen) 5 695 7 751 9 296 2.9 16.9 8 Aluminium ores & conc. (incl. alumina) 5 904 6 336 7 493 2.4 6.8 9 Crude petroleum 9 016 10 564 6 036 1.9 –8.8 10 Wheat 6 085 5 920 5 814 1.8 4.4 11 Professional services 4 600 4 840 5 190 1.6 10.8 12 Copper ores & concentrates 5 192 5 359 4 825 1.5 –0.8 13 Other ores & concentrates (a) 4 486 4 594 4 436 1.4 0.1 14 Business travel 4 200 4 203 4 407 1.4 5.6 15 Aluminium 3 675 3 968 3 934 1.2 –3.0 Total goods and services exports 302 276 331 241 318 737 4.2

Note: (a) Other ores & concentrates consists mainly of Lead, Zinc and Manganese ores & concentrates. Source: DFAT, Australia’s trade in goods and services 2015, DFAT, Canberra, March 2016.

18 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Australia’s top export markets Australia’s top export products The Department of Foreign Affairs and As with Australia’s export markets, Trade publishes a range of statistics Australia’s top export products are describing Australia’s trade figures. more concentrated than imports. Australia’s Trade in Goods and Services, released every six months, provides Table 2 shows the top 15 export products a good overview of Australia’s top for 2015 with relative shares of total exports export markets and export sectors. and growth rates for the five years to 2015.

Table 1 shows Australia’s top export markets Despite the fall in iron ore prices and the for 2015, the share of Australia’s total exports correspondent drop in export revenue, which went to each market (by value) and iron ore remains Australia’s largest export, growth in exports over the five years to 2015. followed by coal. These two commodities Figures for 2000 and 2007 are included to alone represent over a quarter of all show longer-term relative growth trends. export earnings. Primary products still represent the majority of Australia’s top This table shows some of the trends exports, with beef and wheat the largest driving Australian export growth. The rise agricultural sources of export earnings, of China as a key export market is clear, and oil and gas, gold and other metals demonstrated by 28.8 per cent of Australia’s representing the other top goods exports. exports being destined for China, and the remarkable growth since 2000 in Australian Services have become an increasingly exports to this market from under $7 billion important component of Australia’s export in 2000 to over $90 billion in 2015. The revenue, with education-related, personal concentration of Australian export markets is and business travel, and professional also evident with the top four markets (China, services all in the top 15 export categories. Japan, US and South Korea) accounting The growth rates of the services categories for over half (55 per cent) of all exports. show that strong growth in these areas over the past five years has helped offset lower Southeast Asia has seen some of the growth rates in some resource sectors. strongest growth trends in the last five years with exports to Singapore, Malaysia, Indonesia and Vietnam all showing strong growth. Further reading Australian Bureau of Statistics The inclusion of the United Arab Emirates (ABS), International trade in goods is indicative of the strong growth in exports and services, cat. no. 5368.0, ABS, to the Middle East in recent years. Canberra, released monthly.

The Department of Foreign Affairs Department of Foreign Affairs and Trade produces individual fact and Trade (DFAT), Australia’s trade sheets for most countries and regions in goods and services, DFAT, to which Australia exports. Canberra, released biannually.

19 Trends in apprenticeships and traineeships Geoff Gilfillan, Statistics and Mapping

Figure 1 shows long-term trends in trade and non-trade apprentices and trainees by Key Issue calendar year. Apprenticeship and traineeship Figure 1: Trade and non-trade apprentices numbers have been falling since and trainees in training mid-2012. However, the major falls have occurred in non-trade occupation traineeships.

Declining numbers of commencements could be driven by changes to incentive payments made in mid-2012; the decline in demand for skills associated with a softening labour market, and the uncapping of university placements.

Trade and non-trade apprenticeship and traineeship numbers have been falling in Source: NCVER, Apprentices and trainees 2015 Australia since the middle of 2012. Data December quarter, NCVER, 2016, Table 1, Original data. from the National Centre for Vocational Education Research (NCVER) shows there were 291,000 apprentices and trainees in One of the reasons for the decline in non- training in December 2015 (in seasonally trade occupation commencements was the adjusted terms)—down on the most change in incentive payments offered by recent peak of 490,000 in June 2012. the Federal Government which took effect from 1 July 2012. The changes included: When separated out over the longer term, it is evident that apprentices and trainees  the discontinuation of the $1,500 in non-trade occupations have fallen standard employer commencement dramatically from their peak of 300,000 in incentive payment and June 2012 to 104,000 in December 2015.  an increase in the standard completion incentive from $2,500 to $3,000 for Non-trade occupations for trainees existing worker apprentices and trainees include farm managers, sales workers, in non-National Skills Needs List clerical and administrative workers, occupations. community and personal service workers and drivers and machine operators. The fall in apprenticeship and traineeship numbers since mid-2012 may also be a The fall in the number of apprentices and reflection of reduced demand for labour trainees in trade occupations during the in particular industries. In this period the same interval is significant but not as mining industry and utilities have been dramatic—down from 216,600 to 175,000. shedding labour while manufacturing has

20 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT been in long-term decline. Demand for skilled Of the trade occupations, the largest trades has been strongest in construction. falls were recorded for engineering, information and communications Trade-based occupation commencements technology (ICT), and science technicians for apprentices have been relatively (down 58%); and automotive and consistent over the past decade despite engineering trade workers (down 24%). the impact of events such as the Global Financial Crisis (GFC) between Some of the building trades have been 2007 and 2009. In contrast, non-trade less affected. The numbers of apprentice occupation commencements have bricklayers, carpenters and joiners in fallen substantially since mid-2012. training have only fallen marginally (by 5%) while plumbers fell by 3%. However, Figure 2: Trade and nontrade apprentice and electricians in training have fallen by 10%. trainee commencements The only occupation to record a rise in apprenticeships was electronics and telecommunications trade workers (up 27%).

In a recent newspaper article the NCVER suggested that declining apprenticeship numbers could partly be due to the uncapping of university places. The Australian Industry Group expressed concern at the prospect of skill shortages in the future from declining apprentice and trainee commencements.

Current evidence of shortages in skilled occupations is mixed, with a general decline in demand for skilled labour since the GFC Source: NCVER, Apprentices and trainees 2015 contributing to more skilled occupations December quarter, NCVER, 2016, Table 21, Seasonally Adjusted data. being in balance rather than shortage. Analysis conducted by the Department of Employment showed just over 40% of trade The changes appear to have proportionally and technician occupations were in shortage the greatest affect on women and in 2014–15 compared with 97% in 2007–08. older apprentices and trainees. Female apprentices and trainee numbers have fallen by 112,000 or 59% between June 2012 and December 2015, compared Further reading with a fall of 125,500 or 38% for men. NCVER, Apprentices and Over the same period, the number of trainees 2015 December apprentices and trainees aged 45 years quarter, NCVER, 2016. and over fell by 57,000 or 71% while those aged 25 to 44 years fell by 95,600 Department of Employment, or 55%. In comparison, apprenticeships Skill shortages—statistical and traineeships for people aged 19 summary, Department of years and under and 20 to 24 years Employment, Canberra, 2015. fell by 39% and 26% respectively.

21 The Australian Government’s debt position Alicia Hall, Statistics and Mapping

Key Issue Gross debt is the amount of money owed by a government (or The ratings agency Standard its financial liabilities). The major and Poors recently revised its component of gross debt on the sovereign rating outlook on Australian Government’s balance Australia from stable to negative, sheet is Commonwealth Government largely relating to concerns about Securities. More often reported, the government sector’s ongoing net debt is the sum of all financial fiscal position. This brief discusses liabilities (gross debt) of a government the Australian Government’s less its respective financial assets. current and historical debt levels, Gross debt indicates the magnitude and revenues and expenses. of debt owed, but it does not show whether a government can repay that debt and provides limited detail about the overall financial health of The Australian Government’s ‘net debt’ is at a government. This is where net a reasonably high level in a historical context debt is significant. If a government (see Figure 1). Although net debt levels has a gross debt of 50 per cent are still low by international standards, this of GDP, but has large amounts of issue is nonetheless considered a concern cash and or assets (low net debt), by some commentators due to Australia’s then it is in a much better position high level of overall net foreign debt (that is, to handle this level of debt. both private and public net foreign debt).

Australian Government debt is often reported as a relative indicator to allow comparison The Australian Government’s net debt across years. For example, debt can be position is primarily a product of the reduced expressed as a proportion of Gross Domestic revenues associated with the GFC, and Product (GDP). In the 2016–17 Budget, higher government expenditure since that the Government indicated that net debt in time. As can be seen in Figure 2, Australian Australia has risen from a low of -3.8 per Government revenues as a per cent of cent of GDP in 2007–08 to an estimated GDP declined in 2008–09, and have not yet 18.9 per cent of GDP in 2016–17. Based climbed back to 2007–08 levels. Similarly, on Budget forecasts, it is set to peak in expenses as a per cent of GDP peaked 2017–18 at 19.2 per cent, and then decline. in 2009–10 and have not significantly These figures did not change in thePre - declined since that time. Overall, Australia’s election Economic and Fiscal Outlook fiscal balance (revenue less expenses 2016, which was released shortly after the less net capital investment) in 2016–17 Budget. These levels of net debt are higher was estimated at 2.2 per cent of GDP. than the average of 5.9 per cent of GDP The IMF’s 2016 World Economic Outlook between 1970–71 and 2014–15. However, indicates that Australia’s 2015 structural they are not unprecedented. These levels balance is lower than the average of the were reached in 1995–96 when net debt Major Advanced Economies (2.2 vs -2.7). was recorded at 18.1 per cent of GDP.

22 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 1: Net debt

Source: Budget 2016–17, Budget Paper No.1, Statement 10, Table 5.

Figure 2: Australian Government revenue and expenses

Source: Budget 2016–17, Budget Paper No.1, Statement 10, Table 6.

External debt (or foreign debt) Further reading relates to amounts owing to non- residents by residents. This includes OECD Insights, Statistical Insights: amounts borrowed by government. Government assets matter too, High levels of net foreign debt can not just debt, 28 January 2016. be a problem for a country as, amongst other things, it results in T Kryger, Australia’s foreign debt: a increased vulnerability to changes in quick guide, 28 October 2014. interest rates and exchange rates. Fortunately for Australia, current A Hall, The Australian Government’s low interest rates are keeping current debt position, April 2015 interest expenses low for the update. government and the private sector.

23 Employment in Australia Geoff Gilfillan, Statistics and Mapping

The most recent low for the unemployment rate in Australia was 4.1% in April Key Issue 2008—the lowest unemployment rate recorded since monthly estimates started The Australian labour market being released in February 1978. performed more solidly in the 12 months to June 2016 with relatively strong growth in employment and a Figure 1: Unemployment rate modest fall in the unemployment rate

Full-time employment growth remains subdued and wages have virtually flatlined in real terms over the past three years. After signs of a steady fall in the youth unemployment rate since late 2014 there has been a slight uptick in recent months.

Employment In the 12 months to June 2016 employment Source: ABS, Labour force survey, Australia, cat. no. in Australia grew by 212,000 or 1.8% 6202.0, Table 1, Trend. (in trend terms) to 11.9 million. This growth rate is just below the annual Participation average for employment growth of 1.9% recorded since the early 1980s. Other indicators of the health of the labour market include the proportion of the population aged 15 years and However, just over two-thirds (68.3%) over in the labour force (participation of employment growth in the past 12 rate), and the proportion who have a months was in part-time employment: job (employment to population ratio). around 32% of employed Australians worked part-time in June 2016 compared with 26% in January 2000. Both measures showed signs of recovery in the 12 months to late 2015 but have since fallen marginally. The labour force Unemployment participation rate of 64.8% (in trend terms) The unemployment rate has fallen by in June 2016 is below its most recent 0.4 percentage points over the past year peak of 65.7% in December 2010. to 5.7% in June 2016 (in trend terms). Over this period, the number of people The employment to population ratio who are unemployed fell by just over (61.1%) in June 2016 is below its most 40,000 to 726,000 (in trend terms). recent peak of 62.8% in July 2008.

24 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 2: Participation and employment rates Figure 3: Youth and total unemployment rates

Source: ABS, Labour force survey, Australia, cat. no. Source: ABS, Labour force survey, Australia, cat. no. 6202.0, Table 1, Trend. 6202.0, Table 1, Trend. Wages Lower labour force participation is driven by a combination of discouragement from looking Wages in both the public and private sectors for work for some potential job seekers, have grown at a slower pace in recent years. long-term demographic trends such as the ageing of the population, and higher rates Figure 4: Wage Price Index of engagement in full-time education by young people. Conversely, there is evidence of higher participation among older age groups in recent years—perhaps in response to declining superannuation balances following the Global Financial Crisis (GFC).

Youth The unemployment rate for young people aged 15 to 24 years stood at 12.7% (in trend terms) in June 2016—well in excess of the total unemployment rate (people aged 15 years and over) of 5.7%. Source: ABS, Wage price index, Australia, cat. no. While youth unemployment increased 6345.0, Trend. steadily from mid-2008 to late 2014, a much higher proportion of people in this age group Total hourly rates of pay for employees are now engaged in full-time study. Over in the private sector (excluding bonuses) half (54%) of people aged 15 to 24 years grew by 1.9% in the 12 months to were engaged in full-time study in June March 2016, compared with growth of 2016 compared with 47% in July 2008. 2.5% for public sector employees.

25 While nominal wages (unadjusted for inflation) workers aged 15 to 24 years wanted more have grown at a slower pace, real wages hours of work in June 2016 compared with (adjusted for inflation), as measured by 9% of all workers (aged 15 years plus). Average Weekly Ordinary Time Earnings, have virtually flatlined since May 2013. Figure 6: Underemployment ratios

Figure 5: Nominal and real wages

Source: ABS, Labour force survey, Australia, cat. no. 6202.0, Table 22, Trend. Source: ABS, Average weekly earnings, cat. no. 6302.0, Original data. Real wages shown in June 2015 dollars. Long-term unemployment Long-term unemployed people are those The Reserve Bank of Australia found wages who have been unemployed for 12 months have been reacting to a softening in the or more. Increasing levels and rates of labour market and increasing spare capacity long-term unemployment indicates that in the economy. Declining inflationary some unemployed people are taking expectations also appears to have had longer to find suitable employment. some influence. However, wages growth in the past 12 months remains subdued The level and prevalence of long-term despite a strengthening in employment unemployment rose sharply from mid-2008 growth and a fall in the unemployment rate. to late 2010, plateaued until mid-2013 and has been rising since. The number of Underemployment people who were long-term unemployed has increased from 69,000 in July 2008 to Underemployment is an indicator of 182,900 in March 2015 (in trend terms) and the extent of underutilised labour in has since fallen to 166,600 in June 2016. the economy. Underemployed workers Around 22.9% of all unemployed people include those people who worked part were long-term unemployed in June 2016 time and wanted more hours and those compared with 12.8% in February 2009. who normally worked full-time but were working part-time due to being stood down or insufficient work being available.

Underemployment affects younger workers more than older workers. Just under 20% of

26 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 7: Long-term unemployment Figure 8: Annual labour productivity growth

Source: ABS, Labour force survey, cat. no. Source: ABS, National accounts, cat. no. 5206.0, 6291.0.55.001, Table 14b, Trend. Table 1, Trend.

Unemployed people in older age groups The Productivity Commission found the tend to have higher rates of long-term relatively strong growth in labour productivity unemployment. In May 2016, 41% of recorded for mining in 2014–15 was unemployed people aged 55 to 64 driven by a substantial contraction in years were long-term unemployed labour inputs as well as strong growth in compared with 18% of unemployed output. The Commission attributed the people aged 15 to 24 years. improvement in both labour productivity and multifactor productivity in mining Labour productivity to the transition from the investment phase to the production phase. Labour productivity measures the efficiency of use of labour and is equivalent to the growth of output above the growth in labour inputs. Further reading C Kent, Cyclical and Structural The annual rate of growth of labour Change in the Labour Market, productivity (as measured by gross value Address by the Assistant Governor added per hour worked in the 12-industry (Economics) Reserve Bank market sector) has been slowing in Australia of Australia, Reserve Bank of since mid-2012. Labour productivity Australia website, 16 June 2014. grew by 1.4% per cent in the 12 months to March 2016 (in trend terms). J Healy, ‘The Australian labour market in 2015’, Journal of Productivity growth rates are best Industrial Relations, 58(3), measured in growth cycles. According June 2016, pp. 308–323. to the Productivity Commission’s PC Productivity Update (April 2016) labour productivity across the market sector has PC Productivity Update April 2016. averaged 2.3% per annum in the period between 2007–08 and 2014–15. The last, complete cycle occurred between 2003–04 and 2007–08 when annual average labour productivity growth was 1.6%.

27 28 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT THE NATIONAL ECONOMY

Image ID: 122787571, Copyright: Passion Images / Shutterstock.com, Image ID: 442393996, Copyright: Michael Leslie 29 Insolvency laws in Australia Dr Nitin Gupta, Economics

deliberate malpractice by companies, and accordingly, place greater emphasis on Key Issue the protection of creditors. In the second are laws that reflect a ‘rescue culture’ Creating a culture of innovation that allows for financially constrained means striking a balance companies to reorganise themselves between promoting productive rather than be forced into liquidation. and discouraging reckless These assume that insolvency may not risk-taking. Insolvency laws reflect deliberate malpractice and that a help to strike this balance. second chance for the company will be in the longer-term interest of creditors. Australia’s insolvency laws are increasingly out of sync with trends across much of the OECD, and Insolvency in Australia—the key risk undermining the innovation issues outcomes of the Australian economy. Under the Corporations Act 2001, ‘a person is solvent if, and only if, the person is able to pay all the person’s debts, as and when they become due and payable’. Thus ‘a A broad context person who is not solvent is insolvent.’ The importance of innovation as a means to promote growth has been an important part Australian insolvency law does not take of the Government’s policy agenda. This is account of an insolvent company’s longer- because the mining boom—the mainstay of term prospects, its competitiveness, assets, the economy for the last two decades—is or brand value, and is geared towards coming to an end, and there is a broad its premature closure and liquidation. It consensus that the boom has obscured a does not allow for the possibility that, general decline in national productivity. through some restructuring or assistance, the company could return to profitability The ways in which an economy encourages and preserve the interests of creditors. and regulates risk are critical to its innovation outcomes. The rules have to strike a balance Bankruptcy laws in other advanced between promoting risk-taking on one countries hand, and minimising the possibility that risk protections lead to abuse and reckless Globally, insolvency laws have tended behaviour by companies (the moral hazard towards restructuring rather than liquidation. problem) on the other. Insolvency laws are The ‘Chapter 11’ (Ch. 11) provisions of an important marketplace mechanism by the US Bankruptcy Code are considered which countries try to strike this balance. the most liberal, and place great emphasis on corporate rescuing. These provisions Insolvency laws fall broadly into two groups. have been used as a model for insolvency In the first are those that prioritise liquidation law reforms in several other countries. of a company over its restructuring. These assume that insolvency is the result of

30 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Some of the key advantages of the Ch. Proposed reforms in Australia 11 approach are that they provide: Both Labor and Coalition Governments have proposed changes to the Australian  higher planning reliability, avoiding short- insolvency laws in order to modernise them. term thinking in decision making  continued employment and wages for The Ch. 11 provisions have provided workers and a useful reference point for Australia’s  preservation of skills and experience, thinking on insolvency law reforms. Over brand name and relationships. These several years, multiple reviews have yielded intangible assets are highly valued and a general view—illustrated by the 2004 can take years to build. Joint Committee inquiry into insolvency, and the 2015 Productivity Commission In the last few decades the UK, Germany inquiry into Business Set-up, Transfer and and Canada have all recognised the value Closure—that a Ch. 11-style framework of an effective insolvency regime for driving would be inappropriate for Australia. The innovation, and have implemented reforms— specific objection was that an insolvent based on Ch. 11—with the explicit aim of company’s directors should not be in control creating a ‘rescue culture’ rather than one of operations once insolvency is declared. based on liquidating an insolvent company. In this vein the National Innovation and In the UK, insolvency laws are based on the Science Agenda (NISA), announced recommendations of the 1982 Cork Report by the Government in December which reasoned that restoring the profitability 2015, proposed several changes to of companies would be in the longer-term the insolvency laws, including: interests of creditors. Until about 2008, German law was geared towards liquidation  reducing the current default bankruptcy of a debtor’s assets. Since then, laws have period from three years to one year been progressively reformed to improve the  introducing a ‘safe harbour’ provision to possibility of corporate restructuring, and protect directors from personal liability also to raise the profile of German insolvency for insolvent trading if the company is law versus foreign jurisdictions. Canada has undertaking a restructure and implemented several reforms since 1992, and also has special provisions for large  making the ‘Ipso Facto’ clause, which companies owing more than $5 million. allow contracts to be terminated solely due to an insolvency event, unenforceable if the company is undertaking a Laws in these countries broadly follow restructure. Ch. 11 by preventing creditors from liquidating a company’s assets while the latter is underdoing restructuring. However, No legislation to give effect to these unlike Ch.11 which allows an insolvent changes had been introduced prior to company’s directors to retain control over the prorogation of the 44th Parliament. its operations, these countries typically However, the Government demonstrated have greater scrutiny and involvement by its interest in insolvency reform with the the courts, including passing of operational passage of the Insolvency Law Reform control to a court-appointed monitor. Act 2016, which aligned standards for corporate insolvency practitioners with those of personal bankruptcy practitioners.

31 Influencing decisions to retire Kai Swoboda, Economics

Figure 1: Average effective retirement ages for men and women in Australia, 1970 to 2014 Key Issue The decision to retire is typically made with reference to age- based thresholds for access to the means tested Age Pension and superannuation. Changes to these thresholds need to consider a range of issues, including how demographic changes impact on the economy and government finances as well as broader social impacts. Source: OECD, ‘Ageing and employment policies - statistics on average effective age of retirement’, OECD website. What is retirement? Retirement is generally viewed as a Broader impacts of retirement withdrawal from the labour market and/or Individual decisions to retire have broader paid employment. Retirement can also be economic and societal impacts including: viewed as a process, whereby an individual scales down employment—such as by  the loss of skilled employees to the transitioning to part-time employment or economy unpaid/volunteer activities—and moves into a period of leisure that is a ‘reward’  the ability of retirees to devote more time or ‘benefit’ earned through participation in to (unpaid) caring activities employment or as a contribution to society.  for tourism and leisure businesses that provide goods and services to people in Statistics on the age of ‘effective retirement, and retirement’—the average age at which  the funding of retirement by people withdraw from the workforce—show superannuation funds and/or two distinct periods of trends in the average governments. retirement age in Australia since 1970. The first period, which ended in the early to mid– These broader impacts are of particular 1990s, saw the average retirement age falling relevance given the significant ageing (Figure 1). However, since this time, the broad of the Australian population due to the trend has been for the average retirement decline in fertility rates and increase in life age to increase. While this trend is replicated expectancy—changes that are occurring in most other OECD countries, the average across most advanced economies. Most effective retirement age for men and women of the concerns about the impact of in Australia is lower than in New Zealand. ageing have related to the sustainability of government finances due to increasing health, aged care and pension expenditures.

32 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Reasons for retirement and changes eligibility age to 67. Some OECD countries in the age at which people retire have taken the further step of directly linking eligibility to life expectancy. These There are a number of factors that affect include the Netherlands and Portugal. retirement decisions including health status, involuntary redundancy and accumulated There have been a number of proposals to savings. For those who have already retired change the superannuation preservation in Australia, the most common reason given age, including increases to align it with in a recent survey by the Australian Bureau of the Age Pension eligibility age. Statistics was having reached eligibility age to access the age pension or superannuation. This was followed by sickness, injury or Addressing other reasons that can disability, and being retrenched or dismissed lead to early retirement with no other work being available. Apart from changing the age-based thresholds mentioned above, policies Age-based thresholds influencing to encourage later retirement need to retirement decisions address the other factors that influence retirement decisions. For example, Key policy levers regarding the age addressing retirement decisions based on pension and superannuation that matters that may be outside an individual’s frame the retirement decision are: control—such as their own poor health or retrenchment—require more complex policy  the eligibility age for access to the means- responses that may include programs to tested Age Pension—currently 65, address specific barriers or labour market increasing to 67 between 2017 and 2023 issues that prevent many Australians (Social Security Act 1991) from continuing to work as they age.  the superannuation preservation age (the age at which superannuation savings can generally be accessed)—currently 55 increasing to 60 between 2015 and 2024 Further reading (regulations under the Superannuation Industry (Supervision) Act 1993) and Productivity Commission, Superannuation policy for post-  the age at which superannuation benefits retirement, volume 1, 7 July 2015. can generally be accessed tax free— currently 60 (Income Tax Assessment Act 1997). OECD, Pensions at a glance 2015: OECD and G20 indicators, December 2015. During the previous parliament, the Government introduced legislation to further lift the eligibility age for the age pension to M Klapdor, Social Services and Other 70, to take effect between 2025 and 2035. Legislation Amendment (2014 Budget However, this proposal did not pass into law. Measures No. 2) Bill 2014, Bills digest, 16, 2014–15, Parliamentary Library, Canberra, August 2014. A number of OECD countries have also increased the eligibility age for public pensions in recent years. For example, Belgium and Canada have lifted the

33 Influences on superannuation policy settings Kai Swoboda, Economics

There are a number of influences on this growth, including policy settings. Key Issue The 45th Parliament is likely to Election policies and inquiries consider a range of changes to underway superannuation policy settings. The alternative superannuation policy measures presented by the major parties In considering these changes, for the 2016 election included 2016 there are a number of broad Budget measures which propose changed external influences that may affect tax concessions. The Government has the landscape for superannuation committed to advance these proposals in funds and the retirement needs the 45th Parliament after further consultation and outcomes of fund members. on draft legislation. The Government will also consider the fate of measures that were not fully considered by the previous parliament. These include governance changes for At March 2016, the total value of assets superannuation funds, broadening choice of in superannuation exceeded $2 trillion; fund arrangements and changes to penalties more than the annual output of the for employers who make late superannuation Australian economy (Figure 1). contributions on behalf of their employees.

Figure 1: Superannuation assets, 1998 to 2016 The Productivity Commission is conducting two inquiries and can be expected to propose changes. In the first, it is developing criteria to assess the efficiency and competitiveness of the superannuation system. In the second, the Commission is developing a workable model, or models, for allocating members to superannuation funds if the member does not choose one.

Demographic ageing Changes in Australia’s population structure and the impact of ageing have Source: Australian Prudential Regulation Authority and Australian Bureau of Statistics. been well-documented. Increased life expectancies, higher labour participation and rising expenditure on aged care, The superannuation system will continue health and pensions are all outcomes to grow over the medium to long term. of these demographic shifts. Recent projections included in the Financial System Inquiry interim report suggest that superannuation assets will reach Superannuation policy settings will play a between $9 and $13 trillion by 2040. role in adjusting to an ageing population, such as mitigating the impact of ageing

34 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT on labour markets by promoting the global economic growth are fundamentally participation of older people. Policy settings constrained, basing their arguments on may also have a role in addressing the the secular stagnation hypothesis. ‘longevity risks’ associated with higher life expectancies, by providing incentives to draw superannuation savings over a longer period. The financing of retirement lifestyles— Secular stagnation hypothesis in full or in part combination with the age The so-called ‘secular stagnation’ pension—will also be a key consideration. hypothesis suggests that the barriers to growth—demographic change, A maturing superannuation system education, inequality and government debt—combined with the potential With the superannuation guarantee in place for low rates of productivity growth since July 1992, the first cohort of people compared to that achieved in the to have benefited from superannuation over past, will lead to slower and lower their whole working lives will start retiring levels of economic growth in the from around the early to mid-2030s. future. This view is contested, with some economists considering that With the population ageing, the maturing low rates of growth are largely due superannuation system is expected to result to a ‘debt overhang’ in developed in an increase in the total level of benefits paid economies which will dissipate over as fund members retire. At some stage in the time and that technology advances 2020s, these outflows will be larger than the and economic restructuring will level of contributions. This transition, from lead to productivity gains. the ‘accumulation’ to the ‘retirement’ phase, has implications for funds in managing cash flows and adjusting investment strategies. Recent forecasts suggest that the medium- term global outlook is lacklustre. This is An era of low returns? mainly due to concerns about the impact of All other things being equal, higher rates of ‘Brexit’ on confidence, the potential for rising return provide greater levels of retirement oil prices and a continued low interest rate income for fund members, potentially environment, globally. allowing for an earlier retirement or a more ‘comfortable’ retirement. While returns can vary significantly from year to year, over the past 25 years the average nominal return Further reading has been in the order of 7 per cent. I Arsov and A Ravimohan, ‘Secular stagnation: a review With the Australian superannuation of the key arguments’, JASSA, system closely enmeshed with global 1, 2016, pp. 6–16. financial markets and the Australian economy exposed to the global economy, K Swoboda, ‘A comparison of key superannuation returns are influenced by assumptions and outcomes over four changes in domestic and international intergenerational reports’, FlagPost, economic conditions. Some economists Parliamentary Library blog, consider that the prospects for future 5 March 2015.

35 Competition policy Paul Davidson, Economics

In 1999, in modelling a subset of the NCP reforms of relevance to rural and regional Key Issue Australia, the PC found that real GDP would potentially increase by around 2.5 per cent. Competition reforms enacted more than 20 years ago have In 2005, in assessing some of the actual provided significant improvements gains from the NCP reforms, PC modelling to Australia’s overall welfare. of productivity and price changes in large infrastructure sectors attributed to the The issue facing the 45th Parliament NCP reforms (while only forming one part) is whether there is sufficient appetite indicated that real GDP had increased by to pursue further reforms in light of 2.5 per cent, worth $20 billion in 2005. the recent competition policy review. Significant recommendations Some of the central recommendations of In 2013, the Abbott Government Harper are set out below. See also: Australian appointed Professor Ian Harper to review Government response to the competition Australia’s competition policy. Professor policy review recommendations: a quick guide Harper reported in March 2015 and the published by the Parliamentary Library. Government responded in November 2015. Improving institutional arrangements The Harper Review (Harper) was the first holistic review of competition policy since the Harper recommends the establishment Review of National Competition Policy (NCP) of two bodies; the Australian Council for in 1992–3, conducted by Professor Fred Competition Policy (ACCP) and a national Hilmer. Indeed, several recommendations Access and Pricing Regulator. The functions were identical to those put forward over of the ACCP would include undertaking two decades ago. Several of these reforms ‘market studies’; that is, to examine areas are the responsibility of the states and of the economy where competition issues territories. In particular, recommendations may arise and provide recommendations to related to reviewing planning and zoning government. The other would take on the laws, regulations affecting the taxi industry, current functions of the ACCC and in effect and the regulation of retail trading hours. be incorporated into an expanded role for the National Competition Council. The final Benefits of competition policy reform roles and functions of both bodies would be discussed with the states and territories. In 1995, the Productivity Commission (PC) modelled the ‘outer envelope’ of potential Introducing an ‘effects test’ gains of the Hilmer competition policy recommendations. It was found that real At present, the misuse of market power GDP would be 5.5 per cent higher once the provisions of the Competition and Consumer productivity gains, service price rebalancing Act 2010 provides that it is the purpose of and other associated changes had fully a corporation in engaging in proscribed worked their way through the economy. conduct that (in part) determines whether

36 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT the provision has been breached. Harper Future competition policy recommends that the test be changed to ‘purpose, effect, or likely effect’. Harper recommends measures aimed at Essentially, the change will enable the ensuring that competition policy remains court to look at the outcome (including of central relevance to governments. It the likely outcome) of the conduct, rather recommends that governments commit to than merely its purpose or intent. transparent competition principles, including:

The recommendation is not universally  all government regulation that binds supported—the PC says that it may lead public or private sectors should not to regulatory risks, and the Business restrict competition. Council of Australia and others say that  consumer choice in the funding, procuring it would amount to regulatory overreach or providing of government services and ‘chill’ pro-competitive conduct. Even should be promoted. former chairs of the ACCC, Alan Fels and  government procurement should separate Graeme Samuel—in articles published the the roles of policy (including funding), Australian Financial Review in early September regulation and service provision, while 2015—do not agree on the possible also encouraging a range of providers. consequences of introducing an effects test. When applying the competition principles, Competition in human services all governments should subject regulation to a public interest test to ensure that Harper recommended that there should be governments do not restrict competition a diversity of competing providers of human unless it is in the overall community’s interest services to stimulate innovation in service to do so, and that there are no other means provision and to give consumers choice. The by which the policy can be achieved. recommendation foreshadows a new focus for governments being one of overseeing the impact of policies on users (‘stewardship’) rather than on service delivery. Harper Further reading cautioned governments that where they are involved in commissioning services, it should I Harper, P Anderson, S McCluskey, be done with a clear focus on outcomes. M O’Bryan, The Australian Government competition policy The welfare gains from implementing review: final report, Treasury, competition policy reforms into human Canberra, March 2015. services are potentially significant— previous estimates by the PC suggested Productivity Commission (PC), that improved productivity of health Review of national competition service delivery alone could implicitly policy reforms, Inquiry report boost household consumption by $40 no. 33, PC, Canberra, 2005. per person in 2005–06 dollars.

37 38 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT PUBLIC FINANCES

Image ID: 323887754, Copyright: thodonal88, Image ID: 173708309, Copyright: Ben Jeayes 39 Tax expenditures Dr Anne Holmes, Economics

the private health insurance rebate (which is a form of income) gives rise to a tax Key Issue expenditure estimated at $1.5 billion a year. Tax expenditures are concessions— like concessional tax rates and tax Another example is negative gearing. exemptions—that apply to particular This displays some characteristics of activities or classes of taxpayer— tax expenditure but it is not treated as so that those involved pay less one. This is because it is considered by tax than they would normally. Treasury to be a normal application of the principle that expenses incurred in earning assessable income are deductible. They have the same effect on the budget as expenditure but tend to be not as easily controlled. They do It is difficult to measure tax expenditures. not appear in the budget papers but Usually they are expressed as a cost to are reported by the Treasury in the revenue, compared with the ‘normal’ tax annual tax expenditures statement. treatment. But this does not mean that their removal would generate a corresponding increase in revenue. That is because tax Examples that have recently expenditures are often intended to change attracted attention include GST behaviour. With their removal, there would be exemptions for food and some another corresponding change in behaviour. superannuation tax concessions. For example, if the private health insurance rebate were taxable it may lead to fewer people taking out private health insurance Some background which would in turn reduce the rebate.

Tax expenditures arise when the ‘normal’ tax There is also debate about how to define liability is reduced in order to encourage a the benchmark for ‘normal’ tax treatment. particular behaviour or to assist a particular For example, estimates of the tax forgone group. Tax exemptions, tax deductions, from not taxing capital gains on the family tax offsets, concessional tax rates and home would be irrelevant if that policy were deferrals of tax liability are examples. treated as ‘normal’ rather than a concession.

Specific examples include the capital gains discount for assets held longer Treasury Tax expenditures than 12 months, the capital gains tax statement exemption for the main residence, the The Treasury publishes an annual Tax several exemptions from GST (for example, Expenditures Statement. For 2015, it notes for food, water, education) and the that 140 out of 290 tax expenditures deductibility of gifts to certain charities. are unquantifiable. This year’s statement does not publish a total figure, but It is sometimes difficult to identify tax in previous years Treasury estimated expenditures. For example, the private that the value of total measured tax health insurance rebate is classified as a expenditures was 7.5 per cent of GDP. program expense. However, non-taxation of

40 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT By comparison, total Commonwealth per cent to $25.1 billion over the forward revenues recorded in Budget Paper No.1 estimates. In contrast, the cost of three for 2015–16 were 23.5 per cent of GDP. major health tax expenditures is projected to increase by 21.6 per cent to $8.3 billion over the same period. These expenditures are the The case of superannuation exemption from income tax of the private In the last couple of years some policy health insurance rebate, the exemption from makers, academics, think tanks and media GST of medical and health services and commentators have called for concessions the low income medicare levy exemption. to superannuation to be wound back. What might be done? Amongst the reasons given, advocates for reform say that the concessions are Because tax expenditures are targeted to inequitable, as they are worth more to those particular groups or activities, attempts on higher marginal tax rates. Further, they are to end them often meet resistance. a significant imposition on the Budget and Some actions that could be taken to difficult to control as their magnitude depends improve their performance might be to: on decisions made by individual tax payers. And it is claimed that they are not meeting  where possible, convert tax expenditures their policy objectives, like increasing savings to payments and taking pressure off the age pension.  convert all deductions (for example, gifts to charities) to flat-rate rebates, so the The tax expenditure statements show benefit is not greater for those on higher superannuation tax expenditures are among incomes the biggest. Although well behind the capital  cap the amount any individual can claim gains tax concessions for the main residence, in tax expenditures at a proportion of total at $54 billion, they total about $30 billion. income or a dollar amount  introduce a schedule of reviews or sunset Tax expenditures and programs dates for large items Tax expenditures are less transparent than  publish information about who benefits program spending. They do not require from each tax expenditure. annual appropriation, and are not reported in portfolio budget statements. Their target groups are often less clearly defined, and the government has less control over the cost. Further reading They are generally not established with a D B Marron and E J Toder, ‘Tax ‘sunset’ date, and are not regularly reviewed. policy and the size of government’, Urban Institute and Urban- Growth in some tax expenditures Brookings Tax Policy Center, Washington, DC, 2013. The quantum and rate of growth of tax expenditures tends not to attract the same M W Feldstein, ‘Raising revenue attention in the media as do expenditures. by limiting tax expenditures’ in Tax Policy and the Economy, National For instance, there has been debate in recent Bureau of Economic Research, years about the sustainability of Medicare Cambridge, Massachusetts, 2015. which is projected to increase by 14.4

41 Paying for the National Disability Insurance Scheme Dr Luke Buckmaster, Social Policy

This NDIS is not means tested. Like many other Commonwealth social Key Issue policy programs—such as Medicare, the Pharmaceutical Benefits Scheme and The National Disability Insurance income support payments—the NDIS is Scheme (NDIS) is being introduced an uncapped (demand-driven) scheme. across Australia from July 2016, at a cost of around $22 billion by 2019. How does the Commonwealth How much will it cost? plan to pay for its share? The cost of the NDIS will increase substantially over the next four years while it is progressively introduced: from around $4.2 billion in 2016–17 to $21.5 billion in What is the NDIS? 2019–20—representing an increase in spending to around 1.1 per cent of GDP. The NDIS provides support to people with It is important to note, however, that the disability, their families and carers. It is jointly Commonwealth will only be responsible governed and funded by the Commonwealth for half of the annual cost of the scheme. and participating states and territories. The NDIS is being introduced across Australia from July 2016, except in Western The most recent NDIA annual report projects Australia where it is still being trialled. that expenditure will increase gradually to 1.3 per cent of GDP in 2044–45, reflecting the increased cost of supports The main component of the NDIS is as NDIS participants age over time. individualised, long-term funding to provide support for people aged under 65-years with permanent and significant disability, In its 2011 report recommending the or eligible for early intervention support. introduction of the NDIS, the Productivity Participants meet with the National Commission suggested that the benefits Disability Insurance Agency to identify a of the NDIS would outweigh the costs and set of supports agreed as ‘reasonable and add almost 1 per cent to Australia’s GDP. necessary’ to meet their goals. They are provided with funding for these supports Why the funding source is important and can choose how their needs are met. Funding for disability has long been the When the NDIS is fully implemented subject of debates about cost and blame in 2019, it is expected that around shifting between the Commonwealth and 460,000 Australians will receive the states and territories. Guaranteed individualised supports. future funding for disability services was part of the rationale for the NDIS. The NDIS also has a broader role in helping people with disability to access The Productivity Commission noted that mainstream services and community ‘current funding for disability is subject to the services, and to maintain informal vagaries of governments’ budget cycles’ and supports (such as family and friends). proposed that the Commonwealth should

42 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT finance the entire costs of the scheme from Funding from 2019 general revenue, or a levy ‘hypothecated to the full revenue needs of the NDIS’. The Commonwealth Government’s share of NDIS expenditure in 2019 is expected to be around $11.2 billion. The Government How is the NDIS being funded? says that around $6.8 billion of this will come The method of financing agreed between from the redirection of existing disability the Commonwealth (Gillard) and state and funding and the Commonwealth’s share of territory governments is different to the the DisabilityCare Australia Fund, leaving two main approaches proposed by the $4.4 billion to be sourced elsewhere. Productivity Commission. Participating governments jointly provide funding based The Government has proposed that this on intergovernmental agreements. Funding additional amount should come from budget comes from a combination of sources. savings directed to a special account—the NDIS Savings Fund—which will ‘hold NDIS First, existing money spent by underspends, and selected saves from Commonwealth, state and territory across the Government’. While savings governments on disability services is may come from any portfolio, all savings being redirected to the NDIS. According proposed so far have been from the social to the 2016 Report on Government services portfolio. Legislation to establish Services, 29.7 per cent of the $8.0 billion the NDIS Savings Fund lapsed with the spent on disability services in 2014–15 dissolution of the 44th Parliament. came from the Commonwealth. To the extent that it cannot be funded In addition, funds for the NDIS are taken from these sources, the Commonwealth’s from the July 2014 increase to the contribution will be a cost to the Budget—as Medicare levy (from 1.5 to 2 per cent of are most other Government programs that taxable income). Revenue raised from do not have dedicated funding sources. increasing the Medicare levy is directed to a special fund—the DisabilityCare Australia Fund—for the purposes of reimbursing governments for NDIS expenditure. In Further reading contrast to the Productivity Commission L Buckmaster and J Tomaras, model, the increased Medicare levy is not National Disability Insurance designed to meet the full revenue needs of Scheme Bill 2012, Bills digest, the scheme (just as the levy only partially 72, 2012–13, Parliamentary covers the annual cost of Medicare). Library, Canberra, 2013.

Finally, any NDIS funding not offset by T Dale and L Buckmaster, the above sources must come from ‘Funding the National Disability general budget revenue or borrowings. Insurance Scheme’, Budget As the Parliamentary Library noted Review 2015–16, Research paper previously, the reliance on multiple series, 2015–16, Parliamentary sources creates ‘some risk of future Library, Canberra, 2015. instability of financing’ for the NDIS.

43 The Australian Public Service Philip Hamilton, Politics and Public Administration

Figure 1: APS employee numbers, 2001–2015 Key Issue Enterprise bargaining continues.

The Australian Public Service (APS) Commissioner has outlined future directions for the APS.

The Department of Finance is developing a new Commonwealth Performance Framework. Source: Australian Public Service Commission Recommendations of the (APSC), Australian Public Service Statistical Bulletin review of internal red tape 2014–15, APSC, Canberra, 2015. are being implemented. The adjusted line takes account of A government transformation agenda coverage changes in the APS each has been announced, but with few year, by adjusting total APS employee details at this stage. ICT projects numbers by the number of employees are likely to have a prominent role. performing functions moving into or out of coverage of the Public Service Act 1999.

APS Commissioner John Lloyd PSM has observed that ‘over the past 10 years APS workforce the number of non-ongoing employees Workforce size in the APS has steadily increased. This is a healthy sign and reflects the changing Data produced by the Organisation for nature of public sector work’. Figure 2 Economic Co-operation and Development shows non-ongoing APS employees as (OECD) indicates that for 2000, 2008 a percentage of total APS employees and 2013, employment in the Australian from 2001 to 2015, including an apparent public sector was around 15 per cent of longer-term trend since 2010 and a more the total labour force (including federal, pronounced increase since 2014. state and local levels). In 2013, the OECD average was 19.3 per cent.

The Australian Public Service Commission (APSC) has reported that at 30 June 2015 there were 152,430 staff employed under the Public Service Act 1999—down 5,526 (or 3.5 per cent) from 157,956 in June 2014. Figure 1 shows the change in total APS employee numbers over the past 15 years.

44 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 2: Percentage of non-ongoing APS employees in the APS, 2001–2015  more effectively using employment types such as part-time, casual, fixed-term, contractor and labour-hire  reducing complexity and timeframes in recruitment  facilitating mobility of staff between agencies, and between the APS and the private sector  using talent management to identify high potential people and preparing them for business-critical roles  improving performance management Source: APSC, Australian Public Service Statistical  reducing the complexity and length of Bulletin 2014–15, APSC, Canberra, 2015. separation processes and  moving HR management beyond a focus Enterprise agreements on transactions and toward planning and The salaries of most public servants strategy. are determined in agency enterprise agreements, the majority of which expired Budgeting for the APS on 30 June 2014. Negotiations towards new agreements have been protracted, Program funds and running costs most recently because the caretaker conventions effectively precluded significant Most Budget appropriations for public steps in the bargaining process during service agencies are classified as either the two-month election period. administered or departmental.

A substantive point of contention is the Administered funds are administered by position outlined by the APS Commissioner: an agency on behalf of the government for ‘Government policy for the current bargaining the benefit of parties who are external to round is to remove the more detailed the agency, generally through programs. policy and process content from enterprise For example, the Department of Human agreements, and place this material in agency Services (DHS) provides income support documentation.’ The Community and Public payments. Agencies have no discretion Sector Union considers that the use of agency in how administered funds are spent. policy documents rather than agreements For example, DHS must make income would reduce employees’ access to dispute support payments to applicants who fulfil resolution procedures in some circumstances. eligibility requirements. Other examples of administered program funds include grants, subsidies, and other obligations arising from Future directions legislated eligibility rules and conditions. In March 2016 the APS Commissioner outlined the future direction of In contrast, departmental funds are generally the APS. Priorities include: intended to cover agency running costs such as employee salaries and the purchase or rental of equipment and property.

45 In 2014, the National Commission of Audit Reducing red tape reported that ‘of total Commonwealth spending in 2013‒14, some $360 billion The 2015 report of the Independent Review (or 88 per cent) comprised administered of Whole-of-Government Internal Regulation expenses with less than $50 billion (or (the Belcher Red Tape review) made 12 per cent) categorised as departmental 134 recommendations, most of which can expenses’. As such, even significant cuts to be implemented administratively within the departmental expenses have only a minor public service. However, full implementation impact on total government expenditure. of some recommendations will require consideration by parliamentary committees, the Senate or legislative amendments. Efficiency dividend In place for over 25 years, the efficiency Outsourcing dividend (ED) is an annual funding reduction for Australian government agencies, in Notable agency-specific outsourcing general applied only to departmental projects in progress include: expenses. The ED has ranged from 1 to 4 per cent over its life. The 2016–17  the provision of passport application Budget provided that the ED will be lodgement services, for which the maintained at 2.5 per cent through 2016– Department of Foreign Affairs and 18, before being reduced to 2 per cent in Trade sought potential suppliers by 2018–19 and 1.5 per cent in 2019–20. 27 April 2016 and  the upgrade and operation of the registry In a first for the ED, the 2016–17 Budget functions of the Australian Securities indicated that public sector agencies and Investments Commission, for can anticipate the re-investment of a which final bids for interest are due by portion of projected ED savings ($500.0 29 August 2016. million) for ‘specific initiatives to assist agencies to manage their transformation In a project likely to be of relevance to all to a more modern public sector’. This agencies, in early 2016 the Department will mean a total estimated net ED of Finance sought ‘the views of interested saving of $1.4 billion over 2017–20. parties on the most effective and efficient way to consolidate shared and common service Managing the APS delivery’, in particular ‘whether opportunities may exist for partnering with the private Planning and reporting sector to deliver shared services’. The first tranche of shared services will focus on ‘core The Department of Finance is leading transactional services’ considered to be low a Public Management Reform Agenda risk, low to moderate complexity, and high which, through a new Commonwealth volume of activity. Examples include accounts Performance Framework (CPF), will result payable/receivable and payroll administration. in significant changes to Commonwealth entities’ planning and reporting. In the 44th Parliament, the Joint Committee ICT projects of Public Accounts and Audit (JCPAA) During the 2013 election campaign, produced two reports on the CPF, the the Coalition undertook to ‘improve the second of which recommended that Finance transparency of government ICT spending should produce an incoming brief about the with the establishment of a US-style online CPF for the JCPAA of the 45th Parliament. dashboard so taxpayers can assess the performance and progress of major projects’.

46 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT In the 2016 election campaign the Coalition  The incoming president of the Australian promised an expanded online dashboard Medical Association has described enabling ‘public dashboard users … to Medicare’s ICT as ‘clunky, 30 years old’ track the performance of key government and ‘not fit for purpose’. services, including: cost per transaction,  The Chief Information Officer of the user satisfaction, and completion rates’. A Department of Human Services has performance dashboard of this type is being been quoted as suggesting the Medicare developed by the Digital Transformation system needs to be addressed within a Office. AUS -style projects/spending four-year period. dashboard is yet to be released, although an ICT dashboard is mentioned on the One industry analyst has observed that Department of Finance website in the a challenge will be bringing in sufficient context of government investment in ICT. external expertise without compromising on ownership of the final delivered The number of projects that would feature systems, as ‘the worst answer would in a projects/spending dashboard is likely to be for the pendulum to swing all the increase. One stated theme of the 2016‒17 way back in the other direction and for Budget was transforming Government, the government to start coding a whole including by ‘maximising the opportunities new Medicare system from scratch’. of a digital dividend wherever possible’.

The ICT capability of Medicare received some exposure in the 2016 election campaign, albeit Further reading in the context of a highly-charged debate over the possible privatisation of Medicare. P Hamilton, ‘Reducing Red Tape in the public service 1: committees and the Senate’, FlagPost, Parliamentary In August 2014 the Government sought Library blog, 21 December 2015. ‘Expressions of Interest from the private sector’ for handling the claim and payment functions of both Medicare and the P Hamilton, ‘Reducing Red Tape Pharmaceutical Benefits Scheme. However, in the public service 2: legislation’, during the campaign the Prime Minister FlagPost, Parliamentary Library gave a commitment that ‘every aspect of blog, 21 December 2015. Medicare that is delivered by Government today will continue to be delivered by P Hamilton, ‘Selected government Government in the future, full stop’. ICT projects’, Budget Review While that statement aimed to address 2016–17, Parliamentary Library, the privatisation issue, there appears to Canberra, May 2016. be a broadly-held view that Medicare’s ICT capability still requires attention:

 During the election campaign, the Opposition health spokesperson stated that ‘the IT system is going to have to be modernised at some point’, and it was reported that in 2009 the then Labor Government had sought to improve Medicare’s systems in collaboration with the private sector.

47 Government procurement and free trade agreements Philip Hamilton, Politics and Public Administration

(SMEs) for contracts of any size and value’. The aim is that 0.5 per cent of domestic Key Issue contracts will be awarded to Indigenous businesses by 2015‒16, 2.5 per cent by Calls for a ‘buy Australian’ 2018‒19, and 3.0 per cent in 2019‒20. preference in Australian government procurement could fall foul of free trade agreements. Further information about the operation of the CPRs and other aspects of the procurement framework is provided on the Department of Finance's procurement Commonwealth Procurement Rules website and in Volume 2 of the 2015 Belcher Independent Review of Whole-of- Procurement by public sector entities is Government Internal Regulation report. governed by the Commonwealth Procurement Rules—July 2014 (CPRs). A legislative Procurement and free trade instrument exempted from disallowance, the CPRs are issued under section 105B agreements of the Public Governance, Performance Since December 2004, successive and Accountability Act 2013. Compliance versions of the procurement rules (or with the CPRs is mandatory for all non- guidelines as they were previously corporate Commonwealth entities (such as known) have given effect to compliance departments) and corporate Commonwealth with provisions in free trade agreements entities prescribed by section 30 of the Public (FTAs) to which Australia is a signatory. Governance, Performance and Accountability Rule 2014. Currently, twenty corporate Typically, a country will specify in an FTA Commonwealth entities are prescribed. the scope of government procurement open to partner countries. Specifics The ‘core rule’ of the CPRs is the include government entities covered or achievement of Value for Money. For each not covered; goods and services in or out submission to a procurement process, of scope; threshold values of in-scope ‘relevant financial and non-financial procurements; and exemptions such as costs and benefits’ must be taken into the retention of preference for particular consideration, including whole-of-life costs, categories of domestic suppliers. rather than simply the initial purchase price. These specifics are then incorporated into In general, an open tender must be the CPRs which advise that ‘an official undertaken for all procurements greater than undertaking a procurement is not required to $80,000 ($7.5 million for construction). There refer directly to international agreements’. are also requirements to report procurement information on AusTender and elsewhere. Proposals for an Australian focus in Under the Indigenous Procurement Policy, government procurement non-corporate Commonwealth entities During the 44th Parliament, crossbenchers subject to the CPRs ‘can purchase directly proposed that government procurement from Indigenous small to medium enterprises arrangements should be revised to include:

48 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT  a ‘buy Australian’ preference, particularly Possible future agreements in relation to steel products Australia has taken steps to participate in  the redefinition of the ‘value for money’ two more agreements, one of which focuses principle to include ‘secondary and social exclusively on government procurement. benefits to communities’ and  the assessment of future FTAs in terms In June 2015 the Government announced of the ‘impact on [Australian] Australia’s intention to join the World Trade manufacturing jobs’. Organization Agreement on Government Procurement. In February 2016 Australia A central issue is how such proposals was among 12 signatories to the Trans- might contend with Australia’s obligations Pacific Partnership (TPP), which includes under existing FTAs. A Senate committee a chapter on government procurement. inquired into procurement policies and procedures in 2014, and sought The Australian Government has moved to through its recommendations ‘a detailed ensure compliance with TPP provisions, explanation of the barriers to developing with the 2016–17 Budget including: a preferencing scheme, which takes into account Australia’s free trade obligations’.  $12.4 million to upgrade ICT systems to ‘support greater transparency’ in the The Government’s response to the reporting of limited tender procurements Senate committee’s report stated that and ‘international agreements limit the extent to which the Government can  $2.9 million for the Federal Court of preference local suppliers’. Similarly, a Australia to ‘provide a mechanism to submission to the inquiry by a legal expert deal with disputes about procurement concluded that ‘the Commonwealth decisions’. is not free to pursue a buy Australian policy unless an exemption applies’. Further reading If this view is correct, there could be two avenues for the implementation B Belcher, Independent Review of a ‘buy Australian’ policy in of Whole-of-Government Internal government procurement: Regulation: report to Secretaries Committee on Transformation:  re-negotiation of existing FTAs to include volume 2: assessment of key broader ‘buy Australian’ exemptions and regulatory areas, Department of Finance, August 2015.  ensuring that future agreements include broader ‘buy Australian’ exemptions. Commonwealth Procurement Rules 2014. However, both avenues have the potential to result in a patchwork of agreements that differ in their N Seddon, Submission to Senate exemption provisions—the opposite of Finance and Public Administration the more uniform, non-discriminatory References Committee, Inquiry treatment sought by current FTAs. into Commonwealth procurement procedures, 2014.

49 50 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT AUSTRALIAN SOCIETY

Image ID: 341715743, Copyright: Rawpixel.com, Image ID: 251986318, Copyright: Aleksandar Todorovic 51 The future of school funding Marilyn Harrington, Social Policy

By the time of the 2013 election, however, only three state and territory Key Issue governments had concluded agreements with the Australian Government to Australian Government funding implement the new system (the non- arrangements for schools will government school sector automatically change from 2018. Speculation became part of the new system). about this change is taking place amid a national and international debate about what matters most The Coalition Government and in improving school outcomes and school funding whether more funding is the answer. Following its election in 2013, the Coalition Government committed only to the first four years (2014 to 2017) of Labor’s school funding plan. It also applied the Australian Government funding for new funding arrangements to all state and territory government education systems, schools explained including those that had not concluded, or The Review of Funding for Schooling (the had rejected, agreements with the previous Gonski Review) argued that a significant government. These jurisdictions were not increase in funding by all governments required to meet the original agreement’s was required to lift the performance terms nor contribute additional funding. of school students, particularly those from disadvantaged backgrounds. The Government has indicated that it will change how schools are funded from The then Labor Government developed 2018. Its vision for the future is outlined a new school funding system based on in its pre-budget statement, Quality the Gonski Review’s recommendations Schools, Quality Outcomes. However, no for a new schooling resource standard detail about distribution arrangements, (SRS) comprising per student funding which will be a matter for negotiation and loadings to address student and with the states and territories, has been school disadvantage. The long-term goal provided. Nevertheless, the process was for all schools to be at least funded has already begun with the Government at 95 per cent of their SRS by 2019. announcing that a new indexation rate, which is lower than the current rates, will The total amount of additional funding apply to school funding from 2018. ($14.5 billion) to achieve this goal was to be phased in over six years, with the Australian Government contributing $9.8 billion (65.0 per cent) and state and territory governments the remainder. Most of the Australian Government’s funding was to be provided in the last two years of the transition period.

52 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 1: Australian Government funding for schools, 1999–00 to 2019–20 (real prices)

Source: Parliamentary Library; Australian Government, Budget strategy and outlook: budget paper no. 1: 2016–17; Australian Government, Final budget outcome, various years. Notes: * Estimates and projections. Spike in expenditure from 2009–10 to 2010–11 was the result of the Building the Education Revolution (BER) stimulus program.

Does funding matter in improving PISA 2012. At the same time, Australian educational outcomes? Government expenditure on schools grew by 70.0 per cent in real terms from Those who question the benefit of 2000–01 to 2012–13 (see figure above). additional expenditure in improving educational outcomes (including the The evidence Government in Quality Schools, Quality Outcomes) highlight the declining Both the proponents of increased school performance of Australian 15-year- education expenditure and those that olds in the Programme for International question its value in improving educational Student Assessment (PISA) vis-a-vis the outcomes, can draw upon a substantial significant increases in school funding. body of research to support their cases.

The Australian Council for Educational The proponents of ‘Gonski’ funding, such as Research (ACER) summary report on PISA the Australian Education Union in its report 2012 shows the significant declines in Getting Results, point to evidence that shows mean mathematical and reading literacy the importance of increased investment in performance. The former declined by 20 improving educational outcomes, particularly score points on average between PISA for disadvantaged students. A number of 2003 and PISA 2012 and the latter declined anecdotal reports provide similar evidence. by 16 score points from PISA 2000 to

53 International research also supports the The future argument for increased funding. A recent major review of this research, Does The Government has proposed that future Money Matter in Education, concluded: funding should be contingent upon state ‘aggregate measures of per-pupil and territory governments maintaining their spending are positively associated with funding effort and committing to specific improved or higher student outcomes’. education reforms. The proposed new This review also found that schooling conditions for funding relate broadly to resources that cost money are ‘positively improving literacy and numeracy outcomes associated with student outcomes’. and the quality of teachers and teaching, including a focus on disadvantaged schools and science, technology, engineering and In contrast, a PISA analysis, Does Money mathematics (STEM) subjects; and providing Buy Strong Performance in PISA?, concludes more foreign language teachers and access that higher expenditure on education does to languages education. There has been a not guarantee better student performance. mixed response to these proposed reforms What is more important among high-income and initiatives similar to these reforms have countries is how the resources are used. been endorsed by the Council of Australian Governments’ (COAG) Education Council This finding aligns with the tenor of recent and are already being implemented. Australian reports and commentary which examine strategies for improving educational The proposed reforms and distribution outcomes, particularly for those from arrangements for school funding will disadvantaged backgrounds. One example have to be negotiated through COAG, is the Grattan Institute’s Orange Book which has agreed that ‘discussions 2016: Priorities for the Next Commonwealth on new funding arrangements should Government, which suggests that the be concluded by early 2017’. key reforms to lift student outcomes are ‘well known’. These include focusing more on student progress and not just Given the recent history of school funding achievement, improving teaching practice reform efforts, it is likely that negotiating in the classroom, and making ‘trade-offs’ to and implementing the new arrangements improve how and where money is spent. for school funding will be difficult.

A recent ACER report, Five Challenges in Australian School Education, concurs Further reading with the widely accepted view that what is important is how funding is targeted. M Harrington, Funding the National However, the report does not completely Plan for School Improvement: reject the notion of increased funding: an explanation, Background note, Parliamentary Library, … whether or not increased funding Canberra, 26 June 2013. makes a difference depends on how it is applied. Our national challenge is M Harrington, ‘School education’, to maximise the impact of government Budget review 2016–17, Research expenditure by targeting it on paper series, 2015–16, Parliamentary evidence-based strategies to improve Library, Canberra, 2016. performances in Australian schools.

54 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Early childhood education and care Michael Klapdor and Marilyn Harrington, Social Policy

least 15 hours a week) to be eligible for more than 24 hours of CCB per child per week Key Issue (up to a maximum of 50 hours per child per week). CCR is a non-means tested payment The 45th Parliament will need that covers 50 per cent of out-of-pocket to decide between competing costs of approved child care services up to approaches to the way in which a maximum of $7,500 per child per financial government assists families year. CCR has an activity test as well but with the costs of child care. there is no minimum hourly requirement.

The future of early childhood The Government also provides payments education services will also to specific groups such as those on income have to be considered with support looking for work, and provides the key national partnership funding directly to some services which offer agreement expiring in 2017. care to disadvantaged groups or in areas where it is otherwise unfeasible to operate.

Snapshot of child care in Australia The Government estimates that it will spend around $8.6 billion on CCB, CCR and other In 2015, around 1.2 million children were support for the child care system in 2016–17. attending formal child care services. The median hourly fee for a long day care service in 2015 was around eight dollars Jobs for Families package an hour. A family with gross income under In May 2015, the Abbott Government $100,000 per year would spend around announced the most significant changes to ten per cent of their disposable income on fee assistance payments in more than 15 child care if they had one child in care for 50 years: the Jobs for Families package. The hours a week (after receiving government package was in response to a Productivity fee assistance). Child care fees have been Commission report on child care and early increasing, on average, by around seven childhood learning. The package was later per cent per year over the last decade. revised in December 2015, primarily to make it less generous to higher income earners. Australian Government assistance The centrepiece of the package is the Child The two main payments by which the Care Subsidy (CCS) which would replace Australian Government assists families with existing child care payments. The CCS would the cost of child care are Child Care Benefit offer a payment based on a percentage of (CCB) and Child Care Rebate (CCR). an hourly benchmark price or the actual child care service fee, whichever is lower, CCB is income tested, paid at hourly with the benchmark set by government rates and available to those using services and differentiating by service type. The approved by or registered with the Australian benchmark would be based, initially, on Government. Parents/carers must meet an average fees plus an additional loading. It activity test (work, training or study for at would only be increased in line with inflation

55 rather than in line with average fee increases. additional cost. The revised package saw a The rate offered varies by family income: reduction in estimated expenditure in the first two years on the CCS of around $1.2 billion. Table 1: Child Care Subsidy income test The CCS was originally intended to Annual family Subsidy rate–% of actual fee or commence on 1 July 2017. However, in income benchmark (whichever is lower) the 2016–17 Budget, the Government announced that the CCS would be Up to $65,710 85% deferred until 1 July 2018, citing the failure of the Senate to support >$65,710 to Tapering from 85% to 50% the Family Tax Benefit savings. <$170,710 for each $3,000 $170,710 to 50% <$250,000 Reform or patch-up The Jobs for Families package represents a $250,000 to Tapering from 50% to 20% <$340,000 for each $3,000 significant change in direction for child care funding aimed at better targeting assistance, ≥$340,000 20% slowing growth in costs for families, and providing simple levers for government to Source: Department of Education and Training constrain costs. The package is expected (DET), Overview: Jobs for Families child care package, DET, Canberra, 3 May 2016. to see an increase in parents’ workforce participation—but the increase in labour supply is projected to be relatively small given The hours of child care to be subsidised the $2 billion in additional expenditure on the would be based on the number of hours per package its first two years. Criticisms have fortnight parents/carers spent in approved been made of the activity test, the method for activities such as work, training, study, setting the benchmark price, and the number volunteering or looking for work. Eight to of families worse off under the changes. sixteen hours of activities would offer 36 hours of CCS per fortnight; 17–48 hours provides up to 72 hours of CCS; 49 hours+ At the 2016 election the Australian Labor provides up to 100 hours of CCS. For Party (Labor) committed to using the couples, the partner with the lower number of expenditure allocated to the Jobs for hours would determine the CCS entitlement. Families package for a new child care Families with income under $65,000, who do policy to commence from 1 January 2017, not meet the activity test, would be eligible which includes: increasing CCB rates by for a maximum of 24 hours of CCS. Families 15 per cent, increasing the annual CCR with income over $185,000 would have their cap from $7,500 per child to $10,000 CCS entitlement capped at $10,000 per year. per child and new administrative powers to constrain excessive fee increases. Cost and timing Labor’s proposals do not address key When firstannounced , the package was to issues with the current system identified in cost an additional $3.5 billion over five years the Productivity Commission’s report such including $327.7 million for targeted support as the complexity of the payment system, to disadvantaged and vulnerable families poor targeting of some programs, and separate from the CCS. The Government long-term fiscal sustainability. However, the stated that cuts to the Family Tax Benefit proposals would deliver more immediate program would be used to fund the relief to families with the costs of child

56 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT care. While the Government’s policy offers with access to a quality ECE program an improvement on the existing system— of 15 hours per week or 600 hours in in terms of simplification and increased the year prior to full-time schooling. assistance to most families—and comes with a sizeable amount of additional investment A question remains, however, as to in child care, there remain issues with its whether Australia is doing enough in ECE design and the fact that the additional provision. According to the Australian funding is to be drawn from other forms Early Development Census National Report of family assistance. While the Family Tax 2015, which assesses children in their Benefit cuts do not affect higher income first year of school, about one in five families, low and middle-income families children were developmentally vulnerable will see the benefits of the CCSpartly offset in one or more areas (domains). by reductions to these other payments. A review found that, in 2013, most Early childhood education—is jurisdictions were not meeting the NP Australia doing enough? enrolment targets for disadvantaged and Indigenous children in 2013; hence, the The imperative for good quality early current NP’s focus on these children. childhood education (ECE), particularly There is also concern from state and for children from disadvantaged territory governments and ECE services backgrounds, is undisputed. about the NP’s continuing short-term nature which, it is claimed, has led to A recent Organisation for Economic Co- increased uncertainty for service delivery operation and Development report, What and impedes long-term planning. Are the Benefits From Early Childhood Education, reasserts the benefits of ECE Australia’s ECE provision is not keeping (preschool). It also presents evidence about up with that of other countries. Professor the long-term benefits of ECE participation Edward Melhuish from Oxford University as shown by the performance of 15-year- is amongst those who argue that Australia old students in the 2009 Programme for is being left behind—other countries International Student Assessment (PISA). are now providing two years of ECE. An Australian study of national literacy and numeracy tests (NAPLAN) results, Early Bird Catches the , also showed the positive effect of ECE participation. Further reading

State and territory governments have M Klapdor, Family Assistance primary responsibility for the funding of ECE Legislation Amendment (Jobs services. This funding, since 2009, has been for Families Child Care Package) augmented by the Australian Government Bill 2015, Bills digest, 110, through a series of short-term national 2015–16, Parliamentary partnerships (NPs). The current NP will Library, Canberra, 2016. provide $840.0 million from 2016 to 2017. M Harrington, ‘The review of Through the NPs, all governments have universal access to early childhood committed to ‘universal access’ to education’, FlagPost, Parliamentary ECE. The aim is to provide every child Library blog, 30 March 2015.

57 Increasing participation in tertiary education James Griffiths and Marilyn Harrington, Social Policy

The spikes in new VET students shown in the graph may be partly explained by the Key Issue progressive implementation of VET reforms from 2009 to 2012. However, since 2012, the Government policies to increase number of new VET students has noticeably participation in higher and vocational fallen. Peter Noonan from the Mitchell education and training have Institute has attributed the fall to declining had mixed results. Three main funding, VET competition with universities, areas of concern have emerged: increased training fees and ‘a rationalisation containing the cost to government, of programs—particularly at TAFEs—that ensuring quality education and had moved some courses further away than reducing student debt. many students were prepared to travel’.

Figure 1: Commencing domestic students in Increasing access to tertiary tertiary education, 2007 to 2014 education The tertiary education sector comprises higher education (university) and vocational education and training (VET). It is a diverse sector, including public and private universities, state and territory government technical and further education (TAFE) institutes and private VET providers.

Since 2007, significant government efforts have been made to increase participation in the tertiary education sector. In higher Note: VET commencing students are mostly domestic students. Source: Parliamentary Library, education, this has been through the creation using data from the Department of Education and of an uncapped demand-driven system Training (Higher Education Data Collections) and for bachelor-degree places. This means, in National Centre for Vocational Education Research part, that the Government no longer places (Government-funded students and courses) online limits on the number of undergraduate datasets. students public universities can enrol. In VET, this has been through the introduction Containing the cost of tertiary of contestable funding (where public and education private providers compete for funds), and by expanding student loans to the VET sector Costs to government through the VET FEE-HELP program. The increases in the number of government- The graph below shows the number supported higher education and VET of new higher education students students have been accompanied by has increased steadily since the significant increases in government uncapped demand-driven system was expenditure. In higher education, the Review progressively implemented from 2009. of the Demand Driven Funding System

58 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT reported that uncapping bachelor places sector has led to cost-shifting by some of had increased the cost to government from the states for some courses. The states $4.1 billion in 2009 to $6.1 billion in 2013. and territories have been able to reduce The Review estimated that the cost would the number of places they subsidise, with reach $7.2 billion by 2016–17. In VET, the students able to access Commonwealth most recent VET FEE-HELP statistical report VET FEE-HELP loans instead. shows that the value of loans increased from $25.6 million in 2009 to $1.8 billion in 2014. Ensuring quality in tertiary education

Higher education Higher education In an attempt to contain costs, the The quality of the student cohort is an issue Government proposed widespread changes in higher education. More students with to higher education in the 2014–15 lower Australian Tertiary Entrance Ranks Budget, including an average 20 per cent (ATARs) are being accepted into university. reduction in student subsidies. Although Coinciding with the introduction of the these measures have not been legislated, uncapped demand-driven system, the their projected savings continue to appear share of offers to applicants with ATARs in the budget forward estimates. of 50 per cent or less increased from 1.6 per cent (3,607 applicants) in 2012 to The Government’s recent discussion paper, 4.4 per cent (9,723 applicants) in 2016. Driving Innovation, Fairness and Excellence in Australian Higher Education reconsiders the To address concerns that students are being 2014–15 budget proposals and presents accepted into courses for which they are other options for reform. These options not academically prepared, the Minister for include reductions in government subsidies, Education and Training asked the Higher changes to the Higher Education Loan Education Standards Panel (HESP) to Program (HELP) and limited fee deregulation provide advice about ways to improve the for ‘flagship courses’, whereby institutions transparency of higher education student could be given the freedom to set fees for admissions policies. The Go8 universities ‘a small cohort of their students enrolled in support the HESP’s recommendations, identified high quality, innovative courses’. including the proposal to publish minimum, Notably, the Government has ruled out median and maximum ATARs for every fee deregulation across the entire higher degree. The Go8 has also suggested the education sector as a means to contain costs. publication of student progression rates.

The options proposed in the discussion paper Vocational education and training have met with a mixed response. The Group of Eight (Go8) and the Regional Universities In VET, the issue of quality relates to both Network, for instance, oppose the idea students and providers. Contestable of flagship degrees, concerned that they government funding has created an incentive would create a two-tier university system. for new providers to enter the VET market, although the evidence on whether this has occurred is mixed. Also, the Victorian Vocational education and training Registration and Qualifications Authority The Mitchell Institute’s response to recalled almost 10,000 VET qualifications the Government’s discussion paper, in 2014 and 2015 ‘because of concerns Redesigning VET FEE-HELP, suggests that about poor training and standards the expansion of student loans to the VET breaches’. A recent Senate inquiry also

59 examined the private VET sector and Future directions for tertiary found the national regulator, the Australian education Skills and Quality Authority (ASQA), was struggling to adequately regulate the sector, It is not clear if, or how, the higher education protect the rights of students and act system will be changed based on the options firmly and quickly to stamp out abuses. presented in the Government’s discussion paper. The Go8 asserts that the uncapped Declining rates of VET course completions, demand driven system has ‘harmed the in part due to the suitability of students for economy, diminished the value of higher courses, is also an issue for the sector. In education, and created the false view that response, the Government has implemented anyone without a degree is a “failure”’. new minimum literacy and numeracy However, there appears to be little political standards for VET FEE-HELP students and appetite to restore caps on university places. made other amendments to the scheme. The process of VET reform has already begun with the Government’s recent changes Reducing tertiary student debt to VET FEE-HELP. However, the future of The Grattan Institute’s report, Doubtful Debt: the scheme is still under consideration as the Rising Cost of Student Loans, shows that canvassed in the Government’s recent the proportion of unpaid student loan debt tertiary education discussion papers. is increasing. It estimated that by 2017 the A new National Partnership (NP) with Government will have $13.0 billion in loans the states and territories will also have that it does not expect to collect (known as to be negotiated to replace the existing ‘doubtful debt’). One reason for this debt is (NP) Agreement on Skills Reform, which the repayment threshold—some debtors will is scheduled to expire in 2017. The never earn more than the income threshold sustainability of TAFEs also remains an issue. or will do so for too few years to repay all their debt. The major cause of the amount of doubtful debt, however, is that HELP debts in deceased estates are written off. Further reading J Griffiths and M Harrington, The Government’s proposal to reduce the ‘Tertiary education ’, Budget current repayment threshold from $54,869 review 2016–17, Research paper to $50,638 has bipartisan support and series, 2015–16, Parliamentary there is also some support for collecting Library, Canberra, 2016. HELP debts from deceased estates. P Noonan, Participation in tertiary A major concern for the VET sector is education in Australia: policy providers who have used unethical sales imperatives and scenarios, Mitchell techniques to sign up students to a VET Institute policy paper, 2/2016, FEE-HELP loan. These students may have Mitchell Institute, Melbourne, 2016. no hope of repayment. The Government’s proposals in its discussion paper, Redesigning VET FEE-HELP, are intended to redress unethical provider practices. Meanwhile, the Australian Competition and Consumer Commission has launched legal action against five VET FEE-HELP providers.

60 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Aged care—reforming the aged care system Alex Grove, Social Policy

Figure 1: Number and proportion of the population aged 70 and over Key Issue Demand for aged care is growing as the population ages, with a corresponding increase in Australian Government expenditure.

Aged care issues look set to feature strongly in the 45th Parliament. A review of recent reforms will be conducted and tabled in parliament, major changes to Source: Australian Bureau of Statistics, Population home care will commence in Projections (Series B), 2013. 2017, and further reforms have already been foreshadowed. Review of the 2012 reforms The Productivity Commission (PC) released a report in 2011 recommending significant Increasing demand for aged care changes to the aged care system to improve access, quality and choice of services, The Australian Government is the primary and financial sustainability. The then Labor source of funds for, and regulator of, the Government incorporated some of the aged care system. Care is provided in PC’s recommendations in its 2012 Living people’s homes or in a residential (nursing Longer. Living Better (LLLB) reform package. home) setting by more than 2,000 not-for- The first wave of LLLB reforms required profit, for-profit and government providers. consumers to contribute equitably to the cost of their care and accommodation, Recurrent government expenditure on aged placed a greater focus on individualised care services was around $15.8 billion in care and established the My Aged Care 2014–15, with the Australian Government website and call centre to help people providing approximately 95 per cent of navigate the system. The longer term goal this funding. Expenditure is contained by was to create a more flexible and integrated capping the number of subsidised aged care aged care system driven by consumer places in line with growth in the population choice, with less government regulation. aged 70 years or over (aged care services are generally aimed at people aged 65 or The LLLB reforms are now due for review. over, but the average age of consumers The legislation (section 4) requires an is considerably older). As the figure below independent review commencing around shows, the number of people aged 70 August 2016 to be tabled in parliament years and over is projected to grow from in 2017. The review will consider matters 2.5 million in 2016 to 3.6 million in 2026, such as demand for and supply of requiring more subsidised places. In the places, means testing, pricing, access, longer term, demand for aged care services and workforce strategies. It may also is expected to more than treble by 2056. consider issues that have emerged since

61 the reforms were enacted, such as the recommended by the PC in 2011 but not recent tightening of the funding formula adopted by government, such as uncapping for residential aged care providers. the number of subsidised places, and releasing equity in the family home to pay for aged care. Such proposals could come Changes to care in the home with a degree of fiscal or political risk. Significant changes to aged care services provided to people in their homes are set It is likely that aged care workforce issues to commence in 2017. From 27 February including employee remuneration and 2017, packages of home care services will retention, and whether workforce growth be allocated directly to eligible consumers. will be able to keep pace with rising This means that consumers will no longer demand for services, will continue to be have to search for a provider that has a a focus for the parliament. The Senate package available in their area, as they will inquiry into the future of Australia’s aged be able to direct the funding attached to their care sector workforce did not report package to a provider of their choice. While prior to the dissolution of parliament, this should increase consumer choice and and may resume its inquiry in 2016. market competition, questions have been raised about the capacity of consumers to The aged care system has undergone make an informed choice if their decision- significant reforms since 2012. Given making capacity is reduced, or if comparative the increasing demand for services, information on providers is not readily ongoing cost and workforce pressures, available. The changes to home care may and stakeholder calls for further reform, also focus attention on unmet demand, this rapid pace of change is expected to as a national waiting list for home care continue during the 45th Parliament. packages will be created for the first time.

Further changes to home care were flagged in the 2015–16 Budget, with a proposal Further reading to merge home care packages with the entry level Commonwealth Home Support A Grove, ‘Aged Care Roadmap: Programme from 2018. Legislation for a guide to the future of aged the proposed merger has not yet been care?’, FlagPost, Parliamentary introduced, but may come before the Library blog, 12 May 2016. 45th Parliament for consideration. A Grove, Aged Care Legislation Calls for further reform Amendment (Increasing Consumer Choice) Bill 2016, Bills digest, Aged care stakeholders look set to campaign 94, 2015–16, Parliamentary for further structural reform of the aged care Library, Canberra, 2016. system during the 45th Parliament. In April 2016, the Aged Care Sector Committee produced a Roadmap at the request of then Assistant Minister for Social Services, Mitch Fifield, calling for wide-ranging changes to make the system more sustainable, consumer-driven and market-based. This included some proposals that were

62 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Medicare and health system challenges Amanda Biggs, Social Policy

by 2054–55. This growth will be driven largely by non-demographic factors: higher Key Issue incomes (which drive consumption), health sector wage increases and technological Medicare was a key election issue change. This means that keeping health with concerns about privatisation, spending efficient and sustainable over bulk billing incentives and the the period will be a key challenge. rebate freeze capturing attention. While these remain pertinent, other issues affecting Medicare and Out of pocket costs the health system are also likely While the 2014–15 Budget’s $7 patient to come before policy makers co-payment on bulk billed services (with in this term of parliament. exemptions) has been abandoned, a $5 co-payment on subsidised medicines remains. Proposals to increase patient out- of-pocket costs, however, raise concerns Medicare was a high profile issue during that high costs deter people from seeking the election—claims that the Government needed health care. Patient out-of-pocket was intending to privatise the Medicare costs account for around 20 per cent of payments system, the Medicare rebate overall health expenditure—a rate close freeze and changes to bulk billing to the OECD average, but considerably incentives all generated significant debate. higher than New Zealand and the United The Prime Minister subsequently ruled Kingdom. According to the Australian out major changes and committed to Bureau of Statistics, nationally around five Medicare’s full retention. Notwithstanding per cent of people who needed to see this commitment, Medicare and the health a general practitioner (GP), delayed or system will face a number of challenges did not go due to cost. In some regions during this term of parliament. the rate was almost twice as high.

Cost pressures on the Some argue the effect of the Medicare Commonwealth rebate freeze introduced in 2013–14 and extended to 2020 in the most recent Budget, The Australian health system performs is a ‘co-payment by stealth’. Doctor groups comparatively well internationally—life such as the Australian Medical Association expectancy is the sixth highest among warn that the freeze is unsustainable and Organization for Economic Cooperation will force doctors to abandon bulk billing and Development (OECD) countries. At and pass costs on to patients. So far, the 8.8 per cent of GDP, Australia's total national bulk billing statistics show bulk billing expenditure on health (including government rates for GPs remain high. Nevertheless, and private sources) remains close to the reports of GPs abandoning bulk billing and OECD average of 8.9 per cent. But it is patients attending emergency departments expected to rise. The Intergenerational for GP-treatable conditions are emerging. Report 2015 forecasts that Commonwealth spending on health is projected to grow from 4.2 per cent of GDP to 5.5 per cent

63 Parliament’s capacity to overturn the rebate Role of private health insurance freeze is limited. It can move to disallow the regulations that specify the fees for Medicare Reforms to private health insurance may services. But disallowance would revive come before the Parliament, following the the previous regulation which specifies fees recent consultation process. Improving that have themselves been frozen at the consumer value and providing better same level. A further complication is that product information are likely to be a major the regulation itself has a finite life—expiring focus for the Government. Meanwhile, after 12 months and 15 sitting days. insurers will be keenly pursuing policies that address their cost pressures, such as reforming the pricing of prostheses. However, Chronic disease proposals for private health insurers to Another challenge will be addressing the play a greater role in primary care—such rise of chronic disease. New approaches, as in chronic disease management— such as the Health Care Home model could be contentious. Doctor’s groups as proposed by the Primary Health Care remain wary, and some are concerned Advisory Group (see article elsewhere in it could lead to the ‘Americanisation’ of the Briefing Book), warrant consideration. the health system, and the erosion of A greater emphasis on prevention has also the Medicare principle of universality. been urged. One option that has been suggested is a sugar tax. In 2014, Mexico Unpassed budget measures imposed a tax on sugary drinks and other countries, including the United Kingdom Health measures from the 2016–17 Budget (UK), have begun to follow. Early evidence will also need to be considered. This includes suggests the Mexican tax has reduced the proposal to replace the means-tested soft drink consumption, but evidence of Child Dental Benefits Schedule funded impacts on weight is yet to emerge. through Medicare, with a new state-run public dental scheme to be established under a National Partnership Agreement Improving efficiency with the states and territories. Legislation Meanwhile, initiatives to improve efficiency to enact this was introduced in May but and reduce wastage in the health system lapsed when Parliament was dissolved. continue. The Medicare Benefits Schedule In addition, previously presented but Review Taskforce is reviewing the 5,700 unpassed measures from earlier budgets, Medicare funded services against best such as the 2014–15 budget proposal for clinical practice and removing services for a single Medicare Safety Net may be re- which the evidence base is poor. The interim submitted. This legislation was introduced report of this Taskforce recommended in 2015, but lapsed at prorogation. the removal of 23 items, with more recommendations likely by year’s end, when Rural and regional challenges its next report is due. However, in the current political climate any changes to Medicare Providing accessible and affordable health are likely to face considerable scrutiny, care to residents of rural and regional areas particularly proposals for further deletions. remains a high priority for many policy makers. Many of these areas lack ready access to Medicare funded services as a result of the distribution of the medical workforce. The health problems of Aboriginal and Torres Strait Islander people,

64 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT who face particular sociodemographic, While some issues may not be revisited until cultural and language barriers may also the signing of the next agreement in 2020, gain greater consideration in the new the listing of new medicines will continue Parliament with the election of several to impose cost pressures on the PBS. Indigenous members and senators. The review of pharmacy remuneration and regulation, which is currently underway, may also reinvigorate debate on issues Mental health such as the Pharmacy Location Rules that Improving the care of those with mental regulate where pharmacies can operate. illnesses is another pressing issue. The National Mental Health Commission These, and other health issues, look proposed the development of a new likely to feature prominently in the ‘stepped care’ model providing a range of work of the upcoming Parliament. help options of varying intensity to match people’s needs. But mental health reform will be challenging. Questions have been raised over the role of Primary Health Networks Further reading which will commission mental health services and how these will integrate with other Amanda Biggs, Medicare: a services, with concerns that some patients quick guide, Research paper may fall through the gaps. In addition, the series, 2016–17, Parliamentary National Disability Insurance Scheme trials Library, Canberra, 2016. have raised concerns in the mental health sector around workforce issues, funding Alex Grove, The Pharmaceutical and the pace of change the sector faces. Benefits Scheme: a quick guide, Research paper series, 2015–16, Parliamentary Hospital funding Library, Canberra, 2016. It will be important to resolve the future of public hospital funding after 2020, when the recently signed COAG agreement expires. The Turnbull Government’s decision to reverse the contentious 2014–15 budget measure that replaced activity based funding with CPI and population growth as the basis for hospital funding for the life of the agreement, was welcomed by many. But future funding arrangements will still need to be agreed between the Australian Government and the states and territories.

Pharmaceuticals The Parliament passed significant reforms to Pharmaceutical Benefits Scheme (PBS) pricing in 2015 to coincide with the signing of the Sixth Community Pharmacy agreement.

65 A new way to address chronic disease in primary care Amanda Biggs, Social Policy

As the first point of medical care, primary care plays a key role in preventing, Key Issue delaying and reducing the progression of chronic diseases. Australia has a well- The rise in chronic diseases is putting developed primary care sector with general health budgets under pressure practitioners (GPs) at the centre. GP and placing growing numbers services are funded primarily through the of Australians at risk of serious Medicare Benefits Schedule (MBS), largely complications and early death. on a fee-for-service basis. Fee-for-service Improving the management of is considered appropriate for treating chronic diseases in primary care is episodic, acute illnesses but not considered urgently needed. The ‘medical home’ optimal for managing chronic diseases. model is a promising approach, but it faces a number of challenges. Various approaches to better manage chronic diseases through the MBS have been implemented. In 2004, services provided by allied health providers such as A key issue facing policy makers is curbing physiotherapists, dieticians and others were the impacts of the rise in chronic diseases. added to the MBS under the Enhanced Chronic diseases are long-term conditions Primary Care package. Team-based with persistent, negative health effects. care for managing chronic disease was They include cancer, arthritis, cardiovascular strengthened in 2005 with the addition of disease, type 2 diabetes, asthma, mental a number of chronic disease management illness and dental conditions. The Australian (CDM) items to the MBS. Practice incentive Institute of Health and Welfare (AIHW) payments (PIP) which encourage GPs estimates that in 2011, 90 per cent of deaths to better manage patients with asthma in Australia had a chronic disease as an and type 2 diabetes are also available. underlying cause. It also found that half of all Australians have a chronic disease and 20 Despite these initiatives there remains room per cent have at least two, and the incidence for improvement. The Grattan Institute is associated with ageing. Chronic diseases estimates that only 25 per cent of patients are complex and expensive to manage. In with type 2 diabetes get the recommended 2008–09, the management of cardiovascular monitoring and treatment for their condition diseases, oral health issues, mental while poor management of chronic disease disorders and musculoskeletal conditions is estimated to cost $320 million annually. alone cost the health system $27 billion. Recognising that improvements were Importantly, many chronic diseases are needed, the Government established preventable—31 per cent of the burden of a Primary Health Care Advisory Group disease is attributable to lifestyle factors such (PHCAG) in 2015 to examine ‘innovative as smoking, overweight and obesity, alcohol, care models for target groups such as physical inactivity and high blood pressure. those with complex, chronic disease’.

66 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The PHCAG report was provided to The trial of the HCH now looks set to be Government in late 2015. It recommended implemented but it may face challenges. trialling a new model of care for patients The HCH model relies on newly established with chronic diseases—the Health Care PHNs to manage implementation, but their Home (HCH)—and new payment structures capacity to do this remains unclear. To make to incentivise care and replace traditional patients partners in care, the empowerment fee-for-service payments. The HCH model of patients and their carers will be critical. involves the voluntary enrolment of a patient There will be an urgent need to improve with a main provider (usually their GP) who health literacy among patients. ABS data coordinates all aspects of their care, and (2009) shows that just 41 per cent of adults ensures care is flexible and team-based. were assessed as having adequate health Patients would be supported to become literacy but among those with fair or poor partners in their care. The aim is to minimise self-assessed health, only one quarter had preventable hospitalisations and provide adequate health literacy. Research indicates more integrated and coordinated care. that social disadvantage is linked to poor Similar models have been developed in health literacy, and older Australians are overseas jurisdictions notably the US (where particularly vulnerable because they are more it is known as the patient-centred medical likely to experience both poor health literacy home or PCMH), the UK, Canada and NZ. and a higher incidence of chronic diseases.

The Government broadly accepted the Improving co-ordination of care will require PHCAG’s recommendations. In March 2016, better take-up of electronic health records the Health Minister announced $21 million and improved data collection, but progress for a two year trial of HCHs involving 200 is hampered by a number of challenges. medical practices and 65,000 patients, How enrolled patients in the HCH will supported by Primary Health Networks interact with other parts of the health and (PHNs) and commencing in July 2017. social services sectors such as the aged A flexiblepayment structure comprising care sector and the National Disability upfront and quarterly payments Insurance Scheme (NDIS), also needs careful to participating GPs that would consideration given these sectors are also replace fee-for-service payments undergoing changes. The extent to which for these patients is proposed. traditional fee-for-service items on the MBS would be available to enrolled patients for There is broad support politically for medical treatment unrelated to their chronic the medical home model. During the disease is also unclear. Some have warned 2016 election campaign the Labor Party that the trial requires greater funding. Lastly, proposed ‘Your Family Doctor’ which it a sound evaluation will be needed that also described as a patient-centred medical allows enough time for lessons to be learned. home (PCMH)—similar to the HCH. It also includes voluntary enrolment and a key role for PHNs. The Greens also support voluntary enrolment for patients with chronic diseases; their policy proposes to pay GPs $1,000 for each enrolled patient.

67 Meanwhile, the evidence around the medical home model is inconclusive. Evaluations of the patient-centred medical home model in the US show variation in outcomes; possibly reflecting its still embryonic development and experimental implementation. While some studies do show positive outcomes, one study of Ontario’s medical home model found GPs engaged in ‘cherry picking’ healthier patients at the expense of sicker patients, resulting in gaps for vulnerable groups and suboptimal access to care.

The HCH trial is unlikely to require legislation.

Further reading World Health Organization (WHO), Preventing chronic diseases: a vital investment, 2005.

House of Representatives Standing Committee on Health, Inquiry into chronic disease prevention and management in primary care, 2016.

A Biggs, Medicare: a quick guide, Research paper series, 2016–17, Parliamentary Library, Canberra, 2016.

68 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Migration—Australian migration flows and population Janet Phillips, Social Policy and Joanne Simon-Davies, Statistics and Mapping

The growth in the Australian population comprises two components: Key Issue In February 2016, Australia’s  natural increase—births minus deaths and estimated resident population  Net Overseas Migration (NOM)—the net (ERP) reached 24 million. More gain or loss of the population through than one quarter (28.2%) of immigration to Australia and emigration Australia’s resident population from Australia. NOM includes both was born overseas—a level that permanent and long-term (greater than is considered very high compared 12 months) arrivals and departures. to most other OECD countries. The relative contribution these two components make has changed. For example, in 1985 the natural increase represented 58.5% of Australia’s population Australia’s population growth and NOM 41.5%. By 2015, Over the past ten years the annual population natural increase represented only 45.7% growth rate has been in a period of flux, of Australia’s population growth, with reaching its peak in 2008 with the highest- NOM at 54.3%. Interestingly, the NOM ever recorded annual growth rate of 2.2%. increase in recent years has been driven In the following seven years the rate was in by people staying in Australia on long- decline, dropping to 1.8% in 2009 and 1.4% term temporary visas, such as overseas in 2010, before briefly rising in 2012 to 1.8%. students and temporary skills migrants It is currently at 1.4% (as at December 2015). (temporary migration is discussed in more detail elsewhere in this Briefing Book). Figure 1: Annual population growth rate: Figure 2: Components of Australia’s Australia, 1985 to December 2015 population, 1985 to 2015

69 As Figure 2 shows, in 2008—the year Table 1: Migration Program visa grants since Australia experienced its highest level 2000–01 of annual growth since the early 1970s Special (2.2%)—natural increase was at its Year Family Skill Total lowest (33%) and NOM at 67%. Eligibility 2000–01 33 470 44 730 2 420 80 610 Migration flows 2001–02 38 090 53 520 1 480 93 080 Since 1945, over 7.5 million people have 2002–03 40 790 66 050 1 230 108 070 settled in Australia, helping to establish it as one of the most culturally diverse and 2003–04 42 230 71 240 890 114 360 multicultural countries in the developed 2004–05 41 740 77 880 450 120 060 world. Currently, the Australian Bureau of Statistics (ABS) estimates that 28.2% of 2005–06 45 290 97 340 310 142 930 Australia’s resident population was born 2006–07 50 080 97 920 200 148 200 overseas—a level that is considered very high compared to most other OECD countries. 2007–08 49 870 108 540 220 158 630 2008–09 56 366 114 777 175 171 318 Today, Australia’s migrants enter via one of two formal programs managed by the 2009–10 60 254 107 868 501 168 623 Department of Immigration and Border 2010–11 54 543 113 725 417 168 685 Protection (DIBP)—the Migration Program for skilled and family migrants, or the 2011–12 58 604 125 755 639 184 998 Humanitarian Program for refugees and 2012–13 60 185 128 973 842 190 000 those in refugee-like situations. Each year, the Australian Government allocates places 2013–14 61 112 128 550 338 190 000 (quotas) for people wanting to migrate permanently to Australia under these two 2014–15 61 085 127 774 238 189 097 programs. For several years the planning figure for the Migration Program has been set Source: J Phillips and J Simon-Davies, Migration to at a record high level of 190,000 places, with Australia: a quick guide to the statistics, Parliamentary the majority of the available places allocated Library, Canberra, 2016 to the skill stream which is designed to attract migrants with desirable skills in While Australia has always been one of order to relieve skill shortages in Australia. the world’s major ‘immigration nations’, there have been some marked changes to the composition of its migration flows in recent years. Historically, the majority of Australia’s overseas-born residents came from the UK or Europe, but this pattern has shifted significantly. Although the majority of Australia’s overseas-born residents originate from the UK, the numbers are declining—making way for an increasing number who were born in Asia, particularly China and India. In terms of new (permanent) migrants, for the first time in Australia’s history, entrants from China overtook those from the UK in 2010–11.

70 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The following year, migrants from India took out the top spot for the first time.

Another significant development in Australia’s migration story is the growth in the numbers of temporary migrants entering the country. Temporary migrants eligible to stay long-term (12 months or more) and work for varying periods of time include skilled (subclass 457) workers, overseas students and working holiday makers. In addition, under the Trans-Tasman Travel Arrangement, New Zealanders are free to visit, live and work in Australia. As a result, New Zealanders also feature highly in Australia’s settler arrival statistics, but it is important to note that they are not considered permanent migrants (or included in the Migration Program statistics) unless they apply for (and are granted) a permanent visa.

Further reading J Phillips and J Simon-Davies, Migration to Australia: a quick guide to the statistics, Research paper series, 2015–16, Parliamentary Library, Canberra, 2016.

ABS, Migration, Australia, cat. no. 3412.0, ABS, Canberra, 30 March 2016.

71 Migration—issues for Australia’s migration program Harriet Spinks, Social Policy

visa and then later (potentially after many years) transition to permanent residency. Key Issue Australia has a long tradition of Temporary and two-step migration immigration, and has for many years Most of Australia’s long-term temporary welcomed permanent migrants migrants come here as temporary skilled from all over the world under its workers (on the subclass 457 visa), overseas managed migration program. students, or working holiday makers. Unlike Recent years have seen significant the permanent migration program, for which growth in the numbers of temporary annual quotas apply, temporary migration migrants coming to Australia categories are uncapped, demand-driven through uncapped, demand-driven programs. This means that numbers fluctuate programs such as the 457 visa each year according to the number of people program. There is an increasing trend wishing to come to Australia and the number for these temporary migrants to of overseas workers needed by Australian eventually settle here permanently. business to fill local labour market gaps.

Figure 1: Visa grants to 457 visa workers, overseas students and working holiday Australia has a long history of welcoming makers, 1996-97 to 2014-15 migrants, and has for many years run a highly managed permanent migration program, with annual quotas for both skilled and family reunion migrants. In 2016–17 the migration program planning level is for 190,000 places; where it has been for the last five years. Around two-thirds of the permanent migration program is set aside for skilled migrants, with the remaining third allocated to family reunion migrants. There is a separate quota for the humanitarian program, discussed elsewhere in this briefing book.

The last two decades have seen significant Source: J Phillips and J Simon-Davies, Migration to growth in the numbers of temporary Australia: a quick guide to the statistics, Parliamentary migrants coming to Australia, the majority Library, 2016; J Phillips, Working holiday makers in as either temporary skilled workers or Australia: a quick guide, Parliamentary Library, 2016. overseas students. This growth in temporary migration has led to what is perhaps the Immigration Department statistics indicate most significant shift in immigration to that increasing numbers of temporary Australia in the last 60 years—a move migrants are transitioning to permanent to what is frequently termed ‘two-step residency. Figure 2 shows the numbers of migration’. Under this process, migrants permanent skilled visas granted each year, come to Australia initially on a temporary over the last ten years, to people who were

72 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT offshore (outside Australia) at the time of protection of temporary migrants in the visa grant, and people who were onshore (in workplace. The Government had not formally Australia on a temporary visa). During this responded to the report prior to the election. period the proportion of permanent skilled visas granted to people already in Australia The growth in the number of temporary on a temporary visa has grown significantly. migrants coming to Australia has also caused concern in some quarters about Figure 2: Permanent skill stream visa grants the impacts on the local labour market. to offshore and onshore applicants, 2004-05 Further concerns relate to the settlement to 2014-15 and integration of temporary migrants.

Recent reforms to the 457 visa program include those made in response to a 2014 independent review, which was tasked with investigating ways of improving the program’s integrity while minimising the compliance burden on participating businesses. The government agreed to most of the review’s recommendations, and has implemented several of them to date.

It is likely that temporary migration, and in particular the 457 visa program, will continue Source: Department of Immigration and Border to be the subject of debate and reform, Protection, Report on the migration program (various in response to ongoing concerns about years) and Population flows (various years). how best to balance employers’ needs for migrant workers, with the protection Policy considerations of both local and overseas workers. This two-step migration process has many potential benefits, and has been encouraged by successive Governments Further reading as a means of allowing Australia to ‘try out’ potential migrants before allowing H Spinks, The temporary work them to stay permanently. For the (Skilled) (subclass 457) visa: migrants, it offers the chance to test a quick guide, Parliamentary out life in Australia before deciding Library, Canberra, 2016. whether to make a permanent move. J Phillips, Working holiday makers in However, there are also potential problems Australia: a quick guide, Parliamentary with this process. There is evidence that Library, Canberra, 2016. temporary migrants are vulnerable to workplace exploitation. The report of a recent J Phillips and J Simon-Davies, Senate Standing Committee inquiry into Migration to Australia: a quick guide Australia’s temporary work visa programs to the statistics, Parliamentary found that exploitation was a serious problem Library, Canberra, 2016. for temporary migrants, and made several recommendations aimed at improving the

73 Immigration—issues for Australia’s humanitarian program Janet Phillips, Social Policy and Elibritt Karlsen, Law and Bills Digest

The 1951 Convention Relating to the Status of Refugees (Refugee Convention) Key Issue defines a‘refugee’ as any person who: Australia has a long history of accepting humanitarian entrants …owing to well-founded fear of and is one of only a handful of persecution for reasons of race, religion, industrialised countries in the world nationality, membership of a particular that participate in the formal refugee social group or political opinion, is outside resettlement program administered the country of his nationality and is by the Office of the United Nations unable or, owing to such fear, is unwilling High Commissioner for Refugees to avail himself of the protection of that (UNHCR). However, Australia’s country; or who, not having a nationality asylum seeker policies, in particular and being outside the country of his the offshore processing arrangements former habitual residence as a result in Nauru and Papua New Guinea of such events, is unable or, owing to (PNG), remain controversial. such fear, is unwilling to return to it.

These entrants are formally resettled in Australia under the ‘Refugee’ category. The Special Humanitarian Program Australia’s humanitarian program also offers places to people who may Since 1945, when the firstfederal not be refugees, but who face human immigration portfolio was established to rights abuses in their home country and administer Australia’s post-war migration have a connection with Australia. program, 7.5 million people have settled here—including over 800,000 refugees The onshore component of the Humanitarian and other humanitarian entrants. Program offers protection to people who have arrived in Australia, lodged an asylum Today, there are two formal programs claim, and been granted protection. administered by the Department of Onshore entrants may have been found Immigration and Border Protection to to be refugees under Refugee Convention facilitate the entry of Australia’s permanent criteria or may otherwise engage Australia’s migrants—the Migration Program for skilled protection obligations under other human and family entrants, and the Humanitarian rights conventions. Statistics on humanitarian Program for refugees and other humanitarian entrants are available back to the 1940s. The entrants (the Migration Program is discussed following table provides figures since elsewhere in this Briefing Book). 2000–01:

The Humanitarian Program has two main components—offshore and onshore. Most offshore refugees are referred to Australia for resettlement by the UNHCR.

74 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Refugee and humanitarian entrants by category since 2000–01

Special Humanitarian Year Refugee (offshore) Protection Visas (onshore) Total (offshore) 2000–01 3 997 3 116 5 741 13 733 2001–02 4 160 4 258 3 891 12 349 2002–03 4 376 7 280 869 12 525 2003–04 4 134 7 669 2 020 13 823 2004–05 5 511 6 585 1 082 13 178 2005–06 6 022 6 736 1 386 14 144 2006–07 6 003 5 313 1 701 13 017 2007–08 6 004 5 110 1 900 13 014 2008–09 6 499 4 586 2 417 13 507 2009–10 6 003 3 233 4 534 13 770 2010–11 5 984 2 966 4 828 13 778 2011–12 5 988 714 7 043 13 745 2012–13 11 985 503 7 510 19 998 2013–14 6 499 4 507 2 753 13 759 2014–15 6 002 5 007 2 747 13 756

Source: J Phillips, Australia’s humanitarian program: a quick guide to the statistics since 1947, Parliamentary Library, Canberra, 2016.

Responding to irregular maritime Both major parties agree on most of the key arrivals measures that have been put in place to deal with these issues, including mandatory Australia has a highly managed migration immigration detention for unauthorised system and public perceptions or concerns arrivals—introduced in 1992 by the Keating over boat arrivals of unauthorised asylum (Labor) Government—and offshore processing seekers continue to strongly influence arrangements in the Pacific—firstintroduced government policy. In response to rises in by the Howard (Coalition) Government the number of unauthorised boat arrivals in in 2001 and reintroduced by the Gillard Australian waters between 2001 and 2013, (Labor) Government in 2012. Currently, there has been increasing pressure on both the only major policy difference centres on Coalition and Labor governments to adopt whether onshore asylum seekers found to and maintain measures that are seen to deter be refugees should be offered temporary or future boat arrivals, address border security permanent protection visas in Australia. concerns and combat people smuggling. Since forming government in 2013, the Coalition has continued to pursue the regional processing arrangements in Nauru

75 and PNG and there are currently about Stakeholders and experts in the field 1,300 asylum seeker transferees being have urged the Australian Government to processed offshore. The Government has move forward on asylum seeker policy by made it clear that these asylum seekers will creating better protection opportunities not be able to settle in Australia, arguing in the region under a variety of burden- that this would act as a pull factor to other sharing arrangements. Proposals include: unauthorised boat arrivals. As a result, there are limited resettlement options for  developing a broader regional cooperation this cohort—most of whom have been framework that improves protection more accommodated in regional processing generally for all refugees within the region centres since the second half of 2013.  discouraging asylum seekers from engaging the services of people Australia’s offshore processing regime smugglers by: providing alternative legal has been the subject of vigorous debate migration pathways to safe countries in for some time. Critics have highlighted the region, including Australia; negotiating evidence of poor mental health outcomes agreements to develop effective for long-term detainees and note the risk of processing arrangements with countries physical harm in the centres, particularly for in the region, such as Malaysia and women and children in the Nauru centre. Indonesia; and increasing the number of With public concerns escalating, and a new refugees Australia resettles from Malaysia legal challenge in the and Indonesia and arising from the recent PNG Supreme  closing the offshore processing centres Court ruling that the PNG centre was in PNG and Nauru and resettling the unconstitutional, there is significant pressure refugees in Australia, but maintaining on the Government to come up with effective turnbacks to prevent further boat arrivals. resettlement solutions for those affected by this policy. It is highly likely that this issue will continue to challenge the Parliament. Further reading The Expert Panel on Asylum Seekers established in 2012 to advise the Australian J Phillips, Australia’s humanitarian Government on ‘the best way forward’, program: a quick guide to the acknowledged the complexities of the issues statistics since 1947, Parliamentary arising from the arrival of asylum seekers Library, Canberra, 2016. by boat, noting that there ‘were no quick or simple solutions’. The panel argued for E Karlsen, Australia’s offshore an integrated suite of short-term and long- processing of asylum seekers in term proposals that included deterrence Nauru and PNG: a quick guide to measures such as the reintroduction of statistics and resources, Parliamentary an offshore processing regime. Long- Library, Canberra, 2016. term non-deterrence proposals included recommendations that the Government create J Phillips, Asylum seekers better migration pathways and protection and refugees: a quick guide opportunities for refugees, coordinated to key Parliamentary Library within an ‘enhanced regional cooperation publications, Parliamentary framework’. However, many of the long- Library, Canberra, 2016. term proposals along the lines of those recommended by the panel have not been pursued by either of the major parties to date.

76 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Welfare—what does it cost? Michael Klapdor and Don Arthur, Social Policy

students) but does include a broader range of services and supports than are Key Issue often associated with the term ‘welfare’. Public debate over the cost of welfare Social security and welfare represents often focuses only on cash payments to 35 per cent of the Australian working age people such as unemployment Government’s expenses. The level benefits and the Disability Support Pension and sustainability of this expenditure (DSP) but these payments only represent will be a key issue for the Parliament. around 17 per cent of welfare expenditure as presented in the budget and are not the Commentary on welfare expenditure main drivers of growth in expenditure. often focuses on income support to working-age people. However, key drivers of growth in expenditure Key drivers of cost increases are expected to be in the National Welfare and social security programs are Disability Insurance Scheme primarily demand-driven, so costs are and assistance to the aged. affected by factors such as population growth, population ageing, labour market changes and economic circumstances as well as policy changes relating to In 2016–17, the Australian Government eligibility requirements. Most welfare estimates that it will spend around payments are also adjusted regularly $158.6 billion on social security and welfare, to maintain their value over time. and around $191.8 billion in 2019–20. This category of expenditure includes a broad The biggest driver of growth in both welfare range of payments and services including: expenses and overall government payments is the National Disability Insurance Scheme  most income support payments such as (NDIS). As shown in Chart 1, expenditure pensions and allowances (for example, on disability services was $4.7 billion in Newstart) 2015–16 but is expected to rise to $24.0  family payments such as Family Tax billion in 2019–20 when the NDIS roll-out Benefit is completed (the Australian Government  paid parental leave pay is responsible for just over half the NDIS expenditure of $21.6 billion in 2019–20  child care fee assistance payments with states and territories funding the  funding for aged care services rest). The Parliamentary Budget Office  funding for disability services and (PBO) estimates that real annual growth  payments and services for veterans and in expenditure on the NDIS will be 43.6 their dependents. per cent between 2014–15 and 2025–26, rising from almost zero to 1.1 per cent of Gross Domestic Product (GDP) (see This administrative category of expenditure ‘Funding the National Disability Insurance does not include other programs associated Scheme’ elsewhere in this Briefing Book). with the welfare state such as health and education (including income support for

77 Figure 1: Estimated Australian Government expenses on social security and welfare

Source: Australian Government, Budget strategy and outlook: budget paper no. 1: 2016–17, pp. 5-25-5-29.

According to the PBO, expenditure on child Sustainability care will also grow from 0.4 per cent of GDP in 2014–15 to 0.7 per cent in 2025–26 (from Given its size, the welfare budget is often $6 billion to $20 billion) as a result of the a target for savings measures, particularly Government’s proposed child care package. in the face of budget deficits. While welfare expenditure is increasing, it is primarily in areas tracking demographic trends—support The ageing population will see aged care for the aged—and areas in which there is expenditure grow from 0.9 per cent to 1.1 bipartisan support for additional funding— per cent of GDP. Expenditure on the Age disability services and child care. It will be Pension is expected to grow in nominal difficult to achieve significant savings without terms to $72 billion in 2025–26 but not looking at addressing spending in these as a percentage of GDP. Expenditure on areas, particularly the largest component: carer payments is also expected to rise, the Age Pension. Working-aged payments partly as a result of population ageing, from are a less contentious target for savings but 0.5 to 0.6 per cent of GDP (from $7 billion are not the source of the Government’s main in 2014–15 to $18 billion in 2025–26). fiscal pressures (see: ‘Where to for welfare reform?’ elsewhere in this Briefing Book). Expenditure in some areas is expected to decline with Family Tax Benefit falling from 1.4 to 0.9 per cent of GDP over the medium term—partly as a result of policy changes. Further reading Income support for jobseekers is projected to fall (from 0.7 per cent to 0.5 per cent of GDP), D Arthur, What counts as welfare as is expenditure on Parenting Payment (0.4 spending?, Research paper per cent to 0.3 per cent of GDP) while DSP is series, 2015–16, Parliamentary projected to remain at 1.0 per cent of GDP. Library, Canberra, 2015.

78 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Welfare—where to for reform? Don Arthur, Social Policy Background Key Issue In 1999 the Howard Government commissioned a review of Australia’s income The 2014 review into welfare support system. Chaired by Patrick McClure reform recommended moving to of Mission Australia, the Reference Group a simpler system of working age on Welfare Reform consulted widely before payments. The Government has releasing its final report in July 2000. The yet to formally respond to the reference group called for a radically simpler review’s recommendations. income support system with a single payment for recipients of working age and add-ons to take account of particular circumstances such as disability or the cost of raising children. Welfare reform was high on the agenda at the start of the 44th Parliament. In December The reference group acknowledged that 2013, then Minister for Social Services, Kevin moving to a streamlined system would be Andrews, commissioned a review of the costly. There were two reasons for this. welfare system. Reporting in February 2015, Firstly, pensions such as the Disability the Reference Group on Welfare Reform Support Pension are paid at a higher rate (McClure Review) called for a major redesign than allowances such as Newstart Allowance of the income support system to make it and have more generous income tests. simpler, more coherent and more sustainable. Placing both groups on a single base rate More than a year after the report’s release, of payment without reducing payments the Government has not formally responded for current pension recipients would mean to the review’s recommendations. lifting payments for allowance recipients.

The reform process began with an earlier Secondly, under a needs-based system Reference Group on Welfare Reform with a single working age payment, a in the late 1990s. This reference group larger proportion of the low-income proposed a more radical simplification population would be eligible for payment. of the income support system. The If the new system used the income test Government did not act on this proposal. applied to pensions, some full-time employees and self-employed workers As well as the McClure Review, two would be eligible for payment. other reviews included recommendations about the income support system. These While these changes would be costly, the were the National Commission of Audit report argued that removing the pension/ (NCOA) and the Indigenous Jobs and allowance divide would remove unintended Training Review (Forrest Review). incentive and disincentive effects in the current system. The report stressed that ‘changes to the payment structure should not be undertaken for the purpose of reducing expenditure on income support (except in so far as the new system helps people replace income support with employment income).’

79 The report also argued that a for those on pensions. The size of the gap streamlined system would allow was already a problem in the early 2000s support to be better tailored to with then Minister for Social Security, recipients’ individual circumstances. Amanda Vanstone, making it clear that the Government could not afford to lift all While the government adopted some of the payments to the rate of the pension. report’s recommendations (for example, reviewing the work capacity criterion for The abandonment of the single working people with a disability and introducing age payment idea may reflect the second participation requirements for parents with review’s greater emphasis on reducing school-aged children), it decided to pursue growth in the cost of the income support reform within the existing payment structure system. To address this concern, the rather than opting for simplification. report also recommended an ‘investment approach’ to welfare reform modelled after an initiative in New Zealand. The key aspect The second McClure review of this approach is an actuarial valuation that In 2013 the new Coalition Government estimates the lifetime cost of the system commissioned a further review of the and the costs associated with various welfare system, focused on working age groups. This helps identify those groups payments, chaired again by Patrick McClure. most likely to spend long periods of time on income support and can be used to target The reference group again called for welfare to work interventions and prevention simplification,but recommended a less programs. Changes in actuarial valuations radical approach than the earlier report. over time can be used to measure the Rather than replacing all working age success of the interventions and programs. payments with a single base rate of payment with add-ons, the report recommended a The National Commission of Audit tiered working age payment for people with some work capacity (now or in the future), In its 2014 report, the NCOA stated and a Supported Living Pension for people that the IT system that managed whose capacity to work is permanently income support payments was ageing and severely limited. There would also and should be replaced. The NCOA be a separate payment for carers and a suggested that simplifying the income simpler structure for family payments. support system could reduce the cost and complexity of the new IT system. However it also noted this could make it According to the report, creating this new more difficult to tightly target assistance. payment structure would require a new information technology (IT) system. The Forrest review In its interim report, the reference group In October 2013, then Prime Minister, Tony explained that one reason a single working Abbott, announced a Review of Indigenous age payment was no longer feasible was Training and Employment headed by that the gap between payment rates for Fortescue Metals Group chairman Andrew pensions and allowances had grown since Forrest. Forrest’s review went beyond the 2000 report. Creating a single base its original terms of reference, making rate of payment would mean closing the recommendations about early childhood gap by lifting the level of payment for those education, housing, and income support. on allowances and/or reducing the rate

80 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Forrest’s most controversial recommendation Where to now? was the ‘Healthy Welfare Card’, a cashless debit card for income support Radically simplifying the income support recipients designed to prevent spending system by introducing a single working age on alcohol, drugs, and gambling. payment with add-ons is probably now off the agenda. The Government has made it clear it is looking for savings on income Progress so far support and a radically simpler system Since the release of the second McClure is likely to cost more rather than less. report, successive ministers have acknowledged the advantages of the report’s One of the principles behind the first simpler payment model. However, the McClure review was that there should be Government is yet to announce any plans to no reduction in pensions or allowances. implement the review’s recommendation. But if reforms have to be budget neutral or produce savings, simplification of the The Government has taken up the income support system would need to McClure Review’s recommendation reduce payments to people with disabilities on the ‘investment approach’. It has so that they were closer to those for people commissioned PricewaterhouseCoopers on Newstart and Youth Allowance. to undertake an actuarial analysis and has announced a Try, Test and Learn Fund to The same principles apply to the changes develop innovative policy interventions. recommended in the second McClure review. If the changes have to be budget The Government has also acted on the neutral or produce savings, some groups Forrest Review’s recommendation on a of recipients will be made worse off. cashless welfare card. Trials of the card are currently underway in Ceduna in When explaining the need to make savings and in Kununurra and on income support payments, ministers Wyndham in the East Kimberley. have pointed to the large increases in projected spending on social security and Simplifying the structure of the income welfare. While these increases are largely support system is a more challenging driven by spending in areas such as aged reform. In late 2014, ahead of the McClure care and the National Disability Insurance Review’s final report, then Social Services Scheme, ministers have suggested that Minister, Kevin Andrews explained the any increased spending needs to be met department would need to replace its by savings from within the social services IT system to complete the reforms and portfolio (see: ‘Welfare —what does it cost?’). as a result, some changes would not be possible before 2017 or 2018. Reform of the income support system is easier during periods of strong economic The Department of Human Services growth when unemployment is low and is currently working towards an IT tax revenue is high. Strong demand for upgrade. The government announced labour reduces the flow of people into the the first stage of its Welfare Payment income support system and increases the Infrastructure Transformation (WPIT) flow into work and out of the payments program in the 2015–16 budget. system. A strong budget position makes it easier for Government to protect recipients from being made worse off by

81 changes to the income support system (for example, by grandfathering payments).

In a more challenging economic environment, the risk is that future governments will continue to look for savings through incremental changes to the welfare system. This means many of the problems with work incentives will continue and the system will become even more complex and difficult to administer.

Further reading D Arthur, ‘Investment approach to welfare’, Budget review 2016–17, Research paper series, Parliamentary Library, Canberra, 2016.

L Buckmaster, ‘What’s happening with the McClure welfare review?’, FlagPost, Parliamentary Library blog, 19 March 2014.

Reference Group on Welfare Reform, A new system for better employment and social outcomes: final report of the Reference Group on Welfare Reform to the Minister for Social Services, (McClure Report), Commonwealth of Australia, 2015.

82 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Gambling—a reprise for reform? Dr Matthew Thomas, Social Policy

The PC estimated the cost of problem gambling to the Australian community to Key Issue be at least $4.7 billion a year, with EGMs being responsible for the majority of this Using his influence in the 43rd cost. The social costs associated with Parliament, Andrew Wilkie advocated problem gambling result from adverse for some significant gambling impacts on people's health, jobs, finances, reforms. Ultimately, a watered down emotional states and relationships. package of measures was introduced by the Gillard Government. These measures were repealed by the Given the potential for harm associated Abbott Government and gambling- with EGMs, the PC recommended, among related reforms were not a key other things, a progressive move towards focus of the 44th Parliament. Mr an Australia-wide EGM pre-commitment Wilkie has recently indicated that system—under which players could set he and Senator Nick Xenophon spending limits on all EGMs—by 2016. intend to use their key crossbench positions to ‘put gambling reform Gillard Government reforms back on the national agenda’. In 2010, Independent Member for Denison, Andrew Wilkie made the introduction of a full mandatory pre-commitment system a key feature of his agreement Problem gambling and poker to support the minority Gillard Labor machines Government following the federal election.

In 2010, the Productivity Commission Subsequently, the Parliamentary Joint (PC) released its final report after an Select Committee on Gambling Reform extensive public inquiry into gambling recommended in its 2011 report that a card- in Australia. The PC estimated that of based mandatory pre-commitment scheme the $19 billion spent on gambling in be introduced by 2014, and that a trial of 2008–09 around $11.9 billion was spent mandatory pre-commitment be conducted. on Electronic Gaming Machines (EGMs), otherwise known as poker machines. In early 2012, then Prime Minister, announced the gambling reforms the Problem gambling may be defined as being Government would be proceeding with. The ‘characterised by difficulties in limiting reforms included a raft of measures to tackle money and/or time spent on gambling which problem gambling, including legislating for leads to adverse consequences for the pre-commitment capable EGMs. However, gambler, others, or the community’. While they did not include the implementation problem gambling occurs across all forms of of a mandatory pre-commitment system gambling, the PC estimated that a greater and, as a consequence, Mr Wilkie withdrew proportion of EGM players—around 15 per his support for the government. cent of all adults who play EGMs weekly or more often—were problem gamblers.

83 In changing its stance the Gillard Online gambling—an emerging area Government was likely to have been of concern influenced by an intense campaign against mandatory pre-commitment conducted In its 2010 report, the PC observed that primarily by the club and hotel industries. online gaming and sports betting were growing rapidly in Australia. This trend has In November 2012, the Gillard Government continued, with sports betting, in particular, introduced the National Gambling Reform gaining in popularity among young men. Bill 2012 and two companion bills. The It has been estimated that online betting provisions of these bills required that: is growing at 15 per cent per annum.

 from the end of 2013, all new EGMs A number of factors are likely to have would be capable of supporting an contributed to the strong uptake of online approved pre-commitment system sports betting in Australia. These include the  by 2016, EGMs would be linked together centrality of sport and general acceptance as part of a state-wide or territory-wide of gambling in Australian culture, Australia’s pre-commitment system, and display high rate of internet and smartphone electronic warning messages, and usage and intensive advertising and  from 1 May 2013 Automatic Teller promotion by sports betting companies. Machines (ATMs) located in gaming There is some concern that sports betting venues would have a $250 daily advertising during live sports broadcasts withdrawal limit. may be normalising gambling among young viewers, and potentially creating a The bills also proposed the establishment new generation of problem gamblers. of a national regulator to monitor compliance with the new scheme and One of the problems associated with the main features of, and methodology online sports betting is its potential to for, a 12 month trial of mandatory pre- increase corruption in sport. Gambling commitment. The trial was to be undertaken online easily enables wagers to be made by ClubsACT before being postponed in on particular incidents taking place in a the lead-up to the 2013 federal election. sporting competition, and not just on the competition’s outcome. ‘Exotic’ or ‘spot Following its election to office, the Abbott bets’ have already been implicated in the Coalition Government introduced the Social corruption of international cricket. While the Services and Other Legislation Amendment provision and advertising of ‘in play’ betting Bill 2013, which effectively wound back to customers in Australia is prohibited under all of the above reforms in favour of the the Interactive Gambling Act 2001, the existing development and implementation of a approach to regulation has been found to be voluntary pre-commitment scheme and a inconsistent and difficult to enforce, with in focus on responsible gambling and industry play betting readily available through offshore self-regulation. The bill was passed by both providers. It is worth noting that, irrespective houses of Parliament on 25 March 2014. of the regulatory approach adopted, it would be almost impossible to regulate access to or prevent the use of international gaming sites.

84 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Another key concern is the capacity for Comment online gambling to contribute to gambling problems among vulnerable individuals. Although a significant number of Australians The use of communications technology experience gambling-related problems, enables gamblers to gamble from the PC estimated that only around 15 per anywhere, at any time, in privacy, and cent of them seek help. Further, it found the without appearing to spend ‘real’ money. evidence for the effectiveness of many of the These characteristics, when combined available help services is limited. with sports betting companies’ aggressive This suggests that if problem gambling marketing and inducements to gamble, and its associated harms are to be have contributed to rates of problem seriously tackled then there may need gambling among online gamblers being to be a greater focus on preventive more than double the rate for all gamblers. measures. Such measures include changing aspects of the environment that lead The Government is aware of the problems to problems for gamblers vulnerable to associated with online gambling and the harm, such as gambling technology, the limitations of Australia’s current regulatory accessibility of gambling and the nature regime. In 2015, then Minister for Social and conduct of gambling providers. Services, Scott Morrison commissioned a review of the impact of illegal offshore wagering. In its response to the review, the Government committed to, among Further reading other things, the development of a national policy framework that would improve Productivity Commission, Gambling, the regulation of online gambling and Report, 50, Commonwealth the effectiveness of consumer protection of Australia, 2010. and harm minimisation measures. A Biggs and P Pyburne, National Where to next? Gambling Reform Bill 2012, Bills digest, 51, 2012–13, Parliamentary Andrew Wilkie and Nick Xenophon have Library, Canberra, 2012. indicated that they intend to pursue a number of specific gambling reforms, namely, B O’Farrell, Review of illegal the imposition of maximum $1 bets and offshore wagering, Commonwealth $120 in maximum hourly losses on EGMs, of Australia (Department of and the banning of sports betting advertising Social Services), 2015. during G-rated television broadcasts. They also hope to revive the Parliamentary Joint Select Committee on Gambling Reform in order to push for further reform in relation to online gambling and EGMs.

85 Housing affordability in Australia Dr Matthew Thomas, Social Policy and Alicia Hall, Statistics and Mapping

Figure 1: Dwelling Price-to-Income Ratio 1977 to 2012 Key Issue The high cost of housing in Australia has been at the forefront of a range of recent policy debates concerning Australia’s taxation arrangements. This brief examines housing affordability in Australia for both owners and renters over recent decades. It focuses particularly on those households which are most affected by high housing costs—those on low incomes in the private rental market.

Source: R Fox and R Finlay, Dwelling prices and household income, RBA Bulletin, December Quarter What is housing affordability? 2012.

The term ‘housing affordability’ usually refers Much of the growth in housing prices relative to the relationship between expenditure to incomes took place during the late 1980s, on housing (prices, mortgage payments or 1990s and early 2000s. In this context, the rents) and household incomes. The concept Reserve Bank of Australia’s 2014 submission of housing affordability is different to the to the Senate Economics References concept of ‘affordable housing’, which Committee Inquiry into Affordable Housing refers to low-income or social housing. noted ‘Australian housing prices increased by about two thirds relative to income in the Affordability for owners decade or so up to around the end of 2003’.

Housing affordability in Australia has broadly Partly as a consequence of rising house declined since the early 1980s. The OECD’s prices between 1984 and 2009–10, the price to income ratio index shows a 78% Australian Bureau of Statistics’ (ABS) increase between 1980 and 2015. In Household Expenditure Survey indicates Sydney, which has experienced significant that the estimated proportion of average price rises over the period, Parliamentary weekly household expenditure on current Library calculations indicate that the ratio housing increased from approximately of average disposable household income 12.8% to 18.0%. Some of this increase (Australia-wide) to median house prices is likely to represent changing societal has increased from approximately 3.3 in preferences, with households choosing June 1981, to just over seven in June 2015. to put more of their household budget The following graph illustrates Australia- into larger, more comfortable or better- wide ratios from the early 1970s to 2012. located homes. This has been facilitated

86 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT through financial deregulation and a significant growth in household disposable Measurements of housing incomes between 1980 and 2010. affordability Of course, affordability differs between There are two major approaches the states and territories, and between to the measurement of housing capital cities and regional areas. As an affordability in policy discussions indication, Table 1 shows nominal median in Australia—ratio measures and house prices in each of the capital cities residual measures. Ratio measures in March 1980, and March 2016. focus on the relationship between housing expenditure (prices or Table 1: Capital cities’ nominal median costs) and household income, either house prices as a median or mean. The ABS, the OECD and various housing March 1980 March 2016 industry associations publish ratio measures. As outlined by Sydney* $64 800 $999 600 Gabriel, Jacobs, Arthurson, Burke Melbourne $40 800 $713 000 and Yates in their 2005 paper Brisbane* $34 500 $480 000 Conceptualising and measuring the housing affordability problem, Adelaide $36 300 $445 000 residual measures emphasise Perth $41 500 $520 000 the capacity of a household to Canberra $39 700 $570 000 maintain an acceptable standard Hobart Not available $385 000 of living after housing costs. Given the level of complexity associated Darwin Not available $582 500 with their calculation, residual measures are typically published Source: Time series data purchased from the Real Estate Institute of Australia by the Parliamentary by researchers and academics. Library. *REIA advises that comparisons over time for Sydney and Brisbane should be made with caution. Affordability for renters

Rising house prices are one factor behind The ABS’ Housing Occupancy and the declining levels of home ownership in Costs publication indicates that between Australia. The 2016 Household, Income 1994–95 and 2013–14, the proportion and Labour Dynamics in Australia Survey: of households which are renters has Selected Findings from Waves 1 to 14 increased from 26% to 31%. In addition, reports that, in 2001, 68.8% of households the proportion of households renting were owner-occupied, compared to 64.9% from private landlords has increased from in 2014. This trend is most prevalent in 18% to 26% over the same period. (7.8 percentage point decline) followed by New South Wales (4.3 percentage point decline), and South On average, private renters spend more of Australia (2.5 percentage point decline). their gross household income on housing costs than other tenure types. Specifically, the ABS reports private renters spent 20% of their gross household income on housing costs in 2013-14, compared with 16% for those with a mortgage.

87 The cost of renting privately has increased In 2012, the National Housing Supply Council significantly over the period between (NHSC) estimated that as at 30 June 2011, 1994–95 and 2013–14. The ABS’ Housing the gap between overall housing supply Occupancy and Costs publication indicates and demand was 228,000 dwellings. The a 62% increase in average weekly housing NHSC also estimated that there was a deficit costs (after inflation). This compares of 539,000 affordable rental properties for to a 42% increase for owners with a lower income renters. Anglicare Australia’s mortgage and 45% for public renters. annual rental affordability snapshots suggest that the situation for lower income renters remains difficult. Thelatest Anglicare survey of 75,410 rental properties across Australia, What is housing stress? conducted in April 2016, found that at A household is typically described a national level, only 21 properties were as being in ‘housing stress’ if it affordable for single adults living on Newstart is paying more than 30% of its Allowance, and only one was suitable for a income in housing costs. As higher single person living on Youth Allowance. income households can spend a higher proportion of their income In this context, an increasing number on housing without experiencing of Australian renter households are problems, they are often excluded experiencing housing stress. In 2013–14, from these types of analysis. the ABS found 50.1% of low-income renter Consequently, a ratio of 30/40 is households had housing costs greater often used as a benchmark—that than 30% of gross household income is, if households that fall in the (which includes Commonwealth Rent bottom 40% by income spend Assistance (CRA)). While the provision of more than 30% of their income on CRA has helped to reduce the number housing, they are defined as being of Australian households in housing in housing stress. Confusingly, both stress, Parliamentary Library calculations gross and disposable incomes are indicate that for a substantial and growing referenced by researchers when proportion of people renting in certain parts referring to housing stress. of Australia, rental costs are rising at a higher rate than CRA thresholds and rates.

For those low-income households in Affordability in the private rental greatest need, the federal, state and territory market for those on low incomes governments provide social housing. However, the stock of social housing is Much of the recent public debate about not increasing at a rate sufficient to keep housing affordability has focused on the up with demand, and waiting lists for inability of many would-be home owners— social housing remain long. At 30 June and young people in particular—to break 2015, there were 199,133 households into the property market, and factors on social housing waiting lists. contributing to this. Rather less attention has been paid to the difficulties faced by low-to- medium-income earners who are obliged to compete with people on higher incomes for a limited number of affordable rental properties in the private rental market in areas with greater employment opportunities.

88 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Government response The Affordable Housing Working Group is currently considering the merits of a Housing affordability did not receive number of such instruments and Australian significant attention during the 44th Housing and Urban Research Institute Parliament. The Government had committed (AHURI) researchers have undertaken to undertake a review of housing and a significant amount of research on homelessness policies and programs as part Housing Supply Bonds and an Affordable of the reform of the federation white paper Housing Finance Corporation Model. process, with housing issues also to be considered as part of the white paper on the Financing instruments such as these could reform of Australia’s tax system. However, help to increase the supply of affordable the status of this review is unclear given housing over the longer term. However, the cessation of both of the white papers. if low-income households currently experiencing housing stress are to gain On 7 January 2016, the Government some respite, then this might suggest announced that the COAG Council on the need for a more immediate response. Federal Financial Relations would form an Such a response could include changes Affordable Housing Working Group. This to the levels and indexation of CRA to group has been charged with identifying ensure that it better reflects the costs of ways of increasing the supply of affordable rental housing, as recommended by the housing for people on low incomes and Henry Review of the tax system and the implementing trials of models of such McClure Review of the welfare system. arrangements. To this end, the Working Group released an issues paper and called for submissions on ways to boost the supply of affordable rental housing through Further reading innovative housing models. The consultation process was completed on 6 April 2016. Senate Select Committee on Housing Affordability, A good house is hard to If the supply of affordable housing is find: housing affordability in Australia, to be increased sufficiently to meet The Senate, Canberra, 2008. medium- to long-term demand, then this could be met through (among other National Housing Supply things) institutional investment in the Council, Housing supply and affordable end of the residential market. affordability reform, Commonwealth of Australia, 2012. The main barrier to such investment would appear to be that institutional investors have Australia’s Future Tax System shown relatively little interest in affordable Review, Australia’s future tax system: housing, largely due to perceptions of risk report to the Treasurer: part two— and affordable housing’s comparatively detailed analysis, Commonwealth low returns. If investors’ reluctance is to of Australia, Canberra, 2010. be overcome then it is likely that this will require government incentives and the Senate Economics References introduction of some form of financial Committee, Out of reach? instrument (similar to the discontinued The Australian housing National Rental Affordability Scheme). affordability challenge, The Senate, Canberra, 2015.

89 Employment—Measuring and improving outcomes for young Australians Dr Matthew Thomas, Social Policy and Penny Vandenbroek, Statistics and Mapping

Figure 1 shows the regions with the strongest positive growth in youth employment Key Issue (aged 15–24 years), based on the share of population that was employed. Labour market conditions have generally improved for young people in Australia since the Global Financial Figure 1: Growth in youth employment, 2008 Crisis (GFC). However, the recovery and 2015 comparison has been uneven across labour market regions and age groups.

The Government’s main response to youth unemployment is the provision of active labour market programs. Evidence for the effectiveness of these programs is not positive where it comes to disadvantaged young people. Some of the targeted programs introduced in the last two federal budgets have a better prospect of improving participants’ long-term employment outcomes. Generally in the youth population, a large portion of people are neither working nor actively looking for work (i.e. unemployed), Youth employment in Australia as they are students. Young people opting The labour market for young people aged out of, or exiting the labour force, is an 15 to 24 years deteriorated substantially issue of concern, particularly when they after the onset of the GFC and has only do not go on to undertake some form recently shown signs of recovery. of training or other productive activity.

However, this recovery has not been Figure 2 shows the regions that experienced uniformly experienced. Rates of youth the largest growth in young people who were participation in the labour market, education disengaged from the labour force since 2008. and training vary across the country, with some labour market regions remaining relatively depressed. Rates of recovery in youth participation have also varied by age.

90 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 2: Young people not in the labour The ‘fully active’ measure is similar to the force, 2008 and 2015 comparison NEET rate, but focuses on the positive interactions young people are having with either work or study. This measure represents young people who are in full-time education or in full-time work, as a proportion of the civilian population (in the same age group).

Figure 4 shows the youngest age group has had an increase in the fully active rate since the GFC, in contrast to those aged 20 to 24 years, who have seen a decline.

Figure 4: Level of full-time youth participation (in work or study)

Measuring youth engagement The Not in Education, Employment or Training (NEET) rate offers a way of analysing those young people who are disengaged, by expressing them as a proportion of the general working age population (in the same age group). Labour market statistician Karinne Logez suggests this type of indicator can provide ‘insight into how well economies manage the transition between school and work—better than the youth unemployment rate’.

Figure 3 shows a divergence in NEET rates Reasons for youth unemployment for two youth cohorts following the GFC. In developed countries, young people tend to bear the brunt of economic Figure 3: Level of engagement in work, study downturn, suffering greater job losses or training (NEET rate) and higher unemployment rates than adults. This is for two main reasons.

Firstly, young people often have little or no labour market experience, and frequently lack relevant skills. Secondly, businesses face higher costs of investment and lower costs of termination when employing young workers.

Combined, these factors contribute to some young people having a precarious relationship to the labour market. They move between joblessness, training and working,

91 and are more likely to enter temporary and What we do know, based on systematic insecure employment. In the worst cases, evaluations of the evidence, is that young unemployed people experience young people tend to benefit less from ‘scarring’ effects—that is, they suffer from ALMP participation than adults. Further, negative labour market experiences in the while ALMPs work reasonably well for future as a result of having been unemployed. people who are job-ready, they have a limited impact on outcomes for the Active labour market programs most disadvantaged jobseekers. Australia has adopted a number of policy These findings raise questions: what responses to youth unemployment sorts of intervention, or combination of over recent years. These include things interventions, do help young people gain like encouraging and assisting young employment? And, in particular, what forms people to stay in school beyond the age of assistance can deliver results for young of 16 and tightening the conditions for people from disadvantaged backgrounds eligibility for income support. However, (for example early school leavers, young assistance to unemployed youth through mothers, people with disability, non-English active labour market programs (ALMPs) speakers and Indigenous Australians)? is the most common policy response. What policy responses work for Essentially, ALMPs seek to increase the employment participation of people receiving young people? income support from government, or at While the overall evidence for the risk of becoming unemployed. In Australia, effectiveness of ALMPs for disadvantaged ALMPs take three main forms, namely job young people is not positive, the search; work experience; and formal training Organisation for Economic Cooperation and and education. These programs are mostly Development (OECD) and the International run by contracted employment service Labour Organisation (ILO) have identified the providers through the jobactive system. key characteristics of those programs that are most likely to achieve successful labour There is a large body of international market outcomes for disadvantaged youth. evidence on the effectiveness of ALMPs, and labour market expert Professor The most successful programs directly Jeff Borland has recently compiled a target disadvantaged young job seekers, summary of the Australian evidence. providing a comprehensive package of support services, such as literacy and This evidence—which relates to unemployed remedial education; vocational and job- people in general—is mixed where it comes readiness training; job search assistance to employment outcomes. There are and career guidance and counselling; and differences in the results, both positive and social support and workplace training. negative, across and within different ALMP types. The evidence is similarly varied where Borland et al. have recently identified it comes to the effectiveness of ALMPs evidence-based elements of best-practice for young people. One notable exception employment programs for jobseekers with is public sector job creation programs, high levels of disadvantage. They argue that such as Work for the Dole, the evidence ‘an employment program for jobseekers for which is almost universally negative.

92 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT with high levels of disadvantage should substantially address their deficiencies in job readiness and skills and provide a pathway Further reading to employment via work experience’. J Skattebol, T Hill, A Griffiths They emphasise that such programs and M Wong, Unpacking youth are most likely to be feasible where they unemployment, Social policy involve collaboration between service Research Centre, University providers and employers at a local level. of New South Wales, Sydney, September 2015. Programs like these can pay dividends in terms of medium- and long-term employment J Stanwick, Tham Lu, T Rittie and outcomes. However, such programs are M Circelli, How young people are costly and not necessarily highly rated faring in the transition from school by ALMP evaluations that focus primarily to work, Foundation for Young on short-term employment outcomes. Australians, September 2014.

Recent government initiatives H Cuevo and J Wyn, Rethinking youth transitions in Australia: A As a part of the 2015–16 and 2016–17 historical and multidimensional federal budgets, the Government introduced approach, Research report no. a number of youth employment measures 33, Youth Research Centre, that approximate best-practice criteria. University of Melbourne, 2011. The Government has also reduced the emphasis placed on participation in Work for the Dole. This strategy to tackle youth L Denny and B Churchill, ‘Youth unemployment can be seen as being broadly employment in Australia: a consistent with both evidence-based and comparative analysis of labour investment approaches to social welfare. force participation by age However, evidence for the effectiveness group’, Journal of Applied Youth of the Government’s proposed four-week Studies, 2, 2016, pp. 5–22. waiting period for income support for under 25 year olds is questionable.

It is also not clear that the Government’s central proposal to address youth unemployment—through the Youth Jobs PaTH program—will gain sufficient support from employers, or provide adequate assistance to job seekers to produce meaningful results. Much will depend on the level of economic activity over coming years, the boosting of which is the best means to ensure increased levels of youth employment.

93 Closing the Gap James Haughton, Social Policy

Close the gap in life expectancy Key Issue within a generation (by 2031) This target is not on track to be It has been eight years since the met. Indigenous life expectancy is Closing the Gap framework was improving, and mortality rates are established, but only half the Closing decreasing, but progress is slow. the Gap targets are on track to be met. The Productivity Commission has expressed concern that we Figure 1: Indigenous and non-Indigenous life do not know which policies are expectancy: actual, projected and target rates effective. In response to high levels of Indigenous incarceration, there is strong stakeholder pressure to add an Indigenous Justice target.

The origins of Closing the Gap In his Social Justice Report 2005, Aboriginal and Torres Strait Islander Social Justice Commissioner Tom Calma urged Australian governments to commit to Indigenous health Source: Department of the Prime Minister and and life expectancy equality within 25 years. Cabinet, Closing the Gap Prime Minister’s Report At the time, the gap was thought to be 17 2016, Commonwealth of Australia, Canberra 2016. years; better data has since shown it was approximately 11 years. Health and non- government organisations (NGOs) responded Halve the gap in mortality rates for with a Close the Gap campaign in 2007, Indigenous children under five by including the annual National Close the 2018 Gap Day. The Human Rights Commission This target is on track to be met. Since issued its own Close the Gap reports. 1998, the Indigenous child mortality rate has more than halved from 13.5 per 1,000 live Prime Minister and Opposition births in 1998, to 6.4 in 2014. The gap had Leader Brendan Nelson committed to the narrowed by 34% as at 2014. The recent goal in 2008. The Council of Australian National Aboriginal and Torres Strait Islander Governments (COAG) then committed Social Survey found that Indigenous infant to the six (now seven) Closing the Gap and maternal health has been improving. targets in the National Indigenous Reform Agreement (NIRA). The Prime Minister reports annually to Parliament on its progress.

94 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Ensure access to early childhood Indigenous employment rates are increasing, education for all Indigenous four- the gap has not reduced since 2008. The year-olds in remote communities Prime Minister’s report notes that employment is closely tied to educational outcomes. by 2013 This target was not met. In 2013, 85% Are government programs effective? of Indigenous four-year-olds in remote communities were enrolled in early The Productivity Commission has expressed childhood education. This was a higher concern that ‘we need to know more about rate than in major cities (67%) and what works and why’. Although Closing the regional areas (74%). The new COAG Gap reports measure Indigenous outcomes, target is 95% preschool enrolment for and the Indigenous Expenditure Report Indigenous four-year-olds by 2025. measures inputs, little is known about which programs are producing outcomes. Few programs are evaluated and evaluations Close the gap in school attendance rarely consider cost-effectiveness. by the end of 2018 This target is not on track to be met. All of An Indigenous Justice target? the states and territories reported changes in Indigenous attendance rates between 2014 Indigenous people make up 2% of the and 2015 of less than 1%, with the exception population, but over a quarter of adult of the ACT (1.3% rise) and Victoria (1% rise). prisoners (27%) and more than half of young detainees (54%). High imprisonment rates drive Indigenous deaths in custody and Halve the gap in children’s reading, are associated with other poor outcomes. writing and numeracy by 2018 Indigenous organisations are calling for a target of equal Indigenous imprisonment rates Progress on this target has been mixed, by 2040 through Justice Reinvestment. This with half the targets on track to be met is an approach which emphasises reduced and half unmet. Outcomes are worse for spending on corrections, with savings male students and decline drastically with reinvested in preventive strategies. This was remoteness. Most measures are improving, supported by a House of Representatives but some are not improving fast enough. Standing Committee on Aboriginal and Torres Strait Islander Affairs committee report, Doing Halve the gap for Indigenous Time—Time for Doing. A Justice Reinvestment students in year 12 attainment rates trial in Bourke (NSW) is showing good results. by 2020 This target is on track to be met, with an increase in year 12 attainment levels from Further reading 45.4% in 2008 to 58.5% in 2012–13. The Department of the Prime Minister number of students attaining year 12 was and Cabinet (PM&C), Closing the higher in urban and regional areas. The gap Gap—Prime Minister’s report, PM&C, narrowed by 11.6% between 2008 and 2013. Canberra (issued annually).

Halve the gap in employment Productivity Commission (PC), outcomes between Indigenous and Overcoming Indigenous disadvantage: other Australians by 2018 key indicators, PC, Canberra. This target is not on track to be met. While

95 96 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT AUSTRALIA’S ENVIRONMENT

Image ID: 342419369, Copyright: Hypervision Creative, Image ID: 266306048, Copyright: acro_phuket 97 Climate change—a science overview Emily Hanna, Science, Technology, Environment and Resources

the oceans, with the top 75 metres of water warming an average of 0.11 °C per decade Key Issue globally over the four decades until 2010. The impacts of human-influenced The IPCC states that average sea level has changes to the climate are already already risen around 20 centimetres since occurring and are expected to 1901 and is forecast to continue rising at a continue and intensify in the future. faster rate. Sea water has also become more The issue of climate change and its acidic, with surface ocean water 26 per cent impacts has significant implications more acidic than it was in pre-industrial times. for government policy across a range of portfolios and industries. These changes are expected to continue this century, with the average temperature projected to increase, the average sea level continuing to rise and the ocean Nearly 200 national and international becoming warmer and more acidic. scientific bodies, as well as over 97 per cent of recently published climate scientists, agree that the Earth is warming and that humans While these increases may sound minor, are contributing to the change in climate. small changes in average temperature can lead to big changes in the climate system. For example, the IPCC expects Global climate change extreme weather events such as heatwaves, bushfires, floods and droughts to become Since its first assessment in 1990, the more frequent and more intense. Intergovernmental Panel on Climate Change (IPCC) has expressed growing certainty that global warming is underway and that human It is not currently possible to state that an activity is a principal cause. In its latest report individual extreme weather event (such as a on climate change, the Fifth Assessment drought) is definitely attributable to climate Report in 2014, the IPCC stated: change. However, it is now possible to determine how much more likely it is that a particular extreme temperature event is due Warming of the climate system is to climate change. For example, the autumn unequivocal, and since the 1950s, heatwaves in Australia in 2014 were found to many of the observed changes are be 23 times more likely to occur with climate unprecedented over decades to millennia. change, compared to conditions without The atmosphere and ocean have human contribution to climate change. warmed, the amounts of snow and ice have diminished, and sea level has risen. What is causing climate change? Globally, the average temperature (combined The climate is affected by the rise in land and ocean surfaces) has increased greenhouse gas emissions. Greenhouse 0.85 °C between 1880 and 2012, according gases (GHGs) ‘trap’ heat in the lower to the IPCC. Most of this heat is stored in parts of the atmosphere around Earth (by absorbing infrared energy coming off the Earth’s surface which could otherwise

98 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT escape). GHGs include both natural glaciers, as well as the warmer water compounds (such as carbon dioxide (CO2) increasing in volume due to thermal and methane) and synthetic compounds expansion. The rise in ocean acidity is also

(such as chlorofluorocarbon (CFC)). caused by higher atmospheric levels of CO2. As these levels increase, ocean absorption

Some fluctuations in the levels of natural of CO2 becomes greater. The CO2 then GHGs are normal. However, the increasing undergoes a chemical reaction with the trend in GHG concentration and the rate water to form carbonic acid, thus increasing of change is beyond the normal variation the level of acidity in the marine waters. seen over millennia. Atmospheric GHG concentrations have increased dramatically Climate change in Australia since industrial times began in the mid- 19th century, driven by the burning of fossil Australia has become 0.9 °C warmer since 1910. The increase in sea surface fuels and land clearing. For example, CO2 concentrations recently hit 400 ppm (see temperature varies by location. Since 1950, it Figure 1) after not going above approximately has risen approximately 0.12 °C per decade 280 ppm in the last 400,000 years. in north-west and south-west Australia, while the average temperature rise in south-eastern Figure 1: Atmospheric levels of CO over time. Australia has been approximately 0.2 °C 2 per decade. The 30 year period from 1985– 2014 experienced the warmest average temperature in the last millennium compared to other 30 year periods. Australia’s average temperature is virtually certain to continue rising this century, with inland areas forecast to increase more than coastal areas.

Australian rainfall is also changing, Source: National Oceanic and Atmospheric decreasing in winter in south-western Administration (NOAA), NOAA Climate.gov Australia and in autumn in south-eastern Australia. In contrast, average annual rainfall The IPCC considers that: has increased in north-western Australia. Weather extremes are also changing, with fewer cold extremes while hot extremes rise Human influence on the climate system in number and temperature. Heatwaves is clear, and recent anthropogenic are occurring more often and droughts emissions of greenhouse gases are the will become more common in southern highest in history … It is extremely likely Australia. As much of southern Australia that more than half of the observed becomes hotter and drier, the risk of increase in global average surface bushfires is also projected to increase. temperature from 1951 to 2010 was caused by the anthropogenic increase in GHG concentrations. Implications for Australia The IPCC outlined a range of specific risks The higher sea levels are a consequence for Australia from climate change that could of increased temperature. This is caused affect the country this century. These include: by two processes: melting ice sheets (for example, Antarctica and Greenland) and

99  greater flood damage yields, reduce stock numbers, and erode  limited water resources in southern the productivity of farms, threatening their Australia long-term sustainability and viability. While moderate warming may benefit some crops  greater impacts from heat waves on (as long as they are not water stressed) and infrastructure and human health and some colder locations, production levels are mortality and projected to decline over much of southern  worse harm from bushfires in southern Australia as a result of climate change. Australia including possible greater human mortality, damaged ecosystems and economic losses. Infrastructure Infrastructure, including residential and These risks, and the changes in climate commercial buildings, roads, railways and described, have significant implications for industry, is also at increasing risk of damage Australia across a range of policy areas. It is from climate change. Coastal infrastructure also worth noting that these threats are not is particularly vulnerable, mainly due to an simply theoretical but are already occurring. increased risk of flooding from rising sea levels, storm surges, and a higher chance of In 2012, the Productivity Commission erosion. This has wide-reaching implications, found that all governments should ‘embed particularly given that most of Australia’s consideration of climate change’ in risk capital cities are near the coast, along with management strategies and ensure that more than 85% of our population. Many regulatory and policy settings allow the risks critical services, including hospitals and of climate change to be managed. Some wastewater treatment, are on the coast and examples of the policy implications of climate likely to be affected. Indeed, the impact of change for Australia are set out below. climate change on coastal communities was the subject of a 2009 parliamentary inquiry. Coastal councils around Australia recently Health called for the Australian Government to Climate change is likely to affect human implement the inquiry’s recommendations. health in a number of ways. For example, there is likely to be an increase in heat- Environment policy and biodiversity related illnesses such as heatstroke and an increased risk of some infectious diseases Climate change is increasing the extinction (such as those spread by mosquitoes due risk faced by non-human species and to mosquitoes’ changing distribution). In ecosystems. Many species, especially plants turn, this has implications for our health and small mammals, are unlikely to be able system and policy. The Climate and Health to move their geographical range fast enough Alliance recently called for a national strategy to keep up with the current and forecast on ‘Climate, Health and Wellbeing’. changes to climate. Climate change is also affecting habitat (for example, habitat loss caused by erosion and rising sea levels), food Agriculture sources, reproduction and migration—all Climate change also presents challenges of which can adversely affect the survival for agriculture, which is likely to be affected of individuals and reproductive success. by changes to water availability, changes in growing seasons and the effects of These risks are demonstrated by the recent projected increases in extreme weather extinction of the Bramble Cay melomys events. In turn, this may disrupt crop (Melomys rubicola), a type of native rat

100 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT which lived on Bramble Cay in the Torres Climate adaption policies Strait, Australia. It is believed to be the first mammal species globallydriven to While all these risks can be minimised extinction by anthropogenic climate change. by reducing GHG emissions (climate ‘mitigation’), some level of change is now inevitable. This means we also need to Marine environment, fisheries and tourism prepare for the effects of climate change, Climate change also affects the marine which is referred to as climate ‘adaptation’. environment, including fisheries (which in turn can affect food security). Along with In 2007, the Council of Australian increased water temperatures, marine Governments endorsed a National Climate species need to cope with increasing Change Adaptation Framework. In 2015, acidification and lower levels of oxygen in the Australian Government released a the water. Climate change is already causing National Climate Resilience and Adaptation bleaching and loss of diversity in coral reefs, Strategy. The Strategy looks at a range as evidenced by the recent severe bleaching of initiatives across key sectors (such event in the Great Barrier Reef (see the article as agriculture and health) and identifies on the Great Barrier Reef). These events principles to guide effective adaptation. are likely to become more common in the future. This threatens not only the species The Government also established the that depend on those ecosystems, but may National Climate Change Adaptation also impact on Australia’s tourism industry. Research Facility (NCCARF) in 2008, with $47 million funding. This funding initially Other implications ended in June 2013, but in 2014 the Coalition Government provided funding of $9 million The projected increase in extreme weather to allow NCCARF to continue until 2017. events also has implications for the insurance industry, as well as emergency CSIRO and the Bureau of Meteorology management including natural disaster are working together on climate change relief and recovery arrangements. science as well as adaptation to help Australia better prepare for climate change. Commentators have also pointed to However, concerns have been expressed the risk that climate change will cause about the capacity of CSIRO to continue large movements of people—especially its climate science work as a result of from inundated coastal areas or regions a recent controversial restructure. affected by extreme weather events and food and water insecurity. This may in turn either trigger or exacerbate international conflict. Both issues have implications for Further reading Australia’s immigration, foreign affairs and defence policies. For example, in light of A Talberg and S Power, ‘What the impact of climate change on islands the latest IPCC report says about in the Pacific region, there have been calls Australia’, FlagPost, Parliamentary for Australia to expand labour mobility Library blog, 8 October 2013. opportunities for Pacific Islanders. Productivity Commission, Barriers to Effective Climate Change Adaptation, September 2012.

101 Climate Change—the international approach Kate Loynes, Science, Technology, Environment and Resources

The first period of the Kyoto Protocol ran from 2008 to 2012. Australia met and exceeded its Key Issue first period target of108% of 1990 emissions levels by 2012. For the second period, Australia was one of over 170 parties 2013–2020, Australia has a target of 99.5% to sign the Paris Agreement on of 1990 emissions levels by 2020 (equivalent climate change in April 2016. Under to 5% below 2000 emission levels by 2020). the Agreement, most countries have pledged to reduce greenhouse In December 2015, the Prime Minister gas emissions, with the aim to limit announced that Australia would ratify global warming to ‘well below’ 2 °C. the second period of the Kyoto Protocol (as established by the Doha Amendment). The Government needs to table Australia’s ratification will need to the Paris Agreement in Parliament follow the same process as the Paris before Australia can ratify. Agreement, outlined below. However, the Kyoto Protocol ends in 2020 and will be replaced by the Paris Agreement.

Australia has participated in international climate negotiations since the 1980s Paris Agreement and has had a domestic climate The Paris Agreement was agreed in 2015 by change target since 1990. 175 parties. The aim of the agreement is to keep global warming to ‘well below’ Kyoto Protocol 2 °C, and strive to limit warming to 1.5 °C. The Kyoto Protocol is an international The Paris Agreement also includes a agreement on climate change, developed global stocktake every five years to under the United Nations Framework assess international progress, a ‘ratchet’ Convention on Climate Change (UNFCCC). mechanism to increase emission reduction The Protocol encourages 192 parties to targets over time and an aim to peak reduce their greenhouse gas emissions, global emissions as soon as possible. with many developed nations having binding emissions reduction targets. Each party nominated an emissions reduction target. Australia proposed a target Under the UNFCCC and the Kyoto of 26–28% below 2005 levels by 2030. In Protocol, meetings are held annually. comparison, the European Union pledged a At these Conferences of the Parties target of 40% below 1990 levels by 2030. (COPs), decisions are made to promote The United States (US) nominated a target the implementation of the UNFCCC and of 26–28% below 2005 levels by 2025. Protocol. Major meetings have included the disappointing COP15 in Copenhagen in 2009, as well as COP18 in Doha, Comparisons are complicated by the use Qatar in 2012, where the Kyoto Protocol of different baseline years, but Australia’s was extended to 2020 with a second 2030 emissions reduction target has been commitment period (the Doha amendment). described as less ambitious than that of most

102 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT developed nations. The Climate Change The next COP, which will discuss the Paris Authority recommended a 30% reduction Agreement, is in November this year. from 2000 emissions levels by 2025. Montreal Protocol The Paris Agreement will come into effect when at least 55 parties that make up at least The Montreal Protocol on ozone-damaging 55% of global emissions have ratified the gases does not directly address climate Agreement. As of writing, 22 nations which change, but ozone-damaging gases emit 1% of global emissions have ratified. It is contribute to global warming. The 1987 predicted that another 32 countries, including Montreal Protocol binds 196 nations to Australia, China and the US will ratify in reduce the emission of ozone-damaging 2016, covering 53% of global emissions. gases, commonly used in fridges, foam and industrial applications. These gases thin the ozone layer, allowing more Ratifying the Paris Agreement ultraviolet (UV) light to pass through the Former Minister for the Environment atmosphere. Increased exposure to UV light Greg Hunt signed the Paris Agreement in is linked to an increase in skin cancer. April 2016. Signing expresses Australia’s intent to be bound by the terms of the Australia was one of the first nations to Agreement. Australia must now ratify the ratify the Montreal Protocol, and has met Agreement, confirming its participation. or exceeded all of its targets to date. In 2016, scientists reported the first signs of For ratification, a treaty is tabled in healing in the ozone hole over Antarctica. Parliament with a National Interest Analysis, which explains the impact of the treaty on In April 2016, the Government responded to Australia’s national interest. The Analysis a review of Australia’s actions on reducing for the Paris Agreement is currently being the emission of ozone-damaging gases prepared by the Department of Foreign under the Montreal Protocol. The review Affairs and Trade and the Department made a number of recommendations, which of the Environment and Energy. the Government will implement and aims to have in place by the start of January 2018. Major treaties must be tabled for at Amendments to implement these proposed least 20 joint sitting days to allow changes will need to be introduced into this parliamentary scrutiny, including by the parliament to meet the 2018 deadline. Joint Standing Committee on Treaties. From this point, the Prime Minister can recommend the Governor-General approve the ratification of the Agreement. Further reading Climate Change Authority (CCA), Final There are 23 joint sitting days scheduled for report on Australia’s future emissions the rest of 2016. If Australia is aiming to ratify reduction targets, CCA, July 2015. the Paris Agreement this year, as Minister Hunt stated in April, then the government S. Yeo, ‘Timeline: the Paris will need to table the Agreement in the first agreement’s ‘ratchet mechanism’’, week of sitting.The Library has been advised Carbon Brief, January 2016. that the Doha Amendment will be tabled at the same time as the Paris Agreement.

103 Climate change—reducing Australia’s emissions Emily Hanna, Science, Technology, Environment and Resources

According to the most recent Quarterly Update, issued in May this year, Australia Key Issue produced 535.7 million tonnes of carbon

dioxide equivalent (Mt CO2-e) emissions. Climate policy continues to be These emissions came from various sectors: controversial. Following the repeal of the carbon price in the  Energy (Electricity)—187.5 Mt CO -e last parliament, the Emissions 2 (or 35% of the total emissions) were Reduction Fund (ERF) is now produced by fuel combustion to make Australia’s main mechanism to electricity (on- and off-grid). reduce greenhouse gas emissions. However, two-thirds of the ERF’s  Energy (Direct combustion)—94.5 allocated $2.5 billion funding has Mt CO2-e (18%) were produced by fuel now been spent. The ERF, and other combustion directly used in energy, policies, will need further funding mining, manufacturing, buildings and to achieve our climate targets. primary industries. Direct combustion excludes electricity use and transport.

 Transport—93 Mt CO2-e (17%) came from fuel combustion used in road, rail, Under international climate agreements, domestic shipping and aviation, off- Australia has two targets to reduce road recreational vehicles and pipeline our greenhouse gas emissions: transport.

 Agriculture—68.5 Mt CO2-e (13%) were  5% below 2000 levels by 2020 (under the produced from livestock (approximately Kyoto Protocol) and 70% of agricultural emissions), application of fertilisers and soil additives, soil  26-28% below 2005 levels by 2030 emissions and burning of agricultural (under the Paris Agreement). residues.  Fugitive emissions—39.6 Mt CO -e While Australia appears to be on track to 2 (7%) were produced from fugitive gas meet its 2020 target, achieving the 2030 emissions from coal, natural gas and target may prove challenging. To achieve oil extraction, processing and supply. this target we need to know where our Fugitive emissions can be unintentional emissions are coming from and have (for example, a leak) or intentional (such effective policies to reduce those emissions. as the burning of waste gases). The main source is coal mines (66%), with Where do our emissions come from? underground coal mines producing more than surface mines. The Australian Government tracks our  Industrial processes—33.7 Mt CO -e emissions of greenhouse gases (such as 2 carbon dioxide and methane) through (6%) were produced from industrial and National Greenhouse Gas Accounts. The production processes that do not create Department of the Environment and Energy energy. This includes metal production, publishes regular Quarterly Updates on chemical industry processes and Australia’s greenhouse gas emissions. synthetic gas production and use (for example, hydrofluorocarbons).

104 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT  Waste—12 Mt CO2-e (2%) were The Climate Change Authority (discussed produced from waste decomposition, below) is currently reviewing whether treatment and combustion. This includes Australia should have an emissions solid waste in landfill (the major source in trading scheme, as well considering the this category), waste in wastewater and policies that Australia should implement compost. to meet the Paris climate agreement. The  Land use, land use change and Authority’s report on these issues will be released by the end of August 2016. forestry—6.5 Mt CO2-e (1%) were produced from deforestation (such as land clearing), reforestation, revegetation Figure 1: Australia’s climate policies and forest, crop and grazing lands management. There is a greater level of uncertainty in calculating emissions for this sector.

Australia’s climate policies To meet our international climate targets we will need to reduce emissions across all the sectors outlined above. However, finding bipartisan agreement on the most appropriate policies to achieve these Source: Department of the Environment reductions has been challenging. Climate policy has been a polarising and highly political issue in Australia. Several proposals Emissions Reduction Fund to establish an emissions trading scheme The ERF is a voluntary scheme designed to have come unstuck, with the former ALP provide financial incentives for businesses, Government finally establishing acarbon landholders and communities to reduce pricing mechanism in 2012. However, the emissions. Under the ERF, the Government ‘carbon tax’ was repealed by the Abbott purchases greenhouse gas abatement, Government in 2014. Instead, the Emissions quantified by Australian Carbon Credit Units Reduction Fund (ERF) is now the centrepiece through an auction process administered of the Australian Government’s current by the Clean Energy Regulator. Before a policies to limit greenhouse gas emissions. project can participate (or bid) in an ERF auction, it must be eligible and registered The Government is relying on the ERF, with the Clean Energy Regulator. as well as a number of other policies, to reduce our greenhouse gas emissions, and So far, three auctions have been held under meet our 2030 climate target (see Figure the ERF, resulting in the purchase of 143 1). These policies are designed to reduce million tonnes CO -e in emissions reductions emissions, increase energy productivity, and 2 at an average price of $12.10 per tonne. boost the uptake of renewable energy. Of the $2.55 billion allocated to the ERF, over $1.7 million, or around two-thirds, However, questions have been raised as has now been spent, leaving $816 million to whether these policies, particularly the remaining. Further funding for the ERF will ERF, are sufficient to achieve our 2030 apparently ‘be considered in future budgets’. target, particular given that many do not currently appear to have sufficient funding.

105 A range of projects to reduce emissions more productive consumer choices and have been funded under the ERF so far. promote more productive energy services. These include, for example, projects to replace Melbourne street lights with more Measures listed in the NEPP include, for energy efficient light bulbs,native forest example, improved vehicle efficiency; and and vegetation regrowth projects and the improved residential building energy ratings use of gas from waste to create energy. and disclosure. The NEPP could result in reduced greenhouse gas emissions in However, the ERF has been criticised as an numerous sectors including transport, inefficient way of reducing our emissions, agriculture, industry, and electricity. amid suggestions that the Government is paying polluters for emissions reductions The Government expects the NEPP to that would have happened anyway even contribute over one quarter of the emissions without the scheme. The Climate Change reductions required to meet our 2030 Authority concluded in a 2014 report target. However, as of July 2016, there does that ‘by itself, and as currently funded, not appear to be any additional funding the [ERF] scheme is unlikely to deliver specifically allocated to implement this plan. sufficient emissions reductions to reach even Australia’s minimum 2020 target’. Other policies and measures The ERF also includes a ‘safeguard Renewable energy is an important mechanism’, which aims to ensure that method of reducing emissions in the emissions reductions achieved by the energy sectors, which produce over ERF are not offset by rises in emissions half of Australia’s emissions (see above). elsewhere. The safeguard mechanism Policies to increase uptake of renewable came into effect on 1 July 2016, and energy are discussed separately in the encourages large businesses not to increase brief on renewable energy policy. their emissions above historical levels. The mechanism applies to emitters with The Government has also announced annual emissions of over 100,000 tonnes measures to further reduce emissions of CO -e. While the mechanism has been 2 hydrofluorocarbons (HFCs) by 85% by criticised as weak, some commentators 2036, with measures planned to start by have suggested it could provide the basis 2018. These potent greenhouse gases for an emissions trading scheme. The are commonly used in refrigeration and air mechanism will be reviewed in 2017. conditioning. The Government has said it will implement measures to reduce HFC

Energy productivity emissions by up to 80 Mt CO2-e by 2030. These measures include banning imports of To meet our 2030 emissions reduction HFC containing equipment and working with target, the Government is also relying on the business to encourage proper installation and National Energy Productivity Plan (NEPP), maintenance of HFC-containing equipment which aims to enhance energy productivity to reduce gas leakage and energy use. by 40% between 2015 and 2030. Energy productivity combines traditional energy The Government is also exploring efficiency measures (such as more efficient options for improving the fuel efficiency of appliances) with new technology and services Australia’s vehicle fleet, through theVehicle (such as smart appliances and solar power). Emissions Ministerial Forum, established The main aims of NEPP are to encourage in October 2015. The Forum released

106 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT a Discussion Paper in February 2016 These actions resulted in the Climate to seek views on measures to reduce Change Authority’s future being questioned emissions from the road transport sector. by commentators. Although new Board This includes consideration of Euro 6 members were appointed in late 2015, the vehicle emissions standards, improved Authority’s future is still unclear, given that fuel quality standards and measures to it is currently not funded beyond 2017. increase the fuel efficiency of light vehicles. In contrast, the Abbott Government Climate advisory bodies successfully abolished the Climate Commission in 2013. The Climate As part of a package of measures along Commission had been set up by the Gillard with the ‘carbon tax’, the former ALP Government to communicate climate science Government created government agencies to the Australian public in an understandable to review climate change policies and clearly manner. Such was the public outcry after communicate climate science to the public. the Climate Commission’s dismantling, that a social media campaign to crowd- The Climate Change Authority is an fund a replacement body raised nearly $1 independent statutory authority which million in under one week. The resultant came into effect in 2012. It provides independent Climate Council aims to: the government and parliament with ‘rigorous, independent advice on … provide independent, authoritative climate change policies to improve the climate change information to the quality of life for all Australians’. It does Australian public. Why? Because our this by carrying out reviews on climate response to climate change should be change policies and initiatives such based on the best science available. as the Renewable Energy Target. As well as providing information on climate- The Abbott Government introduced related science and climate change impacts legislation in the last parliament in an (for example, health), the Climate Council attempt to abolish the Climate Change provides reports on policies related to climate Authority as part of its effort to dismantle change such as renewable energy. The not- the former ALP Government’s climate for-profit Climate Commission continues to policy structure. However, the first abolition rely on public donations to support its work. Bill was rejected by the Senate, while the second Bill eventually lapsed. Although the attempted abolition was not successful, one half (four) of the Authority’s Board Further reading member positions were left vacant for over a year from 2014. This occurred after the A Talberg, S Hui and K Loynes, members quit because, according to some Australian climate change policy to commentators, the then-Government: 2015: a chronology, Research paper series, 2015-16, Parliamentary Library, Canberra, 5 May 2016. … made it clear that it would not listen to its [the Climate Change Authority’s] advice (although it does Climate Change Authority, seem to have been influenced by its Australia’s climate policy options, recommendations on vehicle emissions Climate Change Authority, 2015. standards and international permits).

107 Commonwealth Environmental Regulation Sophie Power, Science, Technology, Environment and Resources Juli Tomaras, Law and Bills Digest

create a single environmental assessment and approval process for nationally Key Issue protected matters. The aim is to simplify the approvals process for businesses, while The Government’s ‘One-Stop maintaining high environmental standards. Shop’ has been implemented The Government suggests that it will for environmental assessments. result in savings to business, by reducing However, accrediting state approval administrative costs and delays. A 2015 decisions remains problematic, House of Representatives Committee report while other proposed changes to on Streamlining environmental legislation also environmental legislation have stalled. supported the One-Stop Shop (although ALP members disagreed on this point).

The ‘One-Stop Shop’ relies on provisions in The Environment Protection and Biodiversity the EPBC Act that allow the Commonwealth Conservation Act 1999 (EPBC Act) is the to make bilateral agreements with the Commonwealth’s key environmental states, accrediting relevant processes legislation. The EPBC Act is focussed on under state legislation. There are two the protection of nine ‘matters of national types of bilateral agreements: environmental significance’. These matters include World Heritage properties; threatened  Assessment bilateral agreements species; the Great Barrier Reef Marine Park; accredit state and territory assessment and water resources in relation to large coal processes for the purposes of the EPBC mining and coal seam gas developments Act. A project is still referred to the (the ‘water trigger’). Actions that are likely Commonwealth, but assessed under to have a significant impact on a matter the state processes and laws. The of national environmental significance final approval decision is made by the undergo environmental assessment and Commonwealth Environment Minister. require approval from the Commonwealth Assessment bilateral agreements Environment Minister. The Minister usually were made in the past with states and attaches conditions to any approval. territories, prior to the ‘OneStop Shop’ proposal. The One-Stop Shop  Approval bilateral agreements Most projects and developments that accredit state and territory assessment require approval under the EPBC Act also and approval processes, where those need separate approvals under relevant processes meet certain standards. This state or territory legislation. Some industry means the final approval decision on a groups argue that this is unnecessary project is made by the state or territory duplication which in turn results in additional government, not the Commonwealth. costs and delays for those projects. This mechanism has existed in the EPBC Act since it commenced, but has only been used once. Approval bilateral As a result, the Commonwealth Government agreements cannot cover projects has implemented a ‘One-Stop Shop’ to involving the water trigger.

108 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT By December 2015, assessment bilateral During the recent election campaign, agreements were in place with all states both the ALP and Greens issued policies and territories. Draft approval bilateral for stronger national environmental laws. agreements for many states were published Proposals included new ‘triggers’ (or matters in 2014–15, but none have been finalised. of national environmental significance) The Commonwealth has released a such as a ‘climate’ trigger (to regulate land condition-setting policy which aims to reduce clearing) and a national parks trigger; as well duplicative conditions in projects that require as an independent environment protection both state and Commonwealth approval. agency. Another proposal was to extend the water trigger to cover all unconventional The EPBC Amendment (Bilateral Agreement gas projects (such as shale and tight gas). Implementation) Bill 2014 did not pass in the last Parliament. Along with amendments Conservation groups are also calling for a to facilitate the operation of bilateral major overhaul of Australia’s environmental agreements, the Bill also initially proposed to laws and have convened a panel of experts allow the accreditation of state and territory to develop new environmental legislation. approvals relating to the ‘water trigger’. Meanwhile, many recommendations of The ‘One-Stop Shop’ has been criticised a 2009 review of the EPBC Act (Hawke by conservation groups, who argue review) have not been implemented. The that the delays and costs of federal recommendations included, for example, environmental oversight are overstated. establishing a National Environment They would prefer the Commonwealth Commission, responsible for advising on retain its regulatory powers over matters approvals, and monitoring and enforcement. of national environmental significance, particularly matters where Australia has A 2014 audit by the Australian National Audit obligations under international agreements Office raised concerns about the Department such as world heritage. There are also of the Environment’s ‘passive approach’ to concerns that states may have a conflict the management of non-compliance with the of interest in approving projects which are EPBC Act. The Department has since taken of financial benefit to that state.Others steps to improve its compliance monitoring. suggest that the ‘one-stop shop’ may Nevertheless, questions remain as to whether actually be a more complex system. the Department has sufficient resources to monitor the large number of projects referred Other proposals for change and approved under the EPBC Act to date. Another Bill that did not proceed in the last Parliament was the EPBC Amendment (Standing) Bill 2015. That Bill proposed to Further reading restrict the ability of certain individuals and organisations, such as conservation groups, J Tomaras and B McCormick, to seek review of Ministerial decisions made Environment Protection and under the EPBC Act. While supported by Biodiversity Conservation some industry groups, the Bill was criticised Amendment (Bilateral Agreement by lawyers, farming organisations and Implementation) Bill 2014, Bills conservationists. Recent reports suggest this digest, 9, 2014–15, Parliamentary Bill may not be reintroduced this Parliament. Library Canberra, 2014.

109 Great Barrier Reef Emma Knezevic and Bill McCormick, Science, Technology, Environment and Resources

Successive state and Commonwealth governments have referred to the GBR as Key Issue the ‘best managed reef in the world’. They highlight GBRMPA’s multiple-use approach Threats to the Great Barrier Reef to balancing fishing, tourism and recreation, from poor water quality and as well as maritime and transport access. climate change urgently need to be addressed to maintain its Figure 1: Great Barrier Reef and adjacent natural values and ensure long term sustainable uses of the park. catchments

The Great Barrier Reef (GBR) extends 2,300km along the coast of Queensland (see Figure 1) and is the world’s largest system of coral reefs. With great diversity of species and habitats, the GBR is one of the richest and most complex natural ecosystems on earth. It was inscribed on the World Heritage List in 1981. The reef is visited by more than two million people each year and the catchment region generates a value-added economic contribution of $5.7 billion annually.

Managing and conserving the GBR and its unique values is a challenge, and both the Australian and Queensland Governments have specific responsibilities.

The Great Barrier Reef Marine Park Authority (GBRMPA), a Commonwealth authority, manages the Great Barrier Reef Marine Park, as established by the Great Barrier Reef Marine Park Act 1975 (Cth). GBRMPA’s Source: Reef Plan Report Card Summary regulatory tools include zoning, plans of management, permits and policies. Threats to the GBR Threats to reef health include coral bleaching The , through due to elevated sea temperatures, ocean the Queensland Parks and Wildlife Service acidification, outbreaks of Crown of Thorns and Fisheries Queensland, works with the Starfish (COTS), and cyclones. Threats also Commonwealth in managing adjacent arise from coastal development, agriculture state marine parks and islands. and industrial activities on adjacent land

110 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT and the associated catchment run-off and COTS outbreaks vary by location from these activities. As such, land and and timing. The 2012 NAS study (above) water management within or adjacent reported that the remote northern region to the GBR contributes to cumulative had relatively low mortality from COTS impacts on the reef ecosystem. and cyclones, and coral cover was stable with the exception of a slight decline A 2012 study, published by the National due to bleaching from 1998 to 2003. In Academy of Sciences (NAS), found that coral contrast, a 2016 bleaching event has most cover had declined by around 50% since severely impacted the northern region. 1985. Tropical cyclones, predation by COTS and coral bleaching accounted for 48%, 42% Crown-of-Thorns Starfish (COTS) and 10% of the estimated loss, respectively. The authors concluded that tropical cyclones Occasional COTS outbreaks are considered and coral bleaching can be linked to climate natural, but outbreak frequency and intensity change and mitigation measures are have increased as a result of reduced water unlikely to be effective in the short term. quality. In particular, increased nutrient levels as a result of catchment run-off encourage plankton blooms, increasing the food available Water quality and reef management to COTS larvae. During COTS outbreaks, In 2003, the Queensland and Australian the starfish eat coral faster than it can re- Governments released the Reef Water grow, leading to a decline in coral cover. Quality Protection Plan (Reef Plan) to address the issues of run-off from land. In addition to intensive efforts to manually This plan was updated in 2009 and 2013. control COTS during outbreaks, improving the water quality is expected to reduce Funding to implement the plan was the likelihood of COTS outbreaks. sourced from the Natural Heritage Trust, Caring for our Country and Reef Coral bleaching Rescue programs. The Reef Plan website states that, in 2013, the Australian and Coral bleaching is caused by heat Queensland Governments collectively stress when water temperatures rise for allocated $375 million over five years to prolonged periods. Coral bleaching is its implementation. In 2015 a further $100 the term used when tiny marine algae million was committed by each government. that live in coral (zooxanthellae) are expelled. The coral tissue then appears transparent, revealing the white skeleton. The GBR Outlook Report 2014, prepared by GBRMPA, explains that run-off into the GBR from adjacent land carries increased Significant coral bleaching outbreaks nutrients found in fertilisers such as nitrogen occurred on the GBR in 1998 and 2002. and phosphorus, as well as pesticides However, 2016 has seen the most extensive and herbicides used in agriculture. Water bleaching event with reports of up to 90% of quality is further reduced by sediments. some reefs affected to some degree. Impacts from this event are still unfolding, but coral mortality (at June 2016) is 22% across the The impact of run-off is uneven across GBR, with the most affected sites observed the GBR, and depends on pollutants and in the northern section. The Australian their concentrations, catchment sources Institute for Marine Science explains: and distance of reefs from the coast. Similarly, the effects of coral bleaching

111 Between February and May, the GBR This Plan aims to put in place a long-term, experienced record warm sea surface comprehensive approach to improve the temperatures. Extensive field surveys condition of the GBR. The Implementation and aerial surveys found bleaching was Strategy identifies priority actions in the the most widespread and severe in implementation of the Reef 2050 Plan. the Far Northern management area, between Cape York and Port Douglas. Controversy arose in May 2016 when the Here, bleaching intensity was ‘Severe’ Australian Government’s Department of the (more than 60% community bleaching). Environment successfully requested the Bleaching intensity decreased along removal of references to Australian sites, a southerly gradient. While most reefs including the GBR, in a United Nations report, exhibited some degree of bleaching, World Heritage and Tourism in a Changing this bleaching varied in intensity (from Climate. The Department was reportedly less than 10% to over 90% community seeking to avoid confusion over terminology. bleaching) and was patchy throughout most of the management area. (View the GBRMPA map Proposed Reef Fund for more information.) The Coalition’s 2016 Election policy proposes the creation of a $1 billion Reef World Heritage in danger? Fund to finance clean energy projects in the GBR catchment region. The Clean Since 2005, the World Heritage Committee Energy Finance Corporation will manage has repeatedly warned Australia that the the Fund. It is unclear how the Reef Fund GBR was under consideration for inclusion will directly benefit the health of the GBR in on the List of World Heritage In Danger. the short to medium term. It will not fund ‘In danger’ listings are designed to: projects primarily designed to improve water quality, although improvements to water …inform the international community quality may arise as a secondary benefit of conditions which threaten the very from some of the clean energy projects. characteristics for which a property was inscribed on the World Heritage List, The policy cites examples of projects and to encourage corrective action. that will be funded such as:

The World Heritage Committee’s decisions  solar panels to substitute for diesel on a relating to the GBR in recent years have farm and raised concerns about proposed and  more energy efficient pesticide sprayers existing developments in and near the and fertiliser application systems. World Heritage Area, water quality issues (including sediment and agricultural nutrient run-off), and climate change. Further reading The Australian and Queensland governments have responded to these GBRMPA, Great Barrier Reef concerns in a number of ways, to ensure Outlook Report 2014, 2014 the GBR is not placed on the ‘in Danger’ list. A key part of this response is the Australian and Queensland Reef 2050 Long-Term Sustainability Governments, Reef 2050 Long- Plan, which was informed by a strategic term Sustainability Plan, 2015 assessment of the impacts on the reef.

112 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Marine environment Bill McCormick, Science, Technology, Environment and Resources Marine reserves Key Issue Marine reserves may be declared in coastal waters by the relevant state or The management arrangements the Northern Territory. In Commonwealth for the Commonwealth Marine marine areas (generally from three to Reserve Networks have been 200 nautical miles from the coast) the reviewed. New management Commonwealth may proclaim reserves under plans are due in coming years. the Environment Protection and Biodiversity Conservation Act 1999 (EPBC Act). The question remains as to the level of resource exploitation that will The first Commonwealth marine reserve to be be permitted in these reserves. proclaimed was a section of the Great Barrier Reef Marine Park (GBRMP) in 1979. Other Commonwealth marine reserves have been declared on an ad hoc basis over the years. Australia has the third largest marine In 1998, the Commonwealth, state and jurisdiction in the world, with an Exclusive Northern Territory governments committed Economic Zone (EEZ) covering 8.2 million to establishing the National Representative square kilometres (km2). These oceans are System of Marine Protected Areas by home to 11 per cent of the world’s known 2012 as a comprehensive, adequate and marine species, and support over 5,000 representative system of marine reserves. species of fish, and about 30 per cent of the world’s sharks and rays. The economic The Regional Marine Planning process was and conservation value of these waters used to develop a system of Commonwealth is considerable, as they contain valuable marine reserves. The first plan to be oil and gas fields and fisheries, as well as developed was the South-east Regional significant environmental assets such as the Marine Plan in 2003, with the South-east coral reefs, mangroves, sea grass beds, kelp Commonwealth Marine Reserves Network forests and rocky reefs that are home to a established in 2007. Over the next five years diverse range of marine plants and animals. Marine Bioregional Plans and associated Commonwealth Marine Reserve Networks It is essential that economic activity in the were developed for other regions. oceans can proceed while at the same ensuring that important marine ecosystems After consulting marine and tourism are protected from potential damage. For businesses, environmental groups and this reason, economic activity is regulated to the community, in November 2012 the minimise adverse impacts over much of the Government proclaimed new reserve EEZ. A key regulatory tool is the declaration networks for the North-west, North, of marine reserves, which delineate marine Temperate East and South-west Marine areas of high conservation value where Regions, as well as the Coral Sea certain economic activities may be restricted. Commonwealth Marine Reserve (see Such restrictions on fishing became an Figure 1). Most existing marine reserves were issue in the 2013 election. This led to a incorporated into these networks. There are review of the recently proclaimed marine now 58 reserves in these networks, covering reserves (the Marine Reserves Review).

113 2,745 million km2, plus the 344,400 km2 implemented its 2013 fisheries policy to GBRMP and the 71,200 km2 Heard Island suspend and review the management and McDonald Islands Marine Reserve. plans for the reserves. The management plans for the other networks and the Coral Commonwealth marine reserves are Sea Commonwealth Marine Reserve were assigned one or more zones: invalidated when these marine reserves were revoked and ‘reproclaimed’ in December 2013. The marine reserves are still in place,  Sanctuary zone but with no management plans in place for  Marine National Park zone these reserves, the previous management  Habitat Protection zone arrangements were continued, pending the  Recreational Use zone outcomes of the Marine Reserves Review.  Conservation Park zone Input to the review involved 13,124  Special Purpose zone and submissions, 1,859 responses to an  Multiple Use zone. online survey and over 260 meetings and forums around Australia. Proposals were These zones must be managed in reportedly put forward by the review panel accordance with the Australian IUCN to allow commercial fishing in areas of the [International Union for the Conservation reserves where fishing had been banned of Nature] management principles. under the suspended management plans. Management plans outline what activities are permitted in each of the zones in the reserve. The report of the review was given to the Minister for the Environment in December For example, the South-east Commonwealth 2015, but has not yet been made public. Marine Reserves Network Management The Government response to the report Plan came into operation on 1 July 2013. will be released later in 2016 and new Under the plan, petroleum exploration and management plans will then be prepared. production are only permitted in certain zones (Special Purpose and Multiple Use) and then only with a permit from the Fishing Director of National Parks. Fishing using The value of Australian fisheries and bottom-trawling methods is not permitted aquaculture production in 2013–14 was in the marine reserves. However, other $2.5 billion, of which $1.5 billion came types of commercial fishing may proceed in from the wild-catch sector of state, territory Habitat Protection and Multiple Use zones and Commonwealth fisheries. In that year, if permitted by the Director of National 3,594 people were employed in fishing Parks. Recreational fishing is permitted enterprises and 5,111 in aquaculture. in all zones except for the Sanctuary Recreational fishing is also significant, with and Marine National Park zones. 3.5 million people fishing annually. Eighty per cent of the recreational catch comes from Management plans for the other networks estuaries, off beaches and in the ocean. and the Coral Sea reserve were scheduled to come into effect in July 2014. However, Under the Offshore Constitutional Settlement, in response to concerns by commercial coastal waters are managed by state and and recreational fishing groups about the Northern Territory fisheries agencies. loss of access to significant areas of the oceans, the incoming Coalition Government

114 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Figure 1: Commonwealth Marine Reserves Networks

Source: Parliamentary Library

The Australian Fisheries Management manner and export approval can be granted. Authority (AFMA) manages Commonwealth When fish products sourced from specific fisheries that include deepwater or migratory Commonwealth, state and territory fisheries species within the Australian Fishing Zone. are destined for export, these fisheries These fisheries bodies set harvest strategies need to be assessed for their environmental to maintain fish stocks at ecologically performance before export approval can sustainable levels and aim to reduce be granted under the EPBC Act. Over 110 bycatch to minimise impacts on the marine fisheries have been approved for export. environment. For example, from 1 May 2017, all vessels in the South East Trawl sector The impact on the fishing industry of the new and the Great Australian Bight Trawl sector management arrangements for the marine will have to use seabird mitigation devices reserves, as declared in 2012, resulted in a such as a ‘bird baffler’ to deter seabirds proposed Fisheries Adjustment Assistance from foraging around the fishing vessels. Package worth around $100 million. After the Marine Reserves Review and the introduction All export and all Commonwealth fisheries of the revised management plans, it appears must be assessed and approved under there will be a far smaller impact on the the EPBC Act to ensure that these fisheries commercial fishing industry than under the are managed in an ecologically sustainable management plans that were set aside.

115 The Commonwealth has allocated less than February 2016 of the Senate Standing half this amount for fisheries adjustment Committee on Environment and assistance over the next four years. Communications Inquiry into Oil or Gas Production in the Great Australian Bight. The inquiry lapsed with the dissolution of Offshore petroleum the Senate on 9 May 2016. There are 11 Significant offshore petroleum production petroleum titles that have been granted started in Australia after ESSO/BHP Billiton in the GAB which overlap Multiple Use discovered the first offshore gas and and Special Purpose zones of the GAB oil fields in Bass Strait in the 1960s. At and the Western Eyre marine reserves. present, production is occurring in waters off Victoria and Western Australia. As well Climate change and marine reserves as production licences, there are retention leases and exploration permits in waters Marine reserves are essential to protect off every state and the Northern Territory. ecosystems, but are not always able to prevent habitat loss due to issues that The National Offshore Petroleum Safety cannot be directly managed, such as climate and Environmental Management Authority change. For example, recent research regulates all offshore petroleum facilities indicates that the range of the kelp forests of in Commonwealth waters in relation to Western Australia has contracted south by health and safety, structural integrity 100 km due to several years of heatwaves and environmental management. which started in 2011. This will potentially adversely affect the important lobster and abalone fisheries along the coast. Unlike with commercial fisheries, petroleum licences that already exist at the time a marine reserve is declared, continue in operation irrespective of the zoning and management plans. Further reading National Offshore Petroleum Safety Since the management plans for the new and Environmental Management marine reserves have been invalidated, Authority (NOPSEMA), ‘Activities the Commonwealth has issued petroleum within Commonwealth Marine exploration permits in some of these Reserves’, 26 November 2015. reserves with the approval of the Director of National Parks. In addition to permits Australian Fisheries Management granted in Multiple Use and Special Purpose Authority (AFMA), ‘Ecological zones, one permit was granted that risk management strategies for overlaps the Habitat Protection Zone of the Commonwealth commercial Gascoyne and Carnarvon Commonwealth fisheries’, AFMA website. Marine Reserves. Such a permit could not have been granted if the proposed management plan had been in place.

Public concerns about the potential impacts of petroleum exploration in the Great Australian Bight (GAB) on critical marine habitat due to seismic activity and deep water drilling led to the establishment in

116 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Water management Bill McCormick, Science, Technology, Environment and Resources

Water harvesting, storage and distribution have therefore been a vital factor in urban Key Issue and regional development in Australia. The building of dams and associated irrigation Under the Murray-Darling Basin Plan, areas has increased water availability but the Minister will make adjustments has also damaged the environment, causing to limits on water use in the Murray- the long-term ecological decline of rivers, Darling Basin during the next year. wetlands and floodplains.The community and industry has suffered from the adverse The Commonwealth will be environmental effects and poor water quality. contributing to the construction of new dams around Australia through grants and concessional loans. Murray-Darling Basin The decline in river health in the MurrayDarling Basin (MDB) triggered the development of the Basin Plan 2012, Water use in Australia varies year by year. which sets environmentally sustainable In 2013–14, 23,500 gigalitres (GL) were limits for the consumptive use of water. The used, principally for irrigation (13,400 GL or Murray-Darling Basin Authority (MDBA) is 57%) and urban use (3,900 GL or 17%). implementing the Basin Plan in concert with the Basin states (Queensland, New South Australia’s annual rainfall is highly variable, Wales, the Australian Capital Territory, Victoria both in volume and geographic distribution. and South Australia) and other stakeholders. This variability affects runoff, streamflow, groundwater recharge and water availability A fundamental challenge for the Basin Plan for human use. There is high rainfall in parts will be achieving the long-term average of the northern tropics, the east coast and sustainable diversion limit (SDL) of surface western Tasmania. However, 40% of Australia water of 10,873 GL per year for urban, has rainfall of less than 300 millimetres (mm) industrial and agricultural use in the MDB. To per year. Rainfall has also declined in some reach the SDL, the Australian Government areas due to the failure of autumn and early has committed to recovering 2,750 GL of winter rains, with a decrease since 1950 of water for the environment by 2019. This 15–40 mm per decade in south-western recovery will be achieved through both Western Australia (WA) and 20–50 mm per investment in infrastructure efficiency (for decade in eastern Australia and Tasmania. at least 600 GL of the water) and water buybacks. By 30 June 2016, 1,981.4 GL, or While 72% of Australia’s water runoff 72% of this water target, had been recovered. occurs in northern Australia, coastal Queensland and Tasmania, only 7% is The Basin Plan contains a SDL Adjustment generated in the Murray–Darling Basin Mechanism which allows the Minister for (MDB) where more than two-thirds of Agriculture and Water Resources, on the Australia’s irrigation water is used. advice of the MDBA, to change the SDL up or down by up to five per cent (544 GL) as long as environmental and socio- economic outcomes are not compromised.

117 The 2,750 GL of environmental water can infrastructure projects with potential for be decreased by up to 650 GL through Commonwealth involvement, including those ‘supply measures’ that increase the quantity already funded by the Commonwealth. of water available to the environment (for example, by reducing evaporation losses at The Commonwealth has established the storages). Alternatively, it can be increased National Water Infrastructure Development by up to 450 GL through ‘efficiency Fund, with $59.5 million allocated to 40 measures’ that recover additional water for feasibility studies. Funding of $450 million the environment by making water delivery will be available from 2017–18 for water systems for irrigation more efficient. There infrastructure projects, including $170 are also ‘constraints measures’ that ease million for northern Australian projects. or remove structures or rules that constrain the delivery of environmental water. In addition, the $2 billion National Water Infrastructure Loan Facility, announced in Basin states provided an agreed package of the 2016 Budget, will support major water supply, efficiency and constraint measures infrastructure projects proposed by states under the SDL adjustment mechanism to the and territories with private sector partners MDBA in May 2016. The MDBA will publish over 10 years. Concessional loans aim to a draft of the proposed SDL adjustment stimulate and accelerate economically viable in late 2016 or early 2017. The Minister dams, weirs, pipelines and managed aquifer will then table the final SDL adjustments, recharge schemes. The first five years of the which will be disallowable by Parliament. loans will be interest only, with the principal and interest repaid over the next ten years. Dams and water infrastructure projects The 2016 Coalition election policy also commits the Commonwealth Over the past twenty years the construction to providing funding for other water of significant dams has been limited for a infrastructure projects, including up to variety of reasons. These include lack of $130 million for the Rookwood Weir in economic viability and environmental impact. Queensland (if economically viable).

A 2014 CSIRO study of potential dams in northern Australia found that the best sites had been already developed and the next Further reading best sites have limited areas of soils suitable for irrigated agriculture. It did identify other Bureau of Meteorology, Water in potential dam locations, including up- and Australia 2013-14, December 2015. downstream of the existing Burdekin Dam, in the Herbert River Gorge in Queensland and C Petheram et al, Northern rivers in the Fitzroy catchment in WA. The report and dams: a preliminary assessment estimated that if 15 of the ‘most promising of surface water storage potential for large dams’ outside of national parks and northern Australia, CSIRO Technical other protected areas were developed, Report, Australia, December 2014. they could irrigate 350,000 hectares.

In 2013 the Coalition committed to plan for new dams. The 2014 Water Infrastructure Options Paper identified 31 water

118 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Land and Forests Bill McCormick, Science, Technology, Environment and Resources

There has been a 63% decline in log production from native forests of 10.4 million Key Issue cubic metres (m3) in 2003–04 to 3.9 million m3 in 2014–15. This compares to a 46% Many Regional Forest Agreements increase from 16 million m3 to 24.5 million are likely to be extended when they m3 from plantations. This is the result of expire during this term of Parliament. structural change in the industry which has led to a significant decline in native hardwood Significant changes to land clearing logs for woodchip export, but a 280% legislation are proposed for both increase in plantation hardwood logs. Around Queensland and New South Wales, 70,500 people were employed in the forestry with potentially different outcomes. and forest products industry in 2013–14.

Regional Forest Agreements Native vegetation, such as forests, has many Issues associated with native forestry benefits including supporting biodiversity, have been controversial for the past forty reducing land degradation and salinity, years; Commonwealth involvement in improving water quality, storing carbon, native forestry activities started with the and contributing to on-farm production. regulation of woodchip exports in the 1970s. Conservation groups have sought Australia’s State of the Forests Report 2013 to convince state and federal governments said that there are over 19,000 species of to include old growth forest and wilderness vertebrates and plants found in Australia’s in conservation reserves. In 1995, the forests. 1,431 forest-dwelling species are Comprehensive Regional Assessment listed as threatened due to habitat loss process aimed to find a long-term solution from land clearing for agriculture, grazing, by identifying areas for protection and and urban and industrial development areas to be open for harvesting in order as well as predation and competition to enable certainty of future wood supply. from pest and unsuitable fire regimes. Regional Forest Agreements (RFAs) were The report said that forestry operations then agreed between the federal and pose a minor threat to these threatened state governments, protecting 90% of forest-dwelling fauna and flora species. wilderness and 60% of old-growth forests in reserves. Ten RFAs were signed between 1997 and 2001, covering four states: Australia’s forests Forests comprise just 125 million hectares  New South Wales (Eden; North East; (ha), or 16% of Australia’s total land area. Southern) Of this, 123 million ha is native forests  Tasmania and 2 million ha plantations. Only 36.6  Victoria (Central Highlands; East million ha of native forests are available Gippsland; Gippsland; North East; West) and suitable for wood production, of which and 7.5 million ha are in public native forests.  Western Australia.

119 RFAs apply for 20 years, with five-yearly It is still considering whether to establish reviews. As such, they are due to expire more national parks in forest areas of Victoria. in the next few years. However, each RFA In November 2015, it established a Forest may be extended for a further period after Industry Taskforce, which has yet to report. the third five-year review of the RFA. The establishment of RFAs has not halted The 2013 Coalition forestry policy stated significant public opposition to the continued that it would extend the RFAs for five years logging of old growth forests and there are following each five-yearreview, starting now campaigns from conservation groups with the Tasmanian RFA. The third five-year to end all logging in native forests. While review of the Tasmanian RFA has been both the Coalition and the ALP support the finalised. In its response, the indicated continuation of the RFAs, the Greens want they would extend the RFA into a rolling to phase out logging in native forests. 20-year agreement. Tasmania will be entering formal negotiations over the RFA extension with the Australian Government. Vegetation clearing Clearing of native vegetation can have a The agreed process for the Tasmanian RFA number of serious consequences such may be a template for the RFAs in other as biodiversity decline, dryland salinity, states. All three other states have agreed to reduced water quality and quantity, pursue their reviews in 2016. However, the difficulty in flood control, increased erosion, Victorian Government has not decided its increased greenhouse gas emissions position about the extension of its RFAs. and reduced ecosystem functioning (facilitating biological insect pest control).

Figure 1: Annual woody vegetation clearing rate in Queensland (1988–2014)

Source: Land cover change in Queensland 2012–13 and 2013–14 Statewide Landcover and Trees Study Note that HVR stands for high value regrowth vegetation

120 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT High levels of land clearing in the early 1990s  broaden protection of regrowth vegetation led Commonwealth, state and territory in watercourse areas to cover all Great governments to set the goal of reversing Barrier Reef catchments the decline in the quality and extent of  reinstate compliance provisions for native vegetation by 2001. Australia’s Native vegetation clearing offences and Vegetation Framework updates a 2001  regulate against the destruction of framework that aimed to implement this goal. vegetation in watercourses.

The 2001 target was not met and more than The Australian Conservation Foundation 400,000 ha was still being cleared annually, welcomed the changes. However AgForce with the great majority being cleared in Queensland criticised the new legislation as Queensland along with significant areas a ‘knee-jerk action’ and is concerned that in NSW. These states implemented more Departmental mapping is ‘wildly inaccurate’. stringent vegetation management controls from 2006. They resulted in a decrease in land clearing with greenhouse gas New South Wales also plans to overhaul emissions (GHG) from deforestation across its vegetation management by establishing Australia decreasing from 98 megatonnes a new risk-based framework for clearing native vegetation. The framework proposes (Mt) of carbon dioxide equivalent (CO2-e) in 1991 (19% of Australia’s GHG emissions) to remove the requirement for a farmer to just 34 Mt CO -e in 2014 (6.5%). to obtain an approval to clear native 2 vegetation on their property if it is zoned as exempt or the clearing is carried out Change of governments in Queensland according to a code of practice. (2012) and NSW (2011) resulted in a loosening of the restrictions on land clearing in both states. Conservation groups are concerned that the new proposals would see a return to broad- scale clearing. However NSW Environment In the case of Queensland there was a Minister Mark Speakman indicated that there tripling in the rate of land clearing from less would be strong caps to stop overclearing. than 100,000 ha in 2011 to 300,000 ha in 2014 (see Figure 1 above). According to the Queensland Government, land clearing in Queensland is now generating a substantial proportion of Australia's Further reading GHG emissions from deforestation. Department of Agriculture, Regional Forest Agreements – an The newly elected Queensland government overview and history, 2015. is attempting to reverse this trend, and protect the Great Barrier Reef, by The State of Queensland introducing new legislation that will: (Department of Science, Information Technology and Innovation),  reinstate the protection of high-value Land cover change in Queensland regrowth on freehold and Indigenous land 2012–13 and 2013–14 Statewide  remove provisions permitting clearing for Landcover and Trees Study, 2015. high-value agriculture

121 122 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT INFRASTRUCTURE, ENERGY AND RESOURCES

Image ID: 154687475, Copyright: Michael Leslie, Image ID: 380731009, Copyright: Piotr Zajda 123 Energy market challenges Kai Swoboda, Economics

gas users. Indeed, a recent analysis of industrial gas prices conducted for the Key Issue Department of Industry, Innovation and Science found significant price increases There are a number of emerging for industrial gas users in recent years. issues in energy markets that have an impact on the price and Gas prices, as determined at key ‘hubs’, reliability of energy supply. have increased in association with the commencement of LNG exports from Addressing these challenges is Gladstone in January 2015 (Figure 1). complex; it requires joint action by the Australian and state Figure 1: Recent LNG exports from Gladstone and territory governments and and Adelaide and Brisbane gas hub prices regulators to provide the appropriate incentives in energy markets.

The supply of energy to households and businesses in Australia involves complex interactions between governments and privately-owned businesses. These interactions typically occur in markets regulated under a national co-operative approach between governments and involve Source: Thomson Reuters Eikon and Australian national, regional and state-based regulators. Energy Regulator (AER), STTM quarterly prices, AER website. Energy markets are affected by a range of factors including the historical While monthly LNG export quantities from development of energy supplies in each Gladstone have stabilised since the start state, market and weather conditions, of 2016, future volumes will be largely as well as exposure to international dependent on Asian LNG prices. These markets. There are several specific issues in turn, will be affected by changes in oil that affect some energy markets. prices and competition from other exporters, including the United States which has recently commenced exporting LNG. East coast gas exports The recent development of export-oriented Policy prescriptions for addressing the liquefied natural gas (LNG) terminals in potential for higher gas prices as a result Queensland has provided significant of LNG exports include: the development economic benefits through the scale of of additional gas resources, restrictions on investments and export revenues. However, LNG exports, more and higher capacity the increase in gas prices that are an interconnections, improved access outcome of the link to international gas arrangements for gas pipelines and improved markets has created problems for domestic market information for participants.

124 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Wholesale electricity markets Recent changes in wholesale prices are related to jurisdiction-specific events as well The national electricity market (NEM) as to broader policies that specifically apply covers eastern Australian states and the within a jurisdiction. For example, fluctuation ACT. In this market generators compete in prices in Tasmania in the past 12 months to supply electricity to electricity retailers. was related to the interconnection between Wholesale prices in the NEM are typically Tasmania and Victoria being unavailable determined in each state and are influenced between December 2015 and June 2016. by demand conditions, the mix of generation It was also the result of low levels of water technologies in place and the extent of storages available for hydroelectricity interconnections with states. Consumer generation and the need to use imported behaviour and industrial demand are diesel generation to meet demand. also factors that influence the market. In South Australia, recent rises in Between July 2012 and June 2014 there wholesale prices are the result of a was a period of relative stability and declining combination of state-specific factors wholesale electricity prices in the NEM as and broader policies that specifically a result of the repeal of the carbon price pertain to the state. These include: arrangements. Since that time, however, prices in some states—particularly Tasmania,  the high share of wind energy in electricity Queensland and South Australia—have generation that displaces other sources been more volatile (Figure 2).This is of generation when conditions are particularly the case since mid-2015. favourable  a reliance on two capacity-constrained Figure 2: National electricity market wholesale prices, 2009-10 to July 2016 ($ per MWh) interconnections with Victoria to import and export electricity  the closure of uneconomic, older, higher- cost fossil fuel generation as demand remains flat and renewable generation capacity has been added and  the historically wider use of gas-fired generation in the state and the impact on LNG exportrelated higher gas prices.

Policy prescriptions for addressing the Source: Australian Energy Market Operator issues faced in South Australia, and to a (AEMO), ‘Average price tables’, AEMO website. lesser extent, Tasmania’s reliance on the interconnector to Victoria include addressing Electricity retailers and industrial customers competitive pressures through more and can use long-term supply contracts and higher capacity interconnectors between financial instruments to manage the risks states. Other proposed approaches include of volatility in wholesale prices. However, recognising the role of fossil fuel generation should higher prices persist over the in providing supply reliability and developing medium to long term, these higher prices market signals to incentivise such generation. need to be passed on to consumers.

125 Electricity retail markets Security of supply issues Electricity retail markets, where retailers associated with an increasing compete for residential and business share of renewable generation customers, have seen progressive removal of price regulation since the early 1990s. A secure electricity supply generally However, at present, only Victoria (from requires a system that can quickly 2009), South Australia (from 2013) and adjust to changes in the level New South Wales (from 2014) have fully of demand and supply across deregulated retail markets—although the system (such as when air South East Queensland had price conditioners turn on or where a regulation removed from July 2016. generator fails). Another important element of supply security requires Higher network prices largely drove the the frequency and voltage in increase in electricity prices between the system to be maintained 2007 and 2012. In contrast, the repeal of within an acceptable level. the carbon price arrangements—in place between July 2012 and June 2014—and The addition of renewable wind a moderation in regulated network costs and solar rooftop generation have combined to provide a period of is generally not able to provide relative stability or decline in household this stability of frequency and electricity prices in most capital cities voltage. Therefore it needs to (Figure 3). Electricity price increases be supported by ‘synchronous’ for households in most jurisdictions generation—which is typically are expected by the Australian Energy supplied by fossil fuel generation. Market Commission in December 2015 to be relatively flat in 2016–17 (except in South Australia where a rise of seven The challenge of incorporating additional per cent is predicted). A rise of between renewable generation will need to be two to four per cent in most jurisdictions accommodated by the market. The 44th is anticipated in the following year. Parliament reduced the legislated renewable energy target (RET) from 41,000GWh to Figure 3: Nominal household electricity price 33,000GWh by 2020. It was estimated changes, selected capital cities, 2007 to 2016 by the Clean Energy Council in mid-2015, however, that meeting this lower target would require approximately 6,000 MW of additional renewable generation capacity to be built.

A recent summary by the Office of the Chief Economist noted that 320MW of renewable generation capacity had been completed in the year to October 2015. In addition, 3,747MW of renewable generation capacity was at the committed stage—where projects are either under construction or preparing to commence construction—and a further Source: Australian Bureau of Statistics, Consumer 20,000MW was at the feasibility stage. Price Index, Australia, March 2016.

126 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Although switching between retailers in a  the Munmorah power station in New competitive market applies some pressure South Wales in July 2012 (capacity on prices, there are a number of issues in 1,400MW, operating from between 1967 retail markets that will have an impact on the and 1969). ability of customers and retailers to reduce electricity prices. These include technological There are several existing policies in place, changes such as timeofuse ‘smart’ electricity such as the RET and the Government’s metering and the widespread use of roof top ‘safeguard mechanism’, that will exert some solar generation. In the medium term, the influence on incentives for generators and availability of affordable household battery retailers. State-based policies that support storage will also affect retail markets. renewables will also be a factor. There are also a number of policies under development Role of energy policy in meeting or being proposed that may assist emissions emissions reductions targets reductions targets and these will need to be considered in terms of their energy market There is a degree of complementarity impact. These include policies such as: but also tension between emissions reduction policies and objectives for  measures to improve energy efficiency low-cost and secure energy supplies. and productivity, such as the ‘National Energy Productivity Plan 2015–2030’ The consumption of non-transport  programs that aim to encourage the energy is a significant contributor to adoption of more energy efficient Australia’s domestic greenhouse gas technologies and practices by consumers emissions, accounting for 53 per cent and of emissions in 2015 as estimated by  the encouragement of technological the Department of the Environment. innovation in energy supply through entities such as the Clean Energy Finance In recent years, emissions from electricity Corporation and Australian Renewable generation have been falling; a consequence Energy Agency. of the closure of several energy-intensive industrial facilities, flat or declining consumer demand in response to rising electricity prices and a shift to higher renewable Further reading generation. Contributing to this fall has been the closure of a number of ageing Australian Competition and fossil fuel power stations, including: Consumer Commission, Inquiry into the east coast gas market, April 2016.  the Northern power station in May 2016, (capacity 520MW, operating since 1985) Australian Energy Regulator, and the Playford B power station in 2012 State of the energy market (capacity 240MW, operating since1960) in 2015, December 2015. South Australia  the Anglesea power station in Victoria in Australian Energy Market August 2015 (capacity 160MW, operating Commission, 2015 residential since 1969), and electricity price trends, December 2015.

127 Renewable energy policy: retreat, renewal and revitalisation? Juli Tomaras, Law and Bills Digest

a financial incentive for individuals and small businesses to install eligible small- Key Issue scale renewable energy sources such as residential solar panels. The Large-scale The renewable energy sector RET is expected to create the majority of seeks sufficiently stable policy the renewable energy needed by 2020. settings to ensure the necessary investment to meet Australia’s However, concern has been raised by some emissions reduction target. commentators that the Coalition Government has no renewables target beyond 2020. And Australia’s carbon dioxide emissions from electricity are on the rise, mainly due Renewable energy has an important role to a rise in black coal consumption after to play in cutting carbon pollution and several years of falling or flat demand meeting Australia’s emissions reduction due to commencement and expansion target (26–28 per cent below 2005 levels of Liquid Natural Gas (LNG) exports from by 2030), given that the energy sector Queensland. Furthermore, concern has been accounts for both the largest proportion expressed about the lack of clear, stable and biggest growth of greenhouse and sufficient long-term policy settings gas emissions created by people. required to provide incentive and ensure the necessary investment in the large-scale Renewable Energy Target renewable energy sector. It is notable that, between mid-2013 to 2015, there was The Renewable Energy Target (RET) aims negligible investment in the large-scale to reduce emissions from the electricity renewable energy sector in Australia. It is too sector, and the Turnbull Government has early to see whether initiatives announced stated that it aims to achieve a minimum since then will address these concerns. of 20 per cent of energy from electricity coming from renewable sources by 2020. Currently, the commitment is for renewable Renewable energy policy energy to supply 33,000 gigawatt hours Since gaining power in 2013, the (over 23.5 per cent) of Australia’s electricity Coalition Government has sought to by 2020. Minister Frydenberg has locked in make adjustments to policy and action the 23.5 per cent renewable energy target in the renewable energy space. by 2020, in what has been described as a ‘marked change from the avowedly pro- In response to the 2014 Warburton Review coal rhetoric of the Abbott government.’ and the Climate Change Authority RET Review, in June 2015 the then Abbott Government The RET is made up of two schemes: the legislated to reduce the renewable energy Large-scale Renewable Energy Target, and target by 20 per cent from 41,000 GWh per the Small-scale Renewable Energy Scheme. year to 33,000 GWh by 2020. Meeting this The Large-scale RET financially supports lower target was estimated by the Clean the creation and expansion of renewable Energy Council in mid-2015 to require energy power stations (for example, solar approximately 6,000 MW of additional or wind) while the Small-scale RES creates renewable generation capacity be built.

128 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The Clean Energy Finance Corporation favour of large-scale solar. The emphasis (CEFC) co-finances and invests, directly was, instead, to be on investment in new and indirectly financing renewable energy and emerging technologies and not in and energy efficiency projects. ‘The CEFC established, mature technologies with focuses on projects and technologies at the existing access to mainstream finance. later stages of development which have a positive expected rate of return and have In early 2016, the CEFC announced the capacity to service and repay capital.’ that it would be providing $9.1 million However, they also engage with ‘earlier stage to the University of Melbourne to projects which have significant support’ fund renewable energy and energy and an appropriate risk profile. The CEFC’s efficiency projects at the University. 2014–15 annual report shows clean energy investment in Australia was $3.171 million in that financial year—falling 31 per cent Ramping up solar from $4,596 million on the previous financial Concern had been raised that where year under the Labor Government. ‘Australia falls behind in the global solar rankings, is in the large scale sector.’ It had Prime Minister Turnbull shelved the plan also been reported that ‘Australia still sources by former Prime Minister Abbott to abolish more of its power from fossil fuels than other the Clean Energy Finance Corporation and comparable countries in the world and we’re the Australian Renewable Energy Agency not even in the top 10 for wind and [large (ARENA). ARENA works to reduce emissions scale] solar capacity.’ In September 2015, in the electricity sector by providing grants the CEFC and ARENA stated that they were to projects in the research and development targeting an additional 300 MW of large phase that would improve the affordability scale solar in two new funding programs. and increase the supply of renewable energy in Australia. In a joint statement In April 2016 Ministers Hunt and Porter with former Environment Minister Hunt, announced that the Turnbull Government Prime Minister Turnbull announced new would provide $3.3 million funding to support plans to retain and reinvigorate the CEFC the Alkimos Beach residential storage and ARENA as part of a commitment to trial from 2016-2020, which combines supporting jobs and innovation through community-scale battery energy storage investment in clean and renewable energy. and solar. The media release also noted that Australia has the ‘highest per capita rate of This development and shift in position follows household solar in the world’. Minister Hunt the issue of a new investment mandate to has previously stated that the Government the CEFC in December 2015 by former was investing in emerging battery storage Environment Minister Hunt and Minister technologies and had plans to accelerate the Cormann. The mandate directed the CEFC deployment of battery storage in Australian to focus its attention on emerging and households. Minister Hunt has also said innovative technologies, energy efficiency he wants Australia to become number 1 and clean energy technologies. This was in the deployment of battery storage. a change to, and a tempering of, a draft mandate put to the CEFC in June 2015 by the then Treasurer Joe Hockey and Minister Cormann that would have largely precluded further investments in wind and small-scale and changed the mix in

129 Clean Energy Innovation Fund State and territory renewable energy In March 2016 Prime Minister Turnbull and Also of significance in the renewable Environment Minister Hunt announced the energy sector are the actions and initiatives creation of a new Clean Energy Innovation of state and territory governments. Fund (CEIF) which will be allocated $100 State and territory governments have million annually for ten years and funded announced their own targets to support out of the CEFC’s $1 billion allocation. This the renewable energy sector. coincided with what some commentators described as a corresponding defunding of In June 2016, the Victorian Government ARENA. The CEIF will be jointly managed by announced ‘ambitious renewable energy the CEFC and ARENA. The CEIF will provide targets to create thousands of new jobs loans to businesses rather than grants, and cut the state’s greenhouse gas and will ‘support emerging technologies emissions.’ The Victorian Renewable which make the leap from demonstration Energy Target (VRET) will commit the state to commercial deployment.’ The CEIF’s to generating 25 per cent of its electricity focus will be on projects such as ‘large- from renewable energy by 2020, and 40 scale solar with storage, offshore energy, per cent by 2025. It is expected that VRET biofuels and smart grids.’ The announcement will be based on a similar mechanism of this initiative would also seem to align to the scheme used in the Australian with Australia’s Paris commitment to invest Capital Territory, which has managed to ‘new money’ in clean energy innovation. avoid the uncertainty that has affected the renewables industry in recent years. Low Emissions Technology Roadmap In 2014, South Australia announced a target of sourcing 50 per cent its In May 2016, Minister Frydenberg announced electricity from renewable energy by 2025, that the Government was commissioning although it is already above 40 per cent the CSIRO to develop a ‘technology neutral’ at present and this policy is dependent Low Emissions Technology Roadmap that on federal policies. In 2015, Queensland will highlight areas of potential growth in committed to generating 50 per cent of Australia’s clean technology sector and its energy from renewable sources by map the development of new emissions 2030 and to ensure that one million of reduction technologies. However, there its homes had rooftop solar by 2020. was no detail about what this may involve; whether there will be ongoing funding to These commitments translate to a support these technologies, and if they will considerable expansion of the future supply be developed in time to meet Australia’s of electricity from renewable sources. 2030 emissions reduction target. Also necessary for an investment in these technologies is a consideration of the relative price of coal, which is falling. Further reading Clean Energy Council, Power Shift: A blueprint for a 21st century energy system, April 2016.

130 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT National Broadband Network Emma Knezevic, Science, Technology, Environment and Resources

The Coalition’s plan retains the same solution for the 7 per cent but Key Issue uses a mix of technologies for the other 93 per cent of premises. The rollout of the National Broadband Network (NBN) will continue using a mix of technologies. While Important policy settings technology choices, cost and pace of the rollout attract the most attention, Structural separation of Telstra decisions about an important NBN Before the NBN (and in areas where policy setting are still to be made. the fixed line NBN has not yet reached) internet access was provided mainly over The policy of uniform wholesale Telstra’s copper lines. Telstra’s competitors prices is under review by the provide retail services by gaining access Government. The outcome of to services provided by Telstra over those these considerations could lead lines. Telstra provides retail services in to differences in retail prices competition with those other providers and between metropolitan, regional so has the incentive and ability to favour and remote locations. its own retail arm over its competitors.

Structural separation is considered the best solution to this policy problem Australia’s National Broadband Network and is the policy of all major parties. (NBN) was announced in 2009 by the Labor Government. The policy aimed at addressing The original plan was that, as the fibre Australia’s broadband availability and network was rolled out, customers would performance and to facilitate the structural be migrated onto the fibre connection and separation of Telstra by providing an optic Telstra would cease to provide services fibre alternative to its copper access network. over the copper access network, consistent with the statutory formulation of structural The original NBN plan was to reach 93 separation—that Telstra not provide retail per cent of premises with an optic fibre services over an access network that it connection. The remaining 7 per cent of controls. Telstra would then stand on the premises would be served by either a new same footing as other retail providers. Under satellite service or terrestrial fixed wireless the new NBN model, the process is similar. service (that is, a service to a fixed location, like a home, rather than a mobile service). NBN is wholesale only The Coalition won Government in 2013 The NBN is being built and run by a with a policy it said would provide government-owned enterprise, NBN Co sufficient speeds for most users, be (now known as nbnTM). A fundamental policy less costly and faster to build, and setting is that nbnTM provides only wholesale have lower prices for customers. services to retail service providers (RSPs), and does not serve end-users. This policy is set out in legislation so any proposed change would need to be brought before parliament.

131 Uniform wholesale prices This assessment is ongoing. During the course of the new Parliament, A cornerstone of the original NBN policy was the Government will decide how to TM that nbn would charge uniform wholesale implement the Vertigan recommendation prices to RSPs. That meant wholesale about uniform wholesale prices. prices would be uniform for a given service within a technology footprint (for example, all 25 megabit per second services within The original uniform wholesale price policy a fixed wireless area would have the same was not established in legislation, but in a wholesale price). Further, for at least the Statement of Expectations, a non-legislative direction given by shareholder Ministers basic service, the wholesale price would be identical across all technology footprints. to NBN Co in 2010. It is likely that the government would give effect to any changes in this policy area in the same manner. The policy recognised the historical disparities in broadband availability and price between commercially attractive Australia’s broadband performance metropolitan areas and often commercially The Australian Bureau of Statistics’ unviable regional and remote areas. Uniform (ABS) website states that the number of wholesale prices were intended to promote households with access to the internet at uniform retail prices across the country. home increased to 7.7 million in 2014–15, representing 86 per cent of all households In 2013, the Abbott Government initiated (up from 83 per cent in 2012–13). several reviews of the NBN, including three by Dr Michael Vertigan. The Market and According to the authoritative Akamai Regulation Report recommended that the report State of the Internet: 1st Quarter system of uniform wholesale pricing be 2016, Australia’s average peak connection replaced with a pricing structure involving speed is 43.8 Mbps, with a global ranking price caps on all NBN-type services. It stated of 56th (down from a global ranking that the caps need not necessarily be uniform of 30th in the 3rd quarter of 2013). across the country and that an industry levy could be used to subsidise the cost of the provision of services to less profitable areas. Further reading The Government’s response in December 2014 stated: Department of Communication and the Arts, National broadband network The Bureau of Communications Research will undertake an assessment of the NBN Co Limited nbnTM costs of NBN Co’s fixed wireless and satellite services, which serve many Government’s initial response non-commercial parts of Australia, to Vertigan Report, 2014 and provide options to Government for replacing the current opaque NBN Co cross-subsidy embedded in its wholesale access prices with more transparent funding arrangements.

132 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Infrastructure decision making Rob Dossor, Economics

National Land Transport Act 2014 (the Act). The Act gives the Minister wide Key Issue discretion about the investment projects that may be funded. These include: The Commonwealth faces competing demands for the funding  construction of a road or railway in a state of national infrastructure, most or some external territories involving large amounts of money, and requiring difficult decisions  maintenance of a road or railway that around which to prioritise. is part of the National Land Transport Network Many of these decisions are highly  construction of an inter-modal transfer controversial and there have been facility in a state or some external renewed calls for changes to territories and the process.  acquisition or application of technology that will or may contribute to the efficiency, security or safety of transport operations in any state or some external territories. The Commonwealth funds a significant amount of infrastructure covering roads, The Minister may ‘have regard’ to some rail, ports and airports. Development broadly described considerations in deciding of this infrastructure is recognised as whether it is appropriate to approve a being critical to Australia’s economic project. These include any assessments growth and competitiveness across many of the economic, environmental or social sectors, ranging from increasing the costs, or benefits of the project. There is number of shipping containers moved no requirement, however, that a project will through ports, to reducing the travel produce benefits that exceed the cost. time for motorists on urban roads. Infrastructure Australia (IA) was established Infrastructure projects generally involve large in July 2008. One of IA’s functions is to sums of money. In the 2016–17 Budget, for evaluate nationally significant infrastructure example, the Government will spend over proposals (as well as other infrastructure $5 billion on infrastructure projects through as determined by the minister). It is not a the Investment Road and Rail Programme. requirement, however, that IA evaluates all nationally significant infrastructure Current institutional arrangements proposals before the Government provides funding for those proposals. There are few formal requirements around how funding decisions are made by the Commonwealth. Calls for reform A number of projects have attracted To return to the earlier example, the criticism on the basis that a comprehensive Infrastructure Road and Rail Investment assessment was not conducted or Programme is legislated under the made available to the public. For example, in its audit of the approval and

133 administration of the federal funding for rigorous and transparent use of cost- the Victorian East West Link project, the benefit analysis and evaluations, public Australian National Audit Office found: consultations and public reporting of the decision and …neither stage of the East West  the establishment of mechanisms Link project had proceeded fully for the transparent review or audit of through the processes that have been the decision-making process by an established to assess the merits of independent body. nationally significant infrastructure investments prior to the decisions by the Government to approve $3 billion Major party proposals for reform in Commonwealth funding and to pay Before the 2013 election, the Coalition $1.5 billion of that funding in 2013–14. proposed that IA assess infrastructure expenditure exceeding $100 million before The Grattan Institute and the Productivity funding decisions were made. However, Commission (PC) have called for better it did not implement this proposal and did governance arrangements and institutional not expressly take it to the 2016 election. oversight in infrastructure decision making. The Reserve Bank of Australia outlines the Before the 2016 election, Labor committed to importance of rigorous and transparent ensuring that IA would ‘independently [assess] project selection and planning processes. all major infrastructure projects on the basis IA states that ‘instances of publicly of the benefits they provide to the economy, committing to a project before a detailed the way they fit in with existing infrastructure, analysis has been completed and published their commercial viability and their capacity can undercut confidence in government to enhance national productivity.’ Labor decision making…’, and recommends: also committed to ensuring that road projects incorporated smart infrastructure Government [needs] to establish and considered the alternative option of a more rigorous evidence base for using technology to improve the existing infrastructure investment decisions. Key roads, and that IA would administer a $10 steps include: increasing the quality and billion infrastructure financing facility. consistency of long-term infrastructure planning; deepening stakeholder engagement; allocating increased funding for project development work, Further reading such as business cases; improving Productivity Commission Public the transparency of decision-making infrastructure, Inquiry report, and ensuring the consistent delivery Canberra, May 2014. of post-completion reviews. Infrastructure Australia, Australian According to the PC, best practice includes: infrastructure plan, February 2016.

 that decisions are taken in the R Dossor, Infrastructure Australia public interest Amendment (Cost Benefit Analysis  the incorporation of effective processes, and Other Measures) Bill 2014, Bills procedures and policy guidelines digest, 28, 2014–15, Parliamentary for planning and selecting public Library, Canberra, 2014. infrastructure projects, including

134 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Revenue from road use Rob Dossor, Economics Section

The decline in fuel excise revenue is attributed to improvements in fuel efficiency Key Issue of conventionally powered vehicles and the increase in alternatively powered Revenue from the primary road vehicles like electric and hybrid vehicles. user charge, fuel excise, has been This trend can be expected to continue. falling for some time due mostly to improvements in vehicle efficiency. This decline will add pressure for governments to find alternative The pressure to secure other sources of revenue. revenue streams to replace fuel excise presents Governments with an opportunity to design a system However, it also presents opportunities to to replace existing road related design better systems for charging for road revenue charges with one that use that more closely align with the use that solves the revenue decline and individuals make of roads—road use being better reflects individual driver’s use a rare exception to the general proposition of roads, with the added potential that the more we use of something, the to address traffic congestion. more we pay. A feature of stamp duty and registration charges, in particular, is that they are fixed and do not vary with the extent to which a person uses roads.

Decline in road related revenue Absence of strong price signal Public sector road-related revenue A system that puts a price on road use offers primarily comprises state-levied vehicle a tool that can be used to address public registration fees and stamp duty and the policy issues such as traffic congestion. Commonwealth-levied fuel excise and GST. Although few of these charges are hypothecated to road funding, they form a It is estimated that during the morning peak significant part of total government revenue. period, over 20 per cent of Sydney road users travel for discretionary reasons—for example, shopping, recreation or other Fuel excise is the largest source personal reasons—rather than for non- of road-related revenue but it has discretionary work or educational purposes. been falling for some time. In the afternoon that rises to 39 per cent. According to the Bureau of Infrastructure, At the same time, there are no strong price Transport and Regional Development, in signals to provide people with an incentive 2013–14, public sector road related revenue to modify their vehicle use by, for example, totalled $27.8 billion. Fuel excise contributed travelling in off-peak times. Stamp duty and about $10.8 billion or 39 per cent, down registration charges do not vary at all with from about 44 per cent in the early 2000s. use. Fuel excise does vary with use, but few are aware how it is levied (it is about 39.6

135 cents per litre for petrol and diesel), plus Equity effects of road pricing reform it does not vary with time or place, so it is ineffective device for moderating behaviour. In considering these policy options, one of the relevant considerations is the equity effect of the system. Elements of the current Possible solutions system tend to operate against the interests Infrastructure Australia recommends reform of those lower incomes. Fuel excise, for to the whole system; that is, that all existing instance, falls more heavily on those who government road use taxes and charges to drive less efficient vehicles, commute be removed and replaced with ‘direct further and have few alternative commuting charging that reflects each user’s own options. Fuel efficient or alternatively consumption of the network, including the powered vehicles, like electric and hybrid location, time and distance of travel, and vehicles, tend to have initial high costs the individual characteristics of their vehicle which deters low income purchasers. such as weight and environmental impact.’ The equity effects of road pricing reform This system is also recommended by are complex and uncertain, however. For Infrastructure Partnerships Australia, example, lower income workers—generally which says it ‘offers strong opportunities having longer commuting distances, fewer to rationally price access to, and usage alternative means of transport and less of, the road network—providing a flexible work times—would likely continue mechanism to fund network additions, to pay higher road use charges. However, fund maintenance and improve network the reduction of discretionary travel by performance by aligning supply and others in peak times could benefit those demand.’ Australia motoring lobby same people through reduced travel group, the Australian Automobile times. The interactions are complex Association is in favour of this reform. and deserve close consideration.

Other policy options include the introduction of zone pricing, particularly Further reading in cities, and corridor-specific charging. M de Percy, ‘Road users Zone pricing must pay, sooner rather than later’, The Conversation, Zone pricing (also known as a congestion blog, 16 June 2015. charge or tax) charges road users to use certain road systems. Zone pricing has broad Deloitte, Road pricing and transport support from economists, and has been infrastructure funding: reform pathways implemented in a number of places, notably for Australia, Discussion paper, 2013. in London, Singapore and Stockholm. Infrastructure Australia, Australian Corridor-specific charging infrastructure Plan, February 2016. Corridor-specific charging, works in the same way as city toll roads. A fee is levied on users who access a particular road, much the same as a toll road, except the corridor may be publicly, rather than privately, owned.

136 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Financing infrastructure by value capture Rob Dossor, Economics Value capture mechanisms Key Issue There are many commercial and legal arrangements that can be characterised as Land value capture is a method of value capture. The Bureau of Infrastructure, financing investment in infrastructure. Transport and Regional Economics (BITRE), however, identifies four types: Most recently, it is seen by its proponents as the key to developing Tax increment financing (TIF) the mega-project that is the east coast high speed rail. This is TIF captures value through taxes due, at least in part, to the Prime levied on property value. Minister’s ‘plans for a new approach to infrastructure funding’. Value Under this approach, a ‘TIF zone’ is capture features prominently in the established in the vicinity of proposed Government’s Smart Cities Plan. infrastructure, where property values are expected to rise. Pre-investment, or base Value capture describes a range of property values, in the zone are determined financing mechanisms that ‘capture’ by the government, as is base tax revenue. some of the increase in property values generated from transport When property values rise in the TIF zone due infrastructure improvements, for the to infrastructure investment, the increased tax purpose of funding that investment. revenue above the base rate is directed to re- paying loans used to finance the investment. Value capture as a financing method is not a new idea but its explicit use in TIF was developed in the United States in the Australia for large-scale government- 1950s as a policy mechanism to invigorate sponsored projects appears set depressed areas. It is now more widely to become more common. used, including for funding infrastructure necessary for population growth.

In recent years, however, its use has slowed. Improvements in transport infrastructure Several academic reviews have called into tend to cause property prices to rise question its effectiveness. Some state, for due to improvements in accessibility. example, that growth in TIF zones often comes at a cost to surrounding areas. Also, while generally generating a ‘solid Value capture seeks to capture some of and robust’ revenue base, TIF zones the increase in value that would otherwise may not result in increased business accrue to the (usually private) property owner. activity or a rise in property prices. By capturing some of this value, only those who directly benefit from the infrastructure will contribute to it, rather than all taxpayers effectively subsidising the value increase.

137 Betterment tax Joint development Betterment taxes, in their most common Joint development covers several kinds of form, are taxes on property owners arrangements between government agencies considered to be direct beneficiaries of and private firms. A common example is an infrastructure investment. They are usually arrangement for the redevelopment of a train based on unimproved capital value. station under which the Government grants a private firm the right to develop the site and The Henry Tax Review said that betterment surrounding land in return for a contribution taxes must ‘isolate the increase in value to the redevelopment of the train station. attributable to the zoning decision or the building of infrastructure from general land Other things to consider price increases at the local level’. According to Anastasia Roukouni and Francesca Not all investment in transport Medda of University College London, infrastructure causes property prices ‘betterment tax is considered an equitable to rise. Some relevant factors are: and efficient levy due to the fact that it can recover the increased value on private land  There may be a negative relationship if assets accrued with transport investment’. a transport line runs through or near an industrial area. Betterment taxes have a long history  The closeness of a property to the actual in Australia. They contributed to the line may reduce the benefit (due to noise funding of the Sydney Harbour Bridge, and disturbance). Melbourne’s City Loop rail system and  Properties in high crime areas may the Gold Coast Rapid Transit Light Rail. not see the growth in values which may otherwise be associated with Transaction taxes infrastructure provision. Transaction taxes, such as capital  There may be little appreciation in gains tax (CGT) and stamp duty, are an prices if development does not increase existing form of value capture. CGT, a accessibility (for example, when a light rail Commonwealth tax, is a tax on the difference line replaces a rapid bus line). in the price of a property and the price received when it is sold (except when the property is the seller’s main residence).

Stamp duty, on the other hand, is a state tax levied on the purchase of certain assets, including property. Stamp duty has been heavily criticised, with the Henry Tax Review, for example, stating:

…stamp duties are poor taxes. As a tax on transferring land, they discourage land from changing hands to its most valuable use. Stamp duties are also an inequitable way of taxing land and improvements, as the tax falls on those who need to move.

138 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Unconventional gas Rowan Drinkwater, Science, Technology, Environment and Resources

Figure 1: The geology of natural gas resources Key Issue The development of coal seam gas (CSG) and exploration for other unconventional gas sources has been highly controversial. This controversy is focussed mainly on environmental impacts and land access issues. This brief outlines some of the key terms and concepts underlying the debate.

Source: US Energy Information Administration website

What is unconventional gas? Australia’s main CSG projects are located Natural gas is combustible gas that is formed in Queensland and New South Wales (see and held in underground deposits. This gas Figure 2). There are also significant potential is composed mainly of methane—up to 98 volumes of shale and tight gas, across per cent—with varying amounts of other all states and territories except the ACT, trace gases depending on how and where with the largest basins located in Western it is formed. Some sources of natural gas Australia, the Northern Territory and in the are called ‘unconventional’ because they Cooper Basin, which straddles Queensland are more difficult to extract and require and South Australia. States and territories additional technology or effort beyond that are all at different stages in developing their required for more ‘conventional’ gas. regulatory frameworks for shale and tight gas, but these industries are still emerging, with preliminary exploration currently underway. The different types of unconventional gas, and the naming conventions, vary depending on their geological origin. How is it different to conventional There are three main types. CSG—or gas? coalbed methane—is found in shallow coal seams. Tight gas is found in sandstone From a consumer perspective unconventional layers that are not sufficiently porous—or gas may seem practically identical to too ‘tight’—for the gas to flow through conventional sources of natural gas, but and hence trap the gas. Shale gas is there are a few important differences. found in shale layers (see Figure 1). Most sources of conventional gas are located Unconventional gas production, almost offshore, while many onshore sources are exclusively from CSG, from 2011–12 not located near other land users and local accounted for about 13 per cent of communities. In contrast, CSG developments all gas production in Australia. are often close to, or even co-located with other industries, such as agriculture. In addition CSG developments can be located close to regional towns and cities.

139 Figure 2: Australia’s coal seam gas reserves—in petajoules (PJ)—and associated infrastructure

Source: Office of the Chief Economist,Review of the socioeconomic impacts of coal seam gas in Queensland 2015

Co-location at times has resulted in conflict in order to re-open natural fractures between landowners and resource interests. and create pathways for gas to flow.

In addition, the extraction of unconventional Hydraulic fracturing, or ‘fracking’, has gas typically requires more wells and more become synonymous with CSG production. access roads and pipelines. This means more However, this is somewhat of a misnomer, land is needed than for conventional gas as fracking is not always used in CSG developments. Significant volumes of water production in Australia. Of all the CSG wells are also produced through the CSG extraction in Australia, fewer than 10 per cent have process. This water contains salts and other been hydraulically fractured, but this number contaminants that need to be treated at the may increase over time. Hydraulic fracturing surface and used or disposed of appropriately. also requires significant volumes of fresh water—typically in quite dry areas—which For shale and tight gas, hydraulic fracturing can present its own challenges and risks. is usually required to enable gas production. Hydraulic fracturing is a process where Consequently, these projects can fluid and sand is injected at high pressure often be more complex and costly than conventional gas ventures.

140 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Why were these resources The water trigger and the IESC developed? The regulation of onshore gas resources In Queensland, gas production from the is primarily the responsibility of states and two main CSG basins—Bowen and Surat— territories. However, in 2013, the Australian began in 1998 and 2005 respectively. Government amended the Environment Production from these sources began in part Protection and Biodiversity Conservation Act as a result of the reduction of conventional 1999 to require CSG and large coal mining gas production from existing fields. developments to obtain Commonwealth approval where they would have a The production also coincided with a ‘significant impact’ on water resources. Queensland government policy in place at This is known as the ‘water trigger’. the time that required up to fifteen per cent of electricity to be sourced from gas-fired This Commonwealth approval is separate to generation. This policy, in part designed state approvals and must take into account to reduce the state’s greenhouse gas advice from the Independent Expert Scientific emissions, also helped create a fixed gas Committee on Coal Seam Gas and Large demand in the initial stages of development. Coal Mining Development (IESC). Future shale Later expansion of the CSG industry has gas or tight gas projects in Australia will not be been due primarily to the Liquefied Natural regulated under this trigger as it only applies Gas (LNG) export market. The high export to CSG and large coal mining developments. value of LNG also precipitated the exploration The water trigger is currently under review. of shale gas resources in other states. The review report was due to the Minister for the Environment by 31 March 2016. Risks and concerns There have been a number of concerns raised about the risks of unconventional Further reading gas development including: human and M O’Kane, Final Report of the environmental health impacts, threats to Independent Review of Coal Seam water resources, air quality concerns, land Gas Activities in NSW, New South use competition and social impacts. Wales Chief Scientist and Engineer, Sydney, September 2014. Comparing the impacts observed in Australia with overseas industries is challenging Department of Industry, Innovation because of the influence of local conditions and Science, Energy in Australia on the potential risks. However, issues 2015, Canberra, January 2016. around well integrity, environmental and human health risks as well as more general Select Committee on Unconventional concerns have been found to be similar. Gas Mining, Interim Report, Canberra, 4 May 2016. The scarcity of baseline environmental data has also hindered efforts to understand the R Drinkwater, ‘Coal Seam Gas: potential impacts of CSG developments and the Commonwealth’s regulatory establish causal links between certain activities role’, FlagPost, Parliamentary and observed impacts. Research into these Library blog, 13 July 2016. impacts and their management is continuing.

141 Radioactive waste management Sophie Power, Science Technology Environment and Resources

(HIFAR) at Lucas Heights in Sydney. HIFAR operated for around 50 years but was retired Key Issue in January 2007 and replaced by the OPAL reactor. During its life, HIFAR supplied millions After a history of unsuccessful of doses of nuclear medicine and provided attempts to find a suitable site, the neutron beams to study the structure of Commonwealth has now identified a materials. In the 1990s, the Australian possible new site in South Australia and French Governments entered into for a national radioactive waste agreements for France to reprocess HIFAR’s management facility. A recent Royal spent nuclear fuel. Reprocessing removed Commission has proposed a separate residual uranium and plutonium and made waste facility, also in South Australia. the waste safer to manage. This reprocessed spent fuel was returned to Australia at the end of 2015. This waste is now being Radioactive waste in Australia temporarily stored by ANSTO at Lucas Heights until a national facility is completed. Australia’s radioactive waste is produced by the use of radioactive materials in scientific Australia has accumulated almost 5,000 research and industrial, agricultural and cubic metres of radioactive waste (around medical applications. This includes the the volume of two Olympic size swimming operation of the Open Pool Australian pools). This does not include uranium mining Lightwater (OPAL) research reactor at the wastes, which are disposed of at mine sites. Australian Nuclear Science and Technology Organisation (ANSTO) in Sydney. Australia does not have a central facility for the storage or disposal of radioactive Radioactive waste is classified into waste, which is currently held at more categories—including low, intermediate than 100 locations around Australia. Many and high—based on how much radiation organisations are using storage areas that it emits and for how long. Low-level waste were not designed for long term storage contains small amounts of radioactivity of radioactive waste. For example, under and generally requires minimal shielding international safety standards, long term during handling, transport and storage. waste management facilities should be in Intermediate-level waste emits higher levels geologically stable areas with low population of radiation and requires additional shielding. density and not prone to flooding.

Australia produces mostly low-level waste Past attempts to site a national waste (laboratory items such as paper, plastic, repository, including near Woomera in South gloves and filters) and some intermediate Australia and Muckaty in the Northern radioactive waste (for example, from Territory, were unsuccessful, due to the production of nuclear medicines). community concern, and resistance from Australia does not produce any radioactive state governments and affected local and waste classified as high-level. Indigenous communities. This time, however, site selection has been underpinned Some of Australia’s waste comes from by a voluntary nomination process. the former High Flux Research Reactor

142 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Proposed national facility South Australian Royal Commission The process for selecting and establishing In May 2016, the South Australian Nuclear the Commonwealth’s national radioactive Fuel Cycle Royal Commission released its waste management facility is set out in the final report. One of its 12 recommendations National Radioactive Waste Management was that the South Australian Government Act 2012 (Cth) (NRWM Act). The proposed ‘establish used nuclear fuel and intermediate facility will be for long-term disposal and level waste storage and disposal facilities in storage of Australian’s radioactive waste. South Australia’. The Commonwealth has Under the Act, any new site for such a committed to ‘seriously consider’ this report. facility must be voluntarily nominated. The proposed facility would require The current process began in May changes to South Australian legislation 2015, when 28 sites were nominated by and permits and approvals under landholders around Australia. These sites relevant Commonwealth legislation. were evaluated against technical, economic, social and environmental criteria. Six sites Although both proposed facilities may be were then shortlisted. Public consultation located in South Australia, they are separate. on those sites closed in March 2016. A key difference is that the Commission’s proposed facility would manage also On 29 April 2016, the Commonwealth international used nuclear fuel and waste. In announced it had identified a possible site contrast, the NRWM Act does not allow the in Barndioota, South Australia. This site storage of foreign-generated or high-level has already proved to be controversial. A radioactive waste at Commonwealth facilities. $2 million ‘Community Benefit Package’ was also announced to provide grants for projects in communities in and around Barndioota. Further community consultation Further reading will now occur along with more detailed site studies. The Government has stated that Australian Nuclear Science and ‘agreement with the community on hosting Technology Organisation (ANTSO), the facility is essential’ and it ‘will not impose Management of Radioactive Waste the facility on an unwilling community, noting in Australia, January 2011 no individual or group has a right of veto’. M James, A Rann and I Holland, The facility is scheduled to be in operation by ‘Radioactive waste and spent nuclear 2020 and will require licences and approvals fuel management in Australia’, under other Commonwealth legislation, Background note, Parliamentary such as the Environment Protection and Library, Canberra, 21 July 2011 Biodiversity Conservation Act 1999 and the Australian Radiation Protection and Nuclear Nuclear Fuel Cycle Royal Safety Act 1998. Australia’s regulatory Commission (South Australia), South framework for nuclear activities is based on Australian Nuclear Fuel Cycle Royal standards and obligations under a number Commission Final Report, May 2016 of international conventions. This includes, for example, the Joint Convention on the Safety of Spent Fuel Management and on the Safety of Radioactive Waste Management.

143 144 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT AUSTRALIA IN THE WORLD

Image ID: 92467144, Copyright: hxdbzxy, Image ID: 91705817, Copyright: Anton Balazh 145 Australia and the South China Sea: debates and dilemmas Dr Cameron Hill, Foreign Affairs, Defence and Security

perspective, these are all strategic behaviours that have been exhibited by previous great Key Issue power aspirants, including the US. Intensifying disputes in the South Whether coming to terms with China’s China Sea present an acute rise should involve an element of genuine challenge to Australia’s key interests strategic ‘accommodation’, as opposed and relationships in the Indo-Pacific. to simply ‘engagement’, is a question that Australian policymakers often appear reluctant to publicly canvass. In response to recent Chinese actions in the South China Sea, The South China Sea disputes have entered Australia’s current strategy might be best a dangerous new phase in the last several described as one of ‘dissuasion’—working years. Alongside China’s unprecedented with others to convince China of the costs construction and fortification of artificial of unilateral actions, while simultaneously features, incidents at sea involving using engagement to reinforce the benefits clashes between various combinations of of the existing, US-led regional order. fishermen, coast guards and, occasionally, naval assets, are occurring on a routine Even though the pay-offs thus far might basis. With the nationalist credentials of appear slight, the alternatives are perhaps authoritarian and democratically-elected even less appealing. Whether this calculus claimant governments at stake, the potential would hold in the face of even more forceful for miscalculation and escalation (whether Chinese actions—such as Beijing proclaiming inadvertent or intended) is growing. an Air Defence Identification Zone in the South China Sea—or provocative moves Australia’s aspirations for a viable ‘rules- by other claimants, remains to be seen. based’ strategic order in the Indo-Pacific are under significant pressure as regional powers contest the very nature and scope of United States: ‘abandonment’ or these rules via the disputes. Key Australian ‘entrapment’? interests and relationships are being tested. The longstanding alliance with the US is routinely invoked as the foundation of China: a revisionist power? Australia’s security. The South China Sea disputes have forced a sharper consideration As Australia’s largest trade partner since of the benefits and risks of the alliance and 2007, China’s rise and pursuit of its ‘legitimate the conditions under which these could interests’ have been supported by successive manifest. This has been most prominent Australian governments. A key question in debates surrounding whether Australia emerging from China’s recent actions in the should replicate several recent ‘freedom of South China Sea is where do these ‘legitimate navigation operations’ (FONOPs) undertaken interests’ begin and end—do they include by the US Navy through the contested the establishment of ‘spheres of influence’, waters; in particular, whether Canberra the revision of existing regional and global should authorise naval FONOPs within norms, and the right to resort to unilateral the 12-nautical-mile limit of China’s newly action to achieve these ends? From Beijing’s constructed artificial islands. China has

146 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT recently intensifiedwarnings of ‘serious of these divisions, some ASEAN claimants measures’ should Australia seek to challenge have resorted to appeals to international Beijing’s claims though naval operations. arbitration (which China says it will not abide by), as well as more traditional power The FONOPs debate reflects a dilemma balancing strategies—upgrading alliances common to all alliances—the alternating and military cooperation, and intensified anxiety between the fear of ‘abandonment’ acquisition of advanced maritime weaponry. by an ally in the event of a conflict, versus the fear of ‘entrapment’ in an ally’s conflict A former senior Australian official has that is contrary to one’s own interests. Whilst warned that ‘it is not in Australia’s interest for some argue that Australia’s interests demand ASEAN to be divided into different camps’. FONOPs of the kind conducted by the US, ASEAN’s inability to collectively endorse the others counter that such actions could draw international Permanent Court of Arbitration’s the ire of China, with whom Australia also July 2016 ruling against China’s claims seeks to maintain a good relationship. has prompted some experts to argue that the organisation must reform its emphasis These anxieties persist. The result has been on consensus-based decision-making. a form of ‘strategic ambiguity’ in which Australia has communicated its intention Looking ahead… ‘continue to traverse the water and the skies around the South China Sea in accordance Facing difficult choices in its relations with with international laws’ without saying China and the US and the prospect of a whether it would breach the limit of any divided ASEAN, Australia is likely to pursue claimed Chinese boundaries. Again, whether complementary initiatives to advance its this position could withstand a significant maritime security interests. These could escalation of the conflict remains to be seen. include intensified ‘mini-lateral’ cooperation with other non-claimant states such as India, Japan, Singapore and Indonesia, all of whom ASEAN: a house divided? share misgivings about China’s ambitions and Efforts by the Association of Southeast actions. Indonesia will likely be a focus given Asian Nations (ASEAN) to engage both Jakarta’s increased concerns with recent China and the US in multilateral institution- Chinese incursions into its maritime domain. building through venues such as the East Australia may also face continued calls to Asia Summit are a key focus of Australia’s reconsider its approach to its maritime border diplomatic and strategic planning. However, issues with East Timor. In the meantime, the failure to produce a long-awaited ‘code the risk of conflict continues to rise. of conduct’ for managing the disputes bodes poorly for multilateralism. Indeed, some contend that China has deliberately delayed the code in order to ‘buy-off’ non- Further reading claimants such as Cambodia and Laos US Center for Strategic and through increased aid and investment while International Studies, Asia Maritime ramping up construction in disputed areas. Transparency Initiative, website.

There is now a view that ASEAN is B Hayton, The South China Sea: irrevocably split on the South China Sea the struggle for power in Asia, disputes following several recent failures to Yale University Press, 2014. agree on consensus language. In the face

147 China’s ‘One Belt, One Road’ initiative Geoff Wade, Foreign Affairs, Defence and Security

On land, the plan is to build a new Eurasian land bridge and develop the Key Issue economic corridors of: China-Mongolia- Russia; China-Central Asia-West Asia; The ‘One Belt, One Road’ (OBOR) the China-Indochina peninsula; China- initiative is a Chinese economic Pakistan; and Bangladesh-China-India- and strategic agenda by which Myanmar… On the seas, the initiative will the two ends of Eurasia, as well focus on jointly building smooth, secure as Africa and Oceania, are being and efficient transport routes connecting more closely tied along two routes– major sea ports along the belt and road. one overland and one maritime. Supporters suggest that the initiative Formally, OBOR emphasises five permits new infrastructure and key areas of cooperation: economic aid to be provided to needy economies. Critics claim that it facilitates Chinese economic and  coordinating development policies strategic domination of the countries  forging infrastructure and facilities along these routes. OBOR provides networks a global context for China’s growing  strengthening investment and trade economic links with Australia. relations  enhancing financial cooperation and  deepening social and cultural exchanges. The ‘One Belt, One Road’ (OBOR) initiative is a foreign policy and economic strategy But it is infrastructure such as railways, of the People’s Republic of China. The roads, ports, energy systems and term derives from the overland ‘Silk Road telecommunications networks which Economic Belt’ and the ‘21st-Century is receiving most attention. Maritime Silk Road’, concepts introduced by PRC President Xi Jinping in 2013. The overland ‘Belt’ involves the creation of These are the two major axes along which an economic and trade corridor extending China proposes to economically link from China’s west through Central Asia, and Europe to China through countries across finally to Europe. The first step is to further Eurasia and the Indian Ocean. The OBOR link Central Asian states to the Chinese initiative also links to Africa and Oceania. economy, while the longer-distance initiatives In March 2015, the PRC issued an action include railway connections between plan for realising this initiative. While the China and Europe. The ‘Belt’ initiative calls OBOR initiative is being coordinated by for the integration of the Eurasian land China’s National Development and Reform mass into a cohesive economic area. Commission, it also heavily involves the ministries of Foreign Affairs and Commerce. For the maritime ‘Road’, China’s development of ports and hubs across the Indo-Pacific The initiative envisages the building is a key aspect of the initiative. Purchase of six major economic cooperation and construction of port facilities and corridors and several key maritime associated economic zones in Australia, pivot points across Eurasia: Malaysia, Indonesia, Bangladesh, Sri Lanka,

148 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Myanmar, Pakistan, Kenya, Tanzania, Hong Kong Trade Development Council has Oman and Djibouti are intended to provide also arranged visits to Thailand for Chinese China with maritime access and economic investors to promote OBOR investment. benefit across the Indian Ocean. These will connect to Piraeus, Greece’s major Singapore is also essential to promoting port, which has been bought by Chinese offshore economic activities by Chinese shipping group COSCO and which will allow entities. The China Construction Bank direct access to the markets of Europe. signed an MOU with International Enterprise Singapore in April 2016, providing S$30 Foremost among the key projects which billion in financial support to Singaporean have been promoted as focal parts of the and Chinese companies jointly investing in OBOR initiative are the China-Pakistan OBOR projects. A new centre in Singapore Economic Corridor which provides China’s to provide project financing and related western provinces with access to the services to projects is also being planned. Indian Ocean through the Pakistani port of Gwadar, and the Bangladesh China India While China claims that OBOR will ‘include Myanmar Corridor, which will give Yunnan 65 countries, 4.4 billion people and about Province access to the Bay of Bengal. 40 percent of global GDP’, the current realities are much more pedestrian. China Funding for the initiative is a key issue. has reportedly established 75 overseas China’s policy banks are providing massive economic and trade cooperation zones in funds for Chinese enterprises to operate 35 countries as part of the OBOR initiative. along these axes, while further funding will OBOR, however, remains inchoate and still be provided through the Asian Infrastructure strives for external endorsement and support. Investment Bank (AIIB), funded by countries globally. The AIIB was created precisely to service projects under OBOR. The projects China’s other OBOR interests funded by the first loans issued by AIIB It is clear that China has broader uses were in Indonesia, Bangladesh, Pakistan for the increased influence it hopes to and Tajikistan, all countries which China is enjoy through the OBOR initiative. trying to include within its OBOR initiative. The Bank of China has clearly noted that Hong Kong is also being tapped. In his policy OBOR is intended to make the Renminbi address in January 2016, the Chief Executive the main trading and investment currency of the Hong Kong Special Administrative in the countries involved. The expansion Region, CY Leung, underlined that Hong Kong of Chinese banks into new OBOR markets would play an active financial role in OBOR to serve the globalisation of the Chinese and would facilitate educational exchanges economy is also being promoted. OBOR between Hong Kong and ‘OBOR countries’. is further intended to facilitate online A ‘Hong Kong Belt and Road Summit’ was retailing and the collection and use of big also convened in May 2016 to allow Zhang data across OBOR countries. China has Dejiang, Chairman of the Standing Committee also been stressing the role of Overseas of the National People’s Congress, to outline Chinese in promoting OBOR projects. ‘Hong Kong's Four Unique Advantages’ as a hub for OBOR projects. Then in July 2016, The expansion of China-controlled the Hong Kong Monetary Authority launched telecommunications networks is an important the Infrastructure Financing Facilitation aspect of OBOR. CITIC Telecom CPC Office, a new entity to facilitate fundraising for recently acquired Linx Telecommunications, projects related to the OBOR initiative. The which services Russia, Kazakhstan and

149 the ‘Stan’ region, the Baltic Sea and OBOR. Russia needs funding assistance Eastern Europe. This will provide China for developing its resources and appears with telecommunications services across to see OBOR as an avenue for this. much of its targeted ‘Belt’ region. Visits by journalists from OBOR countries to Western reactions have been mixed. China, and publishing arrangements with Business people are generally positive, newspapers abroad are intended to promote while strategists have been less sanguine. China’s views over a broader sphere. In Europe, China has talked up OBOR’s possible integration with the EU’s €315 billion Mining and energy projects are also central to investment plan (the Juncker plan). China is this endeavour, with China widely purchasing simultaneously pushing for an EU-China FTA mines as well as generation and transmission that would make it easier for PRC companies projects across OBOR states. Chinese to invest in European markets. Central and companies now own almost a quarter of Eastern Europe are a major focus for OBOR Kazakhstan’s oil production, while over programs, with the Czech Republic, Serbia $15 billion of oil, gas and uranium deals and Poland receiving major financial inputs. have recently been signed with Uzbekistan. Australia and OBOR And in this year’s white paper on its satellite navigation and location service, Within Australia, enterprises, banks and law China says that it plans to launch another firms are promoting the OBOR initiative as an 30 Beidou satellite navigation system economic opportunity for the country and, satellites over the next five years, with with Chinese endorsement, an Australia- the first 18 satellites being launched China OBOR Initiative has been established before 2018 to cover OBOR countries. to promote Chinese engagement in the Australian economy. China is also utilising the concept to promote its growing economic Reactions engagement with northern Australia. Reactions to the OBOR proposal have Another avenue for encouraging Australia’s varied globally. Ethnic Chinese business further engagement with OBOR is China’s figures in Southeast Asia and their funding and support of various related local political representatives have generally academic conferences and seminars. been enthusiastic about the business possibilities. Malaysia has been active in Criticisms accepting and promoting the idea, with a 162-member Malaysian delegation Not all reactions to OBOR have been heading to Beijing in July 2015 to enthusiastic. Former World Trade participate in an OBOR dialogue. Organization chief, Supachai Panitchpakdi, has stated that the OBOR initiative and, Pakistan and Sri Lanka have also been specifically, its projects along the Mekong particularly welcoming of Chinese capital and River, all serve China’s own interests. infrastructure projects, as have the various Central Asian states. Vietnam, meanwhile, On the economic front, China has been has expressed grave doubts about the criticised for using its massive financial assets initiative. With few exceptions, India has been to dominate smaller economies through stridently suspicious of the overall OBOR long-term control of infrastructure, natural initiative and has repeatedly expressed its resources and associated land assets, and concerns about China’s growing economic through offering less than desirable credit and strategic power being pursued through terms for infrastructure loans. Further, the

150 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT ‘production capacity cooperation’ which Chinese nation’. Such revival requires a China lauds as an integral aspect of OBOR, restored global position and identity for often involves the simple transfer of Chinese- China. Earlier iterations of OBOR involved owned production capacity to countries the catch-phrases ‘common development’ where production is cheaper and markets and ‘win-win cooperation’ to characterise are closer. Such processes can also result the relations between China’s development in China exerting some control over local and that of its neighbours. China also markets, labour and export policies. promoted a ‘China-ASEAN community of shared destiny’ (中国-东盟命运共同体). But Despite the claimed economic nature of the these smaller initiatives have burgeoned into OBOR agenda, critics see the initiative as the Eurasia-wide OBOR, bringing into play being simultaneously a strategic program. the PRC’s massive capital reserves—both China clearly portrays OBOR as both being state and private—achieved through 40 premised on and further validating China’s years of rapid economic growth, and offering claims to the islands of the South China Sea, an outlet for the vast excess production while on the other side of the Indian Ocean, capacities which exist today in China. Djibouti is providing China with both a trade port as well as its first overseas military Regardless of the credence which one base. It has been repeatedly noted in China assigns to the various interpretations of that OBOR is also intended as a regional the OBOR initiative, progress thus far security mechanism, and the future role of makes it clear that as Australia becomes the People’s Liberation Army in protecting increasingly tied economically with China, China’s OBOR facilities abroad has been there is a need to maintain a close watch widely discussed. The two ‘economic on the progress of the OBOR initiative corridors’ now being developed provide China globally. It also suggests that Australia with direct access to the Indian Ocean. needs to adopt a more economically and strategically prudent attitude in determining Broader concerns relate to the longer-term how the Australia-China economic aims of China, with the possibility that the relationship is to further develop. OBOR agenda is aimed at creating a Eurasia- wide, China-led bloc to counter the US. At the June 2016 Shangri-la Dialogue in Singapore, Professor Xiang Lanxin, director of the Centre Further reading of One Belt and One Road Studies at the The Economist Intelligence Unit (EIU), China National Institute for SCO International Prospects and challenges on China’s Exchange and Judicial Cooperation, spoke ‘one belt, one road’: a risk assessment of OBOR as being an avenue to a ‘post- report, EIU, London, 2015. Westphalian world’. As such, some see this initiative as a profound challenge to the current global political and economic status quo. WT Wilson, ‘China’s huge ‘One Belt, One Road’ initiative is sweeping Central Asia’, The Conclusion National Enquirer, 27 July 2016. China’s wielding of this economic statecraft strategy derives from several collocations. On RD Blackwill and JM Harris, War the political front, since late 2012, President by other means: geoeconomics and Xi has been promoting the ‘Chinese dream’ statecraft, Belknap/Harvard University (中国梦), involving the ‘great revival of the Press, Cambridge (Mass.), 2016.

151 The 19th National Congress of China’s Communist Party Stephen Fallon, Foreign Affairs, Defence and Security

The PSC is China’s supreme decision- making body and is currently comprised Key Issue of seven men, among whom Xi Jinping is supposedly first among equals. Given the consequences for Australia of Chinese economic and strategic decision-making, it is timely to This institutionalised process was established consider China’s forthcoming 19th and refined by Chinese leaders of the post- Party Congress, scheduled to take Mao reform era in order to prevent power place in October or November 2017. from becoming concentrated in the hands of one individual. Mao’s leadership, punctuated by disasters such as the Great Leap Forward, the Great Famine and the Cultural Revolution, provided ample evidence of the How does it work? dangers inherent in a dictatorship buttressed by a cult of personality. By promoting The National Congress of the Communist limited terms and collective leadership Party of China takes place every five years, through the PSC, the Party has sought to bringing together approximately 2,200 Party avoid the emergence of another Mao. delegates from across the country. Some delegates are selected in provincial elections while others are drawn from bodies such However, since Xi ascended to the presidency as state-owned enterprises, the military (he is also the General Secretary of the and financial institutions. The role of the Communist Party of China), some critics Congress is to elect the Central Committee have argued that he has begun to construct and approve the General Secretary’s outline a cult of personality reminiscent of that of the Party’s agenda for the next five wielded by Mao. He has taken command of years. However, given the opaque nature several small working groups—affording him of Chinese politics, it is difficult to assess great influence over policy formulation—and how decisions announced at the Congress appears to have marginalised the Premier, Li are reached. It is commonly assumed that Keqiang, who would typically be responsible most, if not all, key decisions are made for economic policy but whose leading role by senior leaders before the Congress. in this sphere has been eclipsed by Xi.

Xi has also prosecuted an anti-corruption Background campaign that has ensnared both ‘tigers The 18th Congress, held in 2012, anointed and flies’, powerful officials and lowly Xi Jinping as China’s leader and it is functionaries. Among the most notable of expected that he will serve for a second those convicted of graft are Bo Xilai, former five-year term, scheduled to conclude party chief of the city of Chongqing, who in 2022. According to convention, Xi sought to parlay his popularity into a position will then be replaced by a new younger on the PSC; Zhou Yongkang, a former PSC ‘sixth generation’ leader who will have member responsible for internal security; been promoted to the Politburo Standing and in July 2016, Ling Jihua, a close advisor Committee (PSC) in next year’s Congress. to Xi’s predecessor, Hu Jintao, and head of the United Front Work Department.

152 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Though corruption is endemic in China and Supporting the thesis that no heir apparent widely recognised as a threat to the Party’s will be appointed, the analysis and advisory legitimacy, many believe that Xi has used consultancy, Oxford Analytica, has corruption as an excuse to purge opponents. highlighted that the 2012 Party Congress A February 2016 Economist article, promoted two sixth generation figures to however, noted that recent prosecutions the Politburo (one level below the PSC). have tended to focus on individuals who The elevation of these up-and-coming are not linked to identifiable factions. leaders, Hu Chunhua and Sun Zhengcai, was seen as preparing the ground for them Nevertheless, Xi’s concentration of power, to replace Xi and Li Keqiang at the 2022 growing cult of personality and penchant Party Congress. However, both are linked for eliminating rivals through corruption with the Communist Youth League (CYL) trials has not gone unremarked in China. faction, a network that Xi has marginalised. In March 2016, a letter was published on He has criticised the CYL, describing it a government-linked website condemning as ‘paralysed from the neck down’, cut Xi. Signed by ‘loyal Communist Party its funding and slashed staff. It therefore members’, it criticised him for abandoning seems unlikely that he would welcome the the principle of collective leadership, promotion of Hu and Sun to the PSC. concentrating power in his own hands and called upon him to step down. Though Moreover, Xi’s anti-corruption campaign the letter was quickly removed from the has destroyed the convention that new internet, it did lead to a number of arrests. leaders do not persecute their predecessors, family members and associates. It is What to look out for plausible Xi may fear that stepping down could enable the incoming leadership to This is the environment in which the 2017 investigate him and those linked to him. Congress will be held. Observers will parse its The notion that it may be advantageous announcements for clues about Xi’s intentions. to extend the duration of his leadership If he does wish to overturn the conventions in order to cement a faction loyal to his that have guided China’s senior leaders, interests will likely have occurred to him. one indication would be a failure to promote to the PSC any candidates who could be groomed to succeed him when his second Why does this matter to Australia? term ends (traditionally such future leaders are The political direction of China matters to selected by the current General Secretary’s Australia because of the strong economic predecessor). If no such candidate is relationship between them. China buys promoted, it may indicate that Xi has amassed Australia’s resources, invests large sums in sufficient power to ignore Party conventions. its property market and is a lucrative source of foreign students for Australian universities. Academic Willy Lam has argued that it is no Meanwhile, its foreign policy is becoming secret that Xi wishes to buck the tradition of increasingly assertive and promotes norms having his predecessor pick his successor, contrary to those long-espoused by Australia. and is grooming his own protégés. That they lack sufficient stature to be promoted Australia therefore has a profound interest in to the PSC may, Lam contends, be a the kind of leader Xi seeks to become. The convenient excuse to delay handing over forthcoming Congress may demonstrate the baton for at least one additional term. whether Xi will be bound by convention or chart a bolder, less predictable path.

153 External powers in the Pacific: implications for Australia Dr Cameron Hill, Foreign Affairs, Defence and Security

China’s interests in the Pacific includeport access, fisheries, natural resources and, Key Issue more recently, deep sea exploration. They also include garnering support for Beijing’s The international relations of position on core interests such as ‘one the Pacific have become more China’ and the South China Sea disputes complex as a wider array of (see separate brief). Both PNG and Vanuatu external powers pursue diverse have recently expressed positions on the interests and increased influence. latter that closely align with those of China.

Russia For reasons of geography, size and history, Russia’s contemporary interests in the South Australia has long been recognised as Pacific stretch back to the Soviet era and the having a leadership role when it comes to Cold War, during which Moscow’s Pacific advancing the prospects and priorities of its Fleet was deployed across the wider region. Pacific Island neighbours. Whilst Australia Although Russia’s current interests and and New Zealand, alongside the US, influence are more modest, it has stepped France, the EU and Japan, remain the most up its Pacific engagement in recent years. significant security, trade and aid partners Russia has increased its military presence for most Pacific countries, a wider range of in the region, including through plans to external powers are playing a bigger role in strengthen its Pacific Fleet and several shaping the region’s international relations. recent high-profile deployments of military assets. Some analysts have speculated Pacific Island countries are leveraging this that over the longer term, Russia may be diversity to advance their own strategic, seeking naval basing rights in the region. economic and development goals. Russia also attracted attention in early 2016 China following revelations of an arms supply deal with Fiji. This deal—which included China has continued to increase its ammunition, small arms, spare parts and engagement in the Pacific. According mechanical workshop trucks—has been to one estimate, China’s bilateral aid in described as ‘the first shipment of lethal aid the Pacific over the last decade totalled into the Pacific by a non-traditional partner’ around US$1.4 billion, around one-fifth of and attracted some criticism within Fiji. that provided by Australia. In 2013, China offered US$2 billion in concessional loans for regional infrastructure development. India China’s aid projects in the Pacific, such India is also becoming a more prominent as the current renovation of the prime player in the Pacific. Given the country’s minister’s office in Vanuatu, are often very large Indian diaspora, Fiji has been a high profile. Fiji, estranged from Australia particular focus. Indian Prime Minister and New Zealand until recently, has been a Narendra Modi’s 2014 visit to Fiji included prominent beneficiary of China’s assistance. promises of increased bilateral aid and investment, as well as commitments to

154 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT enhance cooperation with Pacific Island But Australia will need to adapt to this new countries on climate change, trade, and environment if it is to ensure it remains a space and satellite technologies. partner of choice for its Pacific neighbours. This may mean being more responsive While India’s links with the Pacific remain when it comes to the priorities of these relatively modest, New Delhi is actively countries in areas such as climate change, pursuing enhanced engagement with the labour mobility, and fisheries management. region as part of a wider ‘Indo-Pacific’ maritime outlook. From the perspective It may also mean working harder to ensure of the Pacific Island countries, ‘India’s that greater engagement by external presence offers the prospect of greater powers does not undermine gains in areas balance in the South Pacific’. such as governance, anti-corruption and inter-communal peace. Recent instability in PNG shows the fragility of these gains. Indonesia Some critics contend that Australia’s Indonesia’s recent engagement with the emphasis on maintaining offshore Pacific has been dominated by itsconcerns detention and resettlement agreements over alleged ‘interference’ in the West with PNG and Nauru has undermined its Papuan issue by some members of the credentials and capacity in these areas. Melanesian Spearhead Group (MSG). Jakarta has been particularly keen to ensure It has also been argued that Australia needs that groups promoting independence for to be more flexible when it comes to the West Papua do not gain full membership region’s multilateral architecture. Groupings of the MSG. Indonesia continues to such as the MSG and the Pacific Islands deploy extensive diplomatic resources Development Forum, both of which exclude in the Pacific to avert this outcome. Australia and New Zealand, are seen by some of their members as more responsive As part of its wider development diplomacy, to regional priorities and more attuned Indonesia has also sought to pursue to enduring local sensitivities concerning greater ‘South-South’ cooperation through sovereignty and ‘neo-colonialism’. Australia increased aid and people-to-people may need to think more creatively about links with Pacific Island countries. This how to engage with these groupings. included assistance to Fiji in the wake of 2016 Tropical Cyclone Winston. Further reading Implications for Australia W Bruere and C Hill, Changes to While not as contested as maritime East Australia’s overseas aid program under Asia, the international relations of the South the Abbott and Turnbull governments Pacific have become more complex as 2013–2016, Research paper a wider array of external powers pursue series, 2016–17, Parliamentary diverse interests and increased influence. Library, Canberra, 2016.

Australia’s traditional leadership role in the S Dorney, The embarrassed Pacific is not being directly challenged. colonialist, Lowy Institute for Indeed, increased international trade, International Policy, 2015. investment and aid are regional goals that Australia has long advocated and pursued.

155 Australia and Iran: post-nuclear agreement Renee Westra, Foreign Affairs, Defence and Security

strong commercial and trade links. For much of the period following the 1968 opening Key Issue of Australia’s embassy in Tehran, Iran was Australia’s largest trading partner in the The relaxation of Iranian sanctions Middle East and the ninth largest overall. under the Joint Comprehensive Plan of Action will re-open trade opportunities with Iran—a historically Academics have described Australia’s significant market in the Middle approach to Iran during this time as being East. Increased trade ties may also distinctive for its constructive tradefocused present an opportunity to influence nature which differed from the periodically Iran’s behaviour on a range of other hostile relationships with other Western non nuclear matters. However, countries. Academic Shahram Akbarzadeh monitoring Iran’s adherence to the notes that ‘historically, Australia maintained nuclear agreement and amending a bipartisan consensus on keeping trade Australia’s sanctions accordingly with Iran separate from other political will be an ongoing process. considerations’. Successive Australian governments have pointed to the diplomatic and political advantages of maintaining strong trade ties. Former foreign minister Gareth Evans put this succinctly in 1995: The Joint Comprehensive Plan of Action The Australian government has found these positions [support for Hezbollah The Joint Comprehensive Plan of Action and Hamas, opposition to Israel, and (JCPOA) came into force in July 2015, nuclear and chemical weapons] deeply following extensive negotiations between unpalatable and has consistently Iran and the P5+1 (permanent UN Security said so … But our generally cordial Council members plus Germany/EU). While relationship with Iran and the strong Iran did not agree to end its nuclear program, trade and commercial links between it did agree to give up critical elements of its our two countries have put us in a program that will put its progress towards strong position to maintain a much nuclear weapons back by at least a decade. more direct and critical dialogue with In return, Iran gets relief from some, though the Iranians on these issues than not all, sanctions that have crippled its would otherwise have been possible. economy, especially in recent years.

However, over the past 15 years, increasing Australia-Iran relationship international concern over Iran’s nuclear Over the decades, Australia has attempted program and statesponsored terrorism to balance its trade and economic objectives resulted in international sanctions. Australia in the Middle East with its non-proliferation implemented both sanctions and from 2008, and global security objectives. One of the additional autonomous measures. Specific more challenging aspects has been the regulations introduced in 2014 also imposed Australia-Iran relationship, which, prior to the restrictions on financial transactions with Iran. last decade, was mostly cordial, bolstered by

156 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Iranian sanctions the Australian Embassy in Tehran from the second half of 2016’. The Foreign Minister After the International Atomic Energy Agency has also indicated on multiple occasions that declared Iran in 2005 to be noncompliant she regards Iran as an important element with its Non-Proliferation Treaty obligations, of the fight against the Islamic State. the UN Security Council developed targeted sanctions that are binding on However, the Opposition has not all member states, including Australia. been quite so enthusiastic, with former shadow foreign minister, Tanya Sanctions against Iran vary across different Plibersek, stating earlier in 2016: countries, have multiple objectives and look to counter multiple perceived threats The Foreign Minister has been … so from Iran. But it is those directly related to prepared to turn a blind eye to the Iran’s nuclear (and missile) program that antiAmerican rhetoric of the Iranian have recently been relaxed. Australia’s government, the anti-Israeli rhetoric of the adoption of the UN sanctions and its own Iranian government, to the human rights autonomous sanctions were largely aimed abuses, where people are locked up at addressing this specific nuclear threat, for their sexuality, for following a religion rather than a wider spectrum of issues. that’s not approved of by the regime, and most particularly, for political organisation Conversely, the US has a long history against an oppressive government. of sanctions against Iran—stretching back to the Iranian Revolution in 1979— Although there is enthusiasm to capitalise on that cover a broader spectrum, namely new opportunities afforded by the deal, the ‘Tehran’s support for terrorism and Brookings Institution notes that while ‘there destabilizing regional activities’, and will be a trickle of new business with Tehran which remain current. Collectively, Iranian … the floodgates remain firmly shut for the sanctions are still the toughest the world foreseeable future’. The attitude of the next community has imposed on any country. US President towards the sanctions regime will also be key to the long-term success of Outlook the deal. This uncertainly is a key impediment to doing business with Iran in the near future. The Australian Government has implemented changes in line with its international obligations, but while it has repealed certain For now at least, the deal may provide autonomous sanctions on Iran (including Australia with an opportunity to reinvigorate the financial restrictions), others remain in its human rights dialogue and efforts against place. In May 2016, the Foreign Affairs, the Islamic State. To do this, Iran needs to Defence and Trade References Committee see benefits from the deal, and the initial recommended that the Department of suspension of sanctions is just that. Foreign Affairs and Trade explain the reasoning behind this selective approach and ensure that its website clearly states what trade is still restricted or prohibited. Further reading N Markovic, It’s complicated: a The Government has expressed strong timeline of Australia-Iran relations interest in trading with Iran, and plans to in a historical perspective, reopen a trade office in Tehran—which it Background note, Parliamentary closed in 2010—noting that the office will Library, Canberra, 9 May 2013. ‘establish a permanent presence within

157 United Nations: whither reform? Nicole Brangwin, Foreign Affairs, Defence and Security Section Revitalising the UN: glacial pace of reform Key Issue In the 71 years since the UN’s formation, Issues of UN reform remain the organisation’s structure and operations unresolved and contentious have been subject to significant scrutiny. despite various efforts to pursue Despite this, reforms have been slow or substantive changes. difficult to implement. The use of veto by the Permanent Five (P5) members of the UN Security Council remains a particularly contentious issue. Numerous proposals The United Nations provides a platform for reform have been put forward. Some for Member States, both large and small, of these have been accepted, including a to have a voice. UN membership has resolution adopted on 3 October 1995 by the grown from its original 51 members in UN General Assembly on strengthening the 1945 to 193 members in 2011, with UN system. This resolution noted the work the newly formed state of South Sudan already underway at that time by numerous becoming the most recent member. working groups on specific reform topics.

Membership and the work of the UN are Two years later, Secretary-General Kofi guided by its Charter drafted in 1945. Annan, presented a report to the UN Amendments to the Charter can be made General Assembly, Renewing the United by ‘a vote of two thirds of the members of Nations: a Programme for Reform: Report of the General Assembly’, which has occurred the Secretary-General, that sought to build on three occasions (1963, 1968 and 1971). on the work of these working groups and Predictably, many Member States have transform the leadership and management argued that UN structures—its Charter— structure of the UN. Annan’s aim was are outdated. While it is widely accepted to ‘renew the confidence of Member that changes are needed, reforming the States in the relevance and effectiveness UN is no easy matter—although not of the Organization and revitalize the impossible. Reforming the UN has in spirit and commitment of its staff’. fact been debated since its formation. Nevertheless, while it is an imperfect Many of Annan’s proposals were adopted system, the work of the UN remains vital for in UN General Assembly Resolution 52/12 many people in need around the world. of November 1997, which included:

Australia has a long history of active  establishing the Deputy Secretary-General involvement in the UN: as a founding position member in 1946, to various stints as a  revitalising the working methods of the non-permanent member of the Security General Assembly Council. Successive Australian governments have placed varying degrees of importance  prescribing a time frame for concluding on the UN system and its subsidiary status-of-forces agreements between organs, but continuously support reform. the UN and the host government for peacekeeping operations

158 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT  revising the work undertaken by the Each year since the 2005 World Summit, Disarmament Commission and the First the UN General Assembly has continued Committee of the General Assembly with to support the Ad Hoc Working Group on the intent of updating, rationalising and the revitalisation of the General Assembly. streamlining and This has produced numerous changes  discontinuing the High-level Advisory that are mostly administrative in nature. Board on Sustainable Development. In November 2015, UN Secretary-General, Resolution 52/12 recognised the need for Ban Ki Moon, remarked on the program ongoing UN reform and invited the Secretary- to revitalise the work of the UN General General to present further proposals. Assembly, noting in particular, improvements to the functions of the Office of the UN General Assembly President following At the 2005 World Summit, Annan allegations of corruption against the President presented his most ambitious report, of the 68th Session. Moon called for greater In Larger Freedom: towards Security, transparency and accountability arguing Development and Human Rights for All, which that ‘the United Nations should embody the contained broad proposals for reforming highest level of integrity and ethical standards’. many aspects of the UN’s work. Some He acknowledged the work already of the key proposals included expanding achieved under the revitalisation program membership of the Security Council, and welcomed the General Assembly’s replacing the Commission on Human involvement of civil society and others Rights with a standing Human Rights ‘whose voices and actions can add great Council and overhauling the Secretariat. value to our work’. Part of the revitalisation program includes measures for selecting and Many of Annan’s proposals were appointing future UN secretaries-general. adopted at the World Summit and some have been implemented, including the creation in 2006 of the Human Rights Who will be the new UN Secretary- Council. However, Security Council General? reform remains a major hurdle. The position of UN Secretary-General will be vacated by Ban Ki-Moon on 31 December Efforts to reform the UN are not only 2016. It is expected that the next Secretary- internal. For some prominent people, UN General will be appointed no later than one reform remains a key issue. For example, month before this date. The selection process in July 2005, former foreign ministers from was initiated via a joint letter issued on 15 Canada, Italy, Spain, Thailand, the United December 2015, signed by the presidents of Kingdom and the United States, wrote an the Security Council and General Assembly, open letter to the Wall Street Journal calling which outlines the process to be undertaken. for UN reform. The letter supported the The letter specifies that candidates present: establishment of the Human Rights Council, acceptance of the Secretary-General’s …proven leadership and managerial definition of ‘terrorism’, recognition of the abilities, extensive experience ‘Responsibility to protect’, better support in international relations, and for the Community of Democracies (an strong diplomatic, communication international organisation comprising the and multilingual skills. government, civil society and private sector to promote democracy) and a greater commitment of aid from developed countries.

159 While the letter ‘invites’ Member States For the first time, candidates are undergoing to present candidates, there is no explicit an informal public dialogue, which also rule about who can nominate a candidate. involves participation by civil society However, UN processes tend to follow groups. The first nine candidates took convention and the twelve candidates part in this process from 12 to 14 April nominated to date have all been endorsed 2016. Two more candidates took part by their respective governments. on 7 June. The twelfth candidate was nominated on 7 July and participated The joint letter also emphasised gender in an informal dialogue on 14 July. considerations and noted ‘regional diversity in the selection of previous Secretaries- The first informal ‘straw poll’ was held by General’. This has been interpreted by the Security Council on 21 July 2016 which many commentators, including the Security considered all 12 official candidates. Straw Council Report, to mean preference might polls are traditionally held in secret and take be given to a woman and/or a candidate place prior to the formal ballot in order to from the Eastern European regional group. assess the viability of candidates. The straw polls will ‘continue until there is a majority Since the UN’s formation, eight men have candidate without a single veto from a served as Secretary General: three from permanent member of the Council’. Polling Western Europe, two from Asia, two from outcomes are not publicly communicated—a Africa, and one from Latin America. decision that has drawn criticism about the lack of ‘openness and transparency’, including from the current President of the In the past, very few women have been General Assembly, Mogens Lykketoft. considered for the role. According to the Security Council Report, Appointing the UN Secretary-General: the Challenge for In July 2016, former prime minister, Kevin the Security Council, female candidates Rudd, sought government support for UN were ‘seriously considered’ in 1953 Secretary-General nomination. On 29 July, (Vijaya Lakshmi Pandit from India), 1991 the government announced that it ‘will not (Gro Harlem Brundtland from Norway) be nominating any person’ for this position. and 2006 (Vaira Vike-Freiberga from Latvia). Half of the candidates currently Security Council reform being considered are women: Security Council reform has been one  Srgjan Kerim (Macedonia) of the most persistent and contentious UN reform issues over the last 70-odd   Vesna Pusić (Croatia) years. The use of the veto power by  Igor Lukšić (Montenegro) the Permanent Five (P5) members of  Danilo Türk (Slovenia) the Security Council and proposals for  Irina Bokova (Bulgaria) expanding the Council’s membership (permanent and/or non-permanent seats)   Natalia Gherman (Moldova) remain the main points of debate.  António Guterres (Portugal)  Helen Clark (New Zealand) Substantial pressure to reform the Security  Vuk Jeremić (Serbia) Council has been building in recent years,  Susana Malcorra (Argentina) with reform proposals being promoted by groups such as the Global Centre for the   Miroslav Lajčák (Slovak Republic) Responsibility to Protect (GlobalR2P) and  Christiana Figueres (Costa Rica)

160 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The Elders (an influential group founded by Russia opposes any attempt to restrain its use Nelson Mandela and currently chaired by of the veto. The Security Council Report notes former UN Secretary-General Kofi Annan). that in September 2015, Russia’s Ambassador to the UN stated that the veto is ‘a tool In May 2013, under the GlobalR2P which allows the Security Council to produce umbrella, the Accountability, Coherence and balanced decisions’ and that ‘sometimes Transparency (ACT) Group was formed, with the absence of veto can produce disaster’. 27 small and mid-sized countries promoting UN Security Council reform. In July 2015, the Saudi Arabia made a bold statement ACT Group circulated a Code of Conduct about Security Council reform in October that called on Security Council members ‘to 2013 when it declined its seat as a non- not vote against any credible draft resolution permanent member for 2014–15. The intended to prevent or halt mass atrocities’. Saudi Arabian Government stated it would On 7 February 2015, The Elders adopted not accept membership until the Council a statement on strengthening the UN. was reformed. The Saudi representative to the UN accused the Security Council of In an unprecedented move, two P5 double standards in relation to mandating members, France and the UK, recently peace and security in the Middle East demonstrated their willingness to promote and asserted that reforms of the Security veto restraint in cases where genocide Council’s working methods were needed. or mass atrocities are being reported. In July 2015, the Intergovernmental In September 2013, the Government of Negotiations on Security Council Reform France put forward a proposal to regulate released text that proposed options the P5 veto. France proposed that the P5 to improve the Council’s membership ‘would voluntarily and collectively undertake categories; the use of the veto; acceptable not to use the veto where a mass atrocity regional representation; the size and has been ascertained. Being a voluntary working methods of the Security Council measure, it would not require a revision of the and the relationship between the Security United Nations Charter’. The Government Council and the General Assembly. of Mexico supports France’s position on veto restraint. In August 2015, France and Australia has served as a non-permanent Mexico launched their Political Declaration member of the Security Council on five on Suspension of Veto Powers in Cases occasions (most recently in 2013–14) and of Mass Atrocities which seeks to secure publicly supports UN Security Council reform. voluntary restraint of the P5’s use of veto.

On 1 October 2015, the UK Permanent Representative to the UN announced the Further reading UK’s support for the ACT Group’s Code of Security Council Report, Appointing Conduct and explicitly promised the UK ‘will the UN Secretary-General: the never vote against credible Security Council challenge for the Security Council, action to stop mass atrocities and crimes Research report, 30 June 2016. against humanity’. The UK also supports expanding the Security Council’s membership Security Council Report, The veto, to include Brazil, Germany, India, Japan Research report, 19 October 2015. and more African nations. The ACT Code of Conduct was officially launched in the UN General Assembly on 23 October 2015.

161 Iraq and Syria: far from simple Renee Westra and Nathan Church, Foreign Affairs, Defence and Security Loss of territory does not equal defeat Key Issue According to RAND experts, the Islamic The nature and scope of military State has lost around 36 per cent of its operations in Iraq and Syria are former territory in Iraq and Syria since the significant issues for Australia beginning of coalition military operations given the evolving, long-term in 2014. This includes key cities in Iraq threat from the Islamic State. like Fallujah and Ramadi. But while the Islamic State’s territorial losses in Iraq may However, as Australia’s recent continue, eliminating the group entirely commitment in the Middle East will almost certainly be a much more has escalated, there have been difficult, if not impossible, prospect. increased calls for the Government to clearly articulate its long-term It is broadly recognised that while the strategy and allow a parliamentary Islamic State’s core territory is shrinking, debate on this complex issue. it has managed to expand the reach and territory of its formal and informal branches outside the Levant. The Islamic State has already declared affiliates in In June 2014, Islamic extremists seized parts of Afghanistan, Algeria, Egypt, Libya, control of Iraq’s second largest city, Nigeria, Pakistan, Saudi Arabia, Yemen, Mosul, and routed the Iraqi army before and the Caucasus. This will help the group sweeping south and threatening Baghdad. continue to lay claim to a territorially-based These militants, known as the Islamic caliphate, and conduct attacks worldwide, State in Iraq and the Levant (ISIL, or the despite its losses in the Middle East. Islamic State), declared an Islamic state or caliphate in this captured territory and To deflect attention from its shrinking claimed political and theological authority territorial control and counter any perceived over the world’s Muslims. The speed and weakness, the Islamic State has increased extent of the group’s success took the the number of violent, terrorist or insurgent- world by surprise, but the group had been style attacks throughout its core Middle building for some time, capitalising on Sunni Eastern territories and its affiliate groups disenfranchisement in Iraq and Syria, and worldwide. So while the group’s losses in the ungoverned territory in Eastern Syria Syria and Iraq may weaken its position in resulting from a weakened Syrian regime. In one sense, this alone is unlikely to precipitate June 2014, the Iraqi Government formally the group’s destruction. Many experts also requested US and UN assistance to ‘defeat argue that we are already seeing the first ISIL and protect our territory and people’. stages of the group’s adaptation as it returns Australia was one of the states that joined to its roots as an adaptive insurgent terrorist the coalition in response to this request. network. RAND analysts Howard Shatz and Erin Johnson note: ‘ending the ability of the Islamic State to operate openly in an area does not mean victory—it simply means that the nature of the fight has changed’.

162 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Efforts to counter the Islamic State long-term On 14 September 2014, the Chief of the have, confusingly, also been complicated by Defence Force, Air Chief Marshal Mark the speed and success of military operations Binskin, announced the deployment of in Iraq. Operations are moving too fast for approximately 600 ADF personnel to the the Iraqi Government to consolidate its Middle East—since known as Operation control in recaptured areas by addressing OKRA. The deployment included strike, the population’s political grievances—a early warning and refuelling aircraft, Special key factor in the Islamic State’s initial Forces personnel to assist Iraqi forces, success. The willingness and ability of the and other ADF personnel attached to Iraqi Government to address these issues coalition headquarters as part of broader will be critical to any lasting solution in international efforts. Foreign Minister Julie Iraq; however, the current government is Bishop reiterated this commitment in her paralysed by sectarian infighting and tensions address to the UN Security Council later between different groups are running high. that week, noting that the Islamic State These conditions are unfortunately all too ‘poses a threat to Australia, our friends familiar to those watching Iraq as the Islamic in South East Asia, and beyond’. State gained its foothold in the lead-up to the height of its success in 2014. In October 2014, the anti-Islamic State coalition was formalised under US designator The Islamic State’s presence in Syria will also Operation INHERENT RESOLVE. The continue to provide the group with a claim to coalition has 66 members; however, only territorial control in its core territories, even a core group of nations conduct military if it loses further ground in Iraq. Airstrikes operations in Iraq and Syria, which includes alone will not destroy the group’s presence Australia. The Operation’s mission is and there is no political resolution in sight described as: ‘by, with and through regional that will end the violence or re-establish partners, to militarily defeat DA’ESH (the some alternative form of central control in Islamic State) in the Combined Joint Eastern Syria. Without a substantial challenge Operations Area (Iraq and Syria) in order to its hold in Syria, the group will retain this to enable whole-of-coalition governmental sanctuary and survive—as it did prior to 2014. actions to increase regional stability’.

Australian Defence Force (ADF) Australia’s Air Task Group has had a operations in Iraq and Syria prominent role throughout the conflict in nearly two years of combat operations. It On 14 August 2014, the Australian has completed over 1,600 strike missions Government announced that ADF and delivered almost 1,300 munitions. This operations in Iraq had begun with the is in addition to other Australian command delivery of humanitarian aid to civilians and control and refuelling missions. The targeted by Islamic State forces. As the ADF notes that these have been ‘essential in US-led operations against the Islamic enabling the Iraqi ground forces to continue State in Iraq gathered pace and a broad their mission to defeat Daesh’. In late 2014, international coalition was established, the Special Operations Task Group also the Royal Australian Air Force (RAAF) also commenced its advise-and-assist mission began transporting military equipment in support of the Iraqi Counter-Terrorist (including arms and munitions) to Iraq to Service, the special forces wing of the Iraqi support local forces. This action was taken in military. Australian troops have also joined response to the Iraqi Government’s request with New Zealand forces in a Combined for assistance, under the auspices of a Task Group as part of the coalition’s Building UN resolution condemning the violence. Partner Capacity mission. This is designed

163 to build Iraqi resilience and capacity through Bipartisan—mostly the training of Iraqi forces. As at July 2016, more than 23,000 Iraqi personnel have The Labor Party has consistently received training through this program. underscored its bipartisan support for the The Government recently announced it will war against the Islamic State. However, also expand Australia’s efforts to include as the scope of Australia’s commitment training for law enforcement officers in line has expanded, the Labor Party has with efforts to improve other elements of the reiterated its calls for the Government Iraqi state needed for long-term stability. to allow a parliamentary debate on the issue and sought clarification regarding its longterm strategy, especially following Operations extended into Syria the expansion of the mission to Syria. On 9 September 2015, Prime Minister Specifically, in September 2015 the Tony Abbott indicated that Australia would Opposition called on the Prime Minister to expand its commitment to Syria, with RAAF address Parliament and outline Australia’s airstrikes to be extended to Islamic State long term strategy in Iraq and allow for targets there, following a request from the US appropriate parliamentary discussion. It Government. Prime Minister Abbott noted also highlighted that ‘our role militarily must that the extended operations would mirror be matched by renewed efforts toward a the efforts of other allied nations already long-term, multilateral strategy to resolve operating in Syria to ‘help protect Iraq and its the Syrian conflict’. But the Opposition has people from [Islamic State] attacks inside Iraq been careful to note it is not questioning and from across the border’. The expansion the Government’s prerogative powers. of operations to Syria was justified on the basis that the anti-Islamic State effort directly The objected to the relates to Iraq’s collective selfdefence and initial combat operations in Iraq, stating in the continued commitment of humanitarian September 2014 that ‘if we want to make efforts in the region. The Syrian state’s Australia safer the best thing to do is bring inability to exert control over that area and all Australians together and not follow the address the Islamic State threat, negates its United States into an unwinnable conflict right to object under the circumstances. in the Middle East’. To this end, the Greens introduced Defence Legislation Amendment Humanitarian assistance (Parliamentary Approval of Overseas Service) Bills in 2014 and 2015. These Addressing a different dimension of the amendments proposed making it mandatory conflict, Australia has also continued to for Parliament to approve the deployment provide humanitarian relief to civilians of troops overseas (rather than it being a inside Syria and the almost five million decision by the Executive). The Greens have Syrian refugees located in Turkey, Lebanon, also flagged their intention to reintroduce Jordan, Iraq and Egypt. Since 2011, the the Bill during the 45th Parliament. Australian Government has given $213 million in aid in response to this crisis and Independent MP Andrew Wilkie, and Senator has pledged a further $220 million over Jacqui Lambie, have also spoken out against the next three years, making it one of the ADF deployment to the Middle East. Australia’s most significant aid efforts.

164 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Debating the issue As Australia’s involvement in Iraq and Syria continues, so too is it likely that In Australia, the Government of the day political opposition to Australia’s military is not required to consult Parliament commitment will persist, together with before declaring war or deploying military concerns over how Australia’s troops forces overseas. Under Australian law are deployed in the first place. this is the Government’s prerogative.

In the United Kingdom, Canada and New Zealand, the governments of the day similarly Further reading do not have to seek approval from Parliament before deploying troops. However, in the H Shatz and E Johnson, The UK and New Zealand, conventions have Islamic State we knew: insights developed that see such matters generally before the resurgence and their debated in Parliament. In Canada, if the implications, RAND Corporation Parliament is not already in session, then it is research report, 2015. summoned when such a decision is made. In the United States and some European D McKeown and R Jordan, countries, the Parliament’s consent must be Parliamentary involvement in declaring obtained to send troops overseas, or the war and deploying forces overseas, Parliament is at least notified of such action. Background note, Parliamentary Library, Canberra, 22 March 2010.

Figure 1: Islamic State influence (as at July 2016)

Source: IHS Janes, July 2016

165 Defence capability David Watt, Foreign Affairs, Defence and Security Funding Key Issue The first is money. The 2016 DWP promised additional funding of $29.9 billion The 2016 Defence White Paper in funding for Defence across ten set out a substantial expansion of years to 2025 and linked this to a total Australian defence capability. This will expenditure of $195 billion in defence require consistency in funding and capability across the same period. timeliness in the decision-making and implementation processes. There are two potential problems with A cohesive relationship between this largesse. The first is that historically the Department of Defence and Defence has sometimes found it difficult defence industry will also be to effectively spend substantial increases crucial to ensure that projects in funding. The Australian Strategic Policy are appropriately managed. Institute’s Mark Thomson has pointed out that in the eight years after the 2000 DWP, more than $8.4 billion of capital expenditure was deferred. Similarly, The 2016 Defence White Paper (DWP) between the 2009 and 2013 DWPs, over set out the Turnbull Government’s $10 billion of expenditure was deferred. commitment to the acquisition of a wide range of defence capability. This includes The second problem is that the spending an ambitious naval shipbuilding program commitments of DWPs have, at best, a with 12 new submarines, nine Future mixed record of fulfilment.DWPs were Frigates and 12 offshore patrol vessels. published in 1976, 1987, 1994, 2000, The maritime focus will be deepened with 2009 and 2013 and 2016 and of these, the acquisition of fifteen P-8A Poseidon only the 2000 version could claim to have surveillance aircraft and seven MQ-4C fully implemented its planned expenditure. Triton unmanned surveillance aircraft. The However, the 2000 DWP notably coincided maritime capabilities will join the purchase with a period of sustained economic growth, of seventy-two F-35A Joint Strike Fighters which substantially aided the Government’s and the LAND 400 Program delivering ability to deliver appropriate funding. new vehicles for the Australian Army. Other Australian governments have not In fact, the Integrated Investment Program always been so fortunate. In the late (IIP), released in February 2016 alongside 1980s poor economic conditions led to the white paper, lists 200 ‘key investment the Hawke Government not meeting its decisions’. Of these, 35 had been funding commitments to defence and approved by the Government at the time instead seeking to fund capability via of publication with a further four approved internal savings from within the Defence. by the end of the 2015–16 financial year. Similarly, the Global Financial Crisis (GFC) coincided with the 2009 DWP, making it The ability of Defence to deliver this difficult for the Rudd Government to live ambitious program will be reliant on three up to its substantial funding commitments. key factors: funding, process and skills. Conversely, the Government’s response

166 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT to the GFC led to restraint in defence high priority will be given to the naval funding and the search for savings via shipbuilding program firstannounced during efficiencies within defence itself. August 2015. This brought forward the production of the Future Frigate (to 2020) and Process the Offshore Patrol Vessels (starting in 2018). A further potential impediment to The IIP does not provide assistance the fulfilment of the DWP program in judging progress on project delivery is the timeliness of decision- because it contains timeframes which making by the Government. appear to reflect the expected life of a project, but does not contain information The First Principles Review of Defence about milestones within those timeframes. criticised project approval processes for In addition, Defence has had to implement being lengthy and expensive. The Review the changes to process while also stated that the ‘the average government making a variety of internal structural submission is 70 pages long and takes changes recommended by the Review. 16 weeks to move through the Cabinet preparation process and an average of 46 Skills months to progress from first pass initiation through to second pass approval’. The Much of the white paper capability will be Review recommended a revised process imported from overseas but there is also which simplified some aspects of the a growing emphasis on local industry. The decision-making process, albeit introducing capacity of Australian defence industry a new ‘Gate Zero’ entry point (the point to deliver on time and on budget is an in the approval process where a concept important aspect to this. This is particularly is given initial approval to progress for true of the shipbuilding industry where potential consideration at first pass). It also overlapping programs will place strain on recommended an increase (to $250 million) Australian shipyards and the flow of skills in the level at which Cabinet consideration necessary to staff them. In the Industry is required. The Government agreed to 75 Policy Statement which came with the white out of 76 of the Review’s recommendations paper, the Government sets out its approach (albeit accepting only in principle the raising to Defence industry and has promised of the threshold for Cabinet consideration). $1.6 billion in funding to ‘build industry skills’ and lift Australian industry competitiveness. The 2016–17 Defence Portfolio Budget Statement lists 33 Unapproved Capital Projects for first or second pass approval during the year. There Further reading are a further 11 in the IIP which were expected to be decided during 2015–16 M Thomson, ‘Funding and delivering but do not appear to have been. the 2016 Defence White Paper’, Security Challenges, 12(1), 2016. Defence annual reports for the last ten years list 208 first and second pass approvals A Davies et al., One Defence: which would suggest that the Government one direction: the First Principles might struggle to process the number of Review of Defence, Australian projects mentioned above. Not all projects Strategic Policy Institute, 2016. are of equal importance and, presumably,

167 The current state of trade policies in Australia Paul Davidson, Economics

Cooperation Council and the European Union; to multilateral agreements via Key Issue the WTO on environmental goods. Given continuing difficulty in striking In Australia and overseas, trade is currently multilateral agreements, Australia being disrupted by a significant rise in has increasingly pursued bilateral protectionist measures. In part, these are as and regional trade agreements a direct consequence of the changing nature to further its interests. of trade agreements. Trade agreements now frequently provide significant trade Some issues for the 45th Parliament obligations in areas such as investment, include whether the agreements are the environment, and other areas of public in the national interest, having regard regulation. Protectionist measures include to the relative magnitude of benefits the application of trade-restrictive measures generated, and additional protections (particularly anti-dumping), as well as provided to foreign investors. An the treatment of foreign investment. additional issue is the recent rise in protectionist measures—partly as a result of recently formed trade Anti-dumping measures agreements—and whether such The latest report by the WTO on G20 measures are in the national interest. trade measures highlighted that between midOctober 2015 and mid-May 2016, some 145 new trade-restrictive measures were introduced. This was the highest As one of the 163 members of the World number of new measures introduced Trade Organization (WTO), Australia since the report series begin since 2008 benefits from the mostfavoured nation during the global financial crisis. and nondiscrimination provisions when engaging in international trade with other Although Australia’s initiations of antidumping member nations. In practice, this means investigations had fallen slightly from the that Australia is treated the same as another previous year, 17 matters were still initiated. country’s most-favoured trading partner As noted in a recent Productivity Commission would be, and that Australian products (PC) report, anti-dumping measures have are treated analogously to the identical recently been strengthened and there have domestically produced products of our been calls to strengthen it further. A direct trading partners. In addition to being a link was found between countries with highly WTO member, Australia has negotiated protectionist anti-dumping systems and the a number of bilateral and regional trade level and value of imports subject to duties. agreements with other nations (Table 1). The PC report also found that anti-dumping Australia is currently negotiating a number measures were more than three times of trade agreements, from separate bilateral higher than Australia’s remaining maximum agreements with India and Indonesia, tariff rates. Anti-dumping measures were and regional agreements with the Gulf mainly imposed on base metals, paper and wood, and plastics and polymers products.

168 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Table 1: Trade agreements currently in force in Australia

Agreement Entry into force Australia New Zealand Closer Economic Relations Trade Agreement 1 January 1983 Australia-US Free Trade Agreement 1 January 2005 Australia-Thailand Free Trade Agreement 1 January 2005 Australia-Chile Free Trade Agreement 6 March 2009 Agreement Establishing the ASEAN-Australia-New Zealand Free Trade Area 1 January 2010 Singapore-Australia Free Trade Agreement 2 September 2011 Malaysia-Australia Free Trade Agreement 1 January 2013 Free Trade Agreement between the Government of Australia and the 12 December 2014 Government of the Republic of Korea Agreement between Australia and Japan for an Economic Partnership 15 January 2015 Free Trade Agreement between the Government of Australia and the 20 December 2015 Government of the People’s Republic of China

In particular, it was noted that Australian was signed on 4 February 2016 and includes antidumping measures currently in force 12 signatories: Australia, Brunei, Canada, are predominantly in the steel sector. Chile, Japan, Malaysia, Mexico, Peru, New Zealand, Singapore, the United States, and Vietnam. These 12 nations account Foreign investor protections for around 40 per cent of global GDP. Concerns have been raised by a number of academics, the Productivity Although concerns have been raised, many Commission, and even the Chief Justice of Australia’s existing trade agreements of the High Court about protections contain ISDS provisions, including some granted to foreign investors under trade with other TPP nations. Of the ten trade agreements, principally investorstate agreements above, only the agreements dispute settlement (ISDS) provisions. with New Zealand, Malaysia, the United States, and Japan do not contain ISDS provisions in trade agreements ISDS clauses. Table 2 illustrates that provide a mechanism for foreign Australia already has ISDS provisions investors (including Australian investors with the vast majority of TPP nations. investing overseas) to seek recourse in an international tribunal in the event that A provision in the TPP provides that the a host government to the agreement agreement cannot enter into force without breaches its investment obligations. the acquiescence of the United States (and also Japan). However, the TPP has faced Trans-Pacific Partnership (TPP) staunch opposition in the United States and its passage through the current Congress One of the most high-profile trade is in doubt. Both American presidential agreements—the Trans-Pacific Partnership nominees have explicitly ruled out adopting (TPP)—contains ISDS provisions. The TPP the TPP in its current form. There have

169 therefore been calls from some quarters, which occurs between the presidential including Australia’s Ambassador to the election on 8 November and the inauguration United States, for the TPP to be passed of the new president on 20 January 2017. during a ‘lame duck’ session of Congress,

Table 2: Existence of ISDS provisions with TPP nations, outside of the TPP agreement

ISDS provisions currently exist in: ISDS provisions in TPP country Bilateral Investment Australia-New Zealand- Bilateral trade force, ignoring the Treaty ASEAN Agreement agreement TPP Brunei n/a n/a Darussalam   Canada n/a  n/a  Chile     Japan n/a  * * Malaysia     Mexico   n/a  New Zealand    ** Peru   n/a  Singapore     United States   * * Vietnam   n/a 

n/a means not applicable. * ISDS provisions are not explicit although there is explicit scope for their future inclusion in the trade agreement. ** Does not apply between Australia and New Zealand.

Further reading Chief Justice Robert French AC, ‘Investor-State Dispute Settlement—a cut above the courts?’, Supreme and Federal Courts Judges Conference, Darwin, 9 July 2014.

Productivity Commission, Bilateral and regional trade agreements, Research report, Canberra, 2010.

Productivity Commission, Intellectual property arrangements, Draft report, Canberra, 2016.

170 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT LAW, JUSTICE AND NATIONAL SECURITY

Image ID: 191330819, ChameleonsEye / Shutterstock.com, Image ID: 375938635, Copyright: Evlakhov Valeriy 171 Countering terrorism and violent extremism Cat Barker, Foreign Affairs, Defence and Security

the world (including in Western nations) have increased in both their frequency and, Key Issue somewhat less consistently, their severity. Terrorism continues to evolve and several factors have resulted in Domestic situation and outlook increased threats internationally and In September 2014, Australia raised its domestically in recent years. This is terror threat level for the first time since a persistent threat that will require the system was introduced in 2002. The ongoing attention and resources. decision was made in light of the number of Australians who were joining conflicts in Domestic coordination and Iraq and Syria (and potentially returning); international cooperation, particularly supporting overseas extremist groups from within the region, are important Australia; and potentially planning domestic components of an effective response. attacks (including those ‘prevented from Australia will need to remain travel’). The National Terrorism Threat responsive in a rapidly changing Level remains at ‘probable’, meaning environment. However, consideration there is credible intelligence indicating could be given to a strategic plan that individuals or groups have both the intent would provide direction for, and foster and capability to conduct an attack. coordination of, countermeasures over the longer term. Since the threat level was raised, there have been several successful and foiled attacks in Australia. These have included the stabbing of two police officers in During the 44th Parliament, many countries, Melbourne in 2014, the murder of a police including Australia, became increasingly accountant in Parramatta in 2015 and the concerned about, and took additional steps disruption of attacks allegedly planned for to counter, domestic and international Anzac Day and Mother’s Day in 2015. threats. These include nationals fighting with overseas terrorist and insurgent groups (‘foreign fighters’) and different forms of The number of Australian civilians involved in ‘homegrown’ terrorism—whether it be the Syrian and Iraq conflicts has plateaued, individuals associated with particular groups, remaining at around 110 for around or so-called ‘lone wolf’ or ‘lone actor’ threats. 18 months. This is due to a range of factors, including battlefield deaths and people being prevented from travel by the interventions The conflicts in Syria and Iraq, the rise of families, communities and authorities. of the ‘Islamic State’ group (IS) and its declaration of a caliphate in June 2014 are key factors in the heightened terror Police and security agencies are particularly threat the world currently faces. While a concerned about a trend towards individuals small number of countries in the Middle becoming involved with extremist groups and East, South Asia and Africa continue to ideologies at younger ages. This presents account for a high proportion of attacks and particular challenges, and even the Australian resulting deaths, terrorist attacks around Security Intelligence Organisation (ASIO) has

172 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Some key figures

 16 counter-terrorism operations in Australia since September 2014, resulting in more than 40 people being charged with terrorism and other offences and disruption of nine attacks.  ASIO managing around 400 high-priority counterterrorism investigations.  Around 110 Australians fighting or engaged with terrorist groups in Iraq and Syria, and 190 people providing support (such as recruiting, funding) from Australia.  About 40 Australians have been involved in those conflicts and since returned, while at least 50 emphasised the need for an approach that is Challenges for the coming years include Australian foreign fighters have been killed. ‘far broader and more sustained than simply managing the threats associated with  177 Australian passports have been cancelled and a security and law enforcement response’. returning foreign fighters and individuals 33 suspended. prevented from travel, potential radicalisation ASIO has assessed that while the more in prisons, and managing the release of likely form of terrorist attack in Australia terrorism offenders back into the community. remains a ‘low capability attack against a “soft” target [such as a shopping centre Regional situation and outlook or sporting event], perpetrated by a lone actor or small group’, the threat of a Many existing terrorist and extremist more complex attack remains. The recent groups throughout Southeast Asia have completed and foiled attacks have been pledged their allegiance to or support of the smaller scale, lower capability type. for IS, and some have indicated a wish Lone actors and smaller informal networks to establish an official IS province in are more difficult for police and security the region. IS has recently increased its agencies to detect in advance, and low- propaganda efforts in the region, including capability attacks can move quickly from through videos featuring Indonesians and idea to action as they require less planning. Malaysians—at least one of which urged militants in the region to unite behind the leader of the Philippines-based Abu Sayyaf Group—and the release in June 2016 Some key figures of its first Malay language newspaper. In 2016, both Indonesia and Malaysia have  16 counter-terrorism operations in experienced successful IS-related attacks. Australia since September 2014, resulting in more than 40 people In Indonesia, after largely successful being charged with terrorism and counterterrorism efforts over several years, other offences and disruption of the al-Qaeda aligned group, Jemaah nine attacks. Islamiyah, is reportedly rebuilding and  ASIO managing around 400 preparing for attacks. It has been recruiting high-priority counterterrorism again—with membership estimated to investigations. be back to around 2,000 (matching pre-  Around 110 Australians fighting Bali bombing levels)—raising funds, or engaged with terrorist groups and sending fighters to train in Syria. in Iraq and Syria, and 190 people providing support (such as The number of foreign fighters in Iraq and recruiting, funding) from Australia. Syria originating from Southeast Asian  About 40 Australians have been nations is estimated to be in the range involved in those conflicts and 700–1,000. While this is small proportionally, since returned, while at least 50 authorities are nonetheless concerned about Australian foreign fighters have the threats posed by returning fighters. been killed.  177 Australian passports There have also been concerns raised about have been cancelled and 33 how effective Indonesia’s deradicalisation suspended. efforts are, with the head of an organisation that assists parolees estimating that around 40 per cent of 400 militants released as at December 2015 have returned to a

173 radical network. One of the attackers in a CVE programme, which comprises four January 2016 incident in Jakarta had been main streams of work—social inclusion; released from prison several months earlier. targeted work with vulnerable communities and institutions; addressing online terrorist propaganda; and diversion and Domestic countermeasures deradicalisation. This has generally been In light of increased threats and activity, the welcomed by experts in the field, though Australian Government provided additional there have also been calls for Australia not funding of $630.0 million for counterterrorism to repeat the mistakes of the UK’s Prevent and countering violent extremism (CVE) in strategy. Prevent, the CVE component of the August 2014, supplemented by an additional UK’s counterterrorism strategy, has been $326.4 million (excluding defence spending) criticised by the Independent Reviewer of in the 2015–16 Budget. The bulk of that Terrorism Legislation, amongst others, as funding went to the intelligence and law having become ‘a more significant source enforcement agencies for counterterrorism of grievance in affected communities purposes. Less has been allocated to CVE than the police and ministerial powers’. measures, though the spending and focus on this area has also increased compared CVE initiatives are relatively new in Australia, to previous years. The 2016–17 Budget with Australian Government efforts dating included an additional $5.0 million for back only to 2010. It will be important during CVE, including $4.0 million to ‘establish the process of expanding Australian CVE and trial community support and advice and deradicalisation initiatives to deal with services’ with the states and territories. the current and future threat environment to continue learning from overseas experience. Specific funded initiatives included: Interventions need to be adapted to the Australian context and tailored to each  interventions to prevent Australians individual’s particular circumstances. becoming foreign fighters, including a However, lessons can be drawn from Community Diversion and Monitoring the UK’s experience as well as European Team in the Australian Federal Police, countries, such as Germany and Denmark, a multi-agency disruption group and which have had some success addressing additional investigators and analysts for far-right, far-left and religious extremism. the Australian Crime and Intelligence Commission Some work remains in responding to the  the Australian Border Force establishing recommendations of the Review of Australia’s counterterrorism units at Australia’s eight Counter-Terrorism Machinery and the report international airports on the joint Commonwealth-NSW review of the Martin Place siege (both released  a revised and expanded CVE programme February 2015). The ongoing coronial and inquest into the deaths that occurred during  funding for the establishment and initial the Martin Place siege may identify further operations of the Australian Intervention issues requiring a response. In addition, Support Hub (AISH). in July 2016, the Prime Minister asked the National Counter-Terrorism Coordinator for There has been increasing recognition advice on several matters to guide efforts of the need to work effectively across to prevent lone actor attacks. Among the the spectrum, from prevention and early matters the Coordinator will report on are intervention, through to responding to actual the vulnerability of soft targets and the attacks. This is reflected in the revised means to protect them; measures to ensure

174 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT vulnerable individuals who come into contact terrorism financing. Australia hosted a with the justice and health systems are regional summit on CVE in June 2015 and identified by security authorities; and how co-hosted a counterterrorism financing agencies are responding to the challenges summit in November 2015 with Indonesia. presented by rapidly radicalised lone actors. The latter will become an annual summit, with the next one to be held in Indonesia While many of the fundamentals remain the in August 2016. Australia and Indonesia same, Australia’s counterterrorism framework also co-chair the GCTF Detention and underwent significant changes during the Reintegration Working Group and Australia last parliament, and many of those changes has been keen to learn from Malaysia took place quickly in a reactive environment. and Singapore about their approaches While it will remain important for Australia and programs for deradicalisation. to be responsive in this policy area, the Australian Strategic Policy Institute has The current security environment suggested it is time for Australia to take a highlights the importance of step back and spend some time formulating Australia’s continued engagement and a strategic plan for counterterrorism. Such a cooperation with regional partners. plan would go beyond the Counter-Terrorism Strategy agreed to by governments in 2015, See also the separate articles in this by providing a framework to guide future Briefing Book on national security and work across different levels of government counterterrorism laws, and Iraq and Syria and ensuring it remains coordinated (for information on military involvement). and directed towards shared goals.

Regional cooperation Further reading Australia has been working for some time with countries in the region both bilaterally C Barker, Australian Government and multilaterally through forums including measures to counter violent the Association of Southeast Asian extremism: a quick guide, Research Nations (ASEAN), the Jakarta Centre for paper series, 2014–15, Parliamentary Law Enforcement Cooperation and more Library, Canberra, 2015. recently, the Global Counterterrorism Forum (GCTF). Australia and Indonesia’s joint Council of Australian Governments investigation of the 2002 Bali bombings (COAG), Australia’s counter- built a strong foundation for cooperation, terrorism strategy, COAG, 2015. and Indonesia has been a key focus of Australia’s bilateral capacity-building S Zeiger and A Aly, eds, Countering and cooperation on counterterrorism. violent extremism: developing an Australia has also worked closely with evidence-base for policy and practice, Malaysia, Thailand, and the Philippines. Curtin University, Perth, 2015.

Mirroring international developments and JC Liow, ‘ISIS in the Pacific: attention, there was somewhat of a shift assessing terrorism in Southeast in Australia’s regional engagement during Asia and the threat to the homeland’, the last parliament, with a greater focus Brookings Institution, 27 April 2016. on: CVE, including online; deradicalisation; foreign fighter issues; and countering

175 National security and counter-terrorism laws Monica Biddington, Law and Bills Digest

The Government attempted to abolish the Office of the Independent National Security Key Issue Legislation Monitor (INSLM). The repeal Bill was removed from debate following strong Domestic responses to terrorism are opposition. In December 2014, Roger Gyles increasingly focused on enhancing AO QC was appointed to the Office. jurisdictional cooperation between law enforcement agencies and building resilience and social Issues for the new Parliament cohesion in the community. Australia’s national security legislation is subject to oversight by multiple independent The Government has flagged further and parliamentary scrutiny mechanisms. legislation to develop and maintain These include: the INSLM, the Parliamentary a rigorous national security program Joint Committee on Intelligence and with a number of legislative initiatives Security (the PJCIS), the Senate Legal and review of existing regimes. and Constitutional Affairs Committee, the Senate Foreign Affairs, Defence and Trade Committee, the Parliamentary Joint Standing Committee on Foreign Key events in the 44th Parliament Affairs and Trade and the Parliamentary Significant changes were enacted to Joint Standing Committee on Treaties. national security and counter-terrorism laws during the last parliament, including: While there is generally bipartisanship on matters relating to national security, there  establishment of a data retention regime is a continued imperative for the detailed scrutiny, oversight and accountability of the  the introduction of a Special Intelligence Parliament’s response to national security. Operation regime for Australian Security Intelligence Organisation (ASIO) officers, As part of this, there are also a number of which allows immunity from prosecution statutory reviews that will be considered if a crime is committed during the during the life of the 45th Parliament. course of the operation. The regime also introduced a prohibition on the publication of information about special intelligence The PJCIS must complete a review of the operations (the oft-called ‘journalist’s following counterterrorism and national offence’) security legislation by 7 March 2018: questioning and detention powers that  increases to the powers of ASIO and the arise under Part III of the Australian Australian Security Intelligence Service Security Intelligence Organisation Act 1979  the expansion of both the purposes of the (ASIO Act), Division 3A of Part 1AA of the control order regime and the grounds on Crimes Act 1914 (Crimes Act) (terrorism- which orders may be made and related stop, search and seizure powers  the introduction of an offence of entering ), Divisions 104 and 105 of the Criminal a declared area in which a terrorist Code Act 1995 (control orders and organisation is engaging in hostile activity. preventative detention orders) and other

176 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT provisions of the Criminal Code including The Commonwealth has not stated its sections 119.2 and 119.3 (relating to positon on this, nor whether it is considering foreign incursions and recruitment). changes to the detention provisions in Division 2 of Part 1C of the Crimes Act. The Government accepted a recommendation from the PJCIS’s report on Post-sentence detention of the Counter-Terrorism Legislation Amendment convicted terrorists (Foreign Fighters) Bill 2014 that the INSLM also review the regime. The INSLM is In April 2016, at a COAG meeting, there required to review the same specified was agreement to establish a regime that legislation by 7 September 2017. The INSLM would ensure the continued detention of is presently conducting a review of Division convicted terrorists past their sentence 3 of Part III of the ASIO Act (questioning end date. Attorney-General George and detention for terrorism matters), the Brandis has said that these laws could powers of the Australian Federal Police under be similar to those in some states which Part IC of the Crimes Act (relating to the keep sex offenders in jail after they have investigation of Commonwealth offences), served their sentence, if they still pose a and the coercive powers of the Australian serious risk to the community. On 5 August Criminal Intelligence Commission. The 2016, the Attorney-General announced INSLM has also indicated that he will be that all Australian Attorneys- General had conducting a review of the effectiveness of reached an in-principle agreement to the the legislative changes in connection with proposed scheme. He indicated that the the terrorist threat posed by Australians who Government intends to introduce legislation may travel to participate in conflicts abroad. to enact the proposed scheme in the Commonwealth Criminal Code, and to refer The PJCIS is required to commence a this to the PJCIS for inquiry and report. review of the data retention regime by 13 April 2019 and to complete a review This legislation may raise constitutional into the operation, effectiveness and issues, particularly with respect to its implications of the revocation of citizenship compatibility with the judicial power of provisions in the Australian Citizenship the Commonwealth in Chapter III of Act 2007 by 1 December 2019. the Constitution. In Fardon v Attorney- General (Qld) 2004 the High Court Pre-charge detention upheld the validity of state legislation authorising the post-sentence detention In December 2015, COAG agreed to of dangerous sex offenders, but much prioritise work to implement nationally will depend on an assessment of the consistent legislation on pre-charge provisions of the particular legislation. detention, consistent with recommendations of the Australia-New Zealand Counter- The catalyst for this policy has been Terrorism Committee (ANZCTC). twofold. Firstly, the incarceration of terrorism offenders from more than 10 years ago In April 2016 COAG agreed, in principle, is due to end and there may be evidence to the NSW model as the basis for a that could be presented to a court that strengthened, nationally consistent, pre- demonstrates that there are continued and charge detention scheme for terrorism varied risks that a terrorism offender poses suspects, with the ACT reserving its once released back into the community. position. NSW will introduce the legislation Secondly, Prime Minister Malcolm Turnbull and consult with other jurisdictions.

177 is advocating for changes and greater ‘ensure greater consistency, transparency diligence in the wake of atrocities overseas and accountability for managing national in Orlando, United States and Nice, France. security risks across all parts of the telecommunications sector’. The Government If a regime is introduced to continue a will continue to work to manage risks in this convicted terrorist’s time in prison, there sector of espionage, sabotage and foreign would need to be safeguards for the interference and legislation is anticipated individual, including periodic review and to be presented to the new Parliament. evidence presented to a court that shows the person continues to pose an unacceptably The Australian Government may also high risk to the community. The proposal consider prohibiting the publication of raises questions around how flexible that terrorist’s names and images. France is period of extended detention might be and currently deliberating whether this would whether penalties for terrorism offences deny the terrorists the glorification that should be increased in the first instance. many of them may seek from their acts. Questions of censorship, balanced with the In contrast, the United Kingdom (UK) reporting of facts, would prompt a robust has a notification regime where a person debate in the Australian Parliament. who has been released after serving a sentence for terrorism offences is See the separate article in this Briefing required to notify police of changes to Book for further detail on countering personal detail and travel plans. terrorism and violent extremism.

Lapsed legislation from the previous Parliament Further reading The Government has confirmed it will be M Biddington and C Barker, reintroducing national security legislation that National Security Legislation lapsed at the prorogation of Parliament. This Amendment Bill (No.1) 2014, Bills includes the Counter-terrorism Legislation digest, 19, 2014–15, Parliamentary Amendment Bill (No.1) 2015, which, among Library, Canberra, 2014 other things, would reduce the minimum age at which a control order may be C Barker, J Mills and J Murphy, imposed from 14 to 16 years of age. The Counter-Terrorism Legislation Transport Security Amendment (Serious or Amendment Bill (No.1) 2015, Bills Organised Crime) Bill 2016 also lapsed at digest, 80, 2015–16, Parliamentary prorogation and is likely to be reintroduced Library, Canberra, 2016. to enhance the preventive mechanisms in place to target those who engage in serious or organised crime through the A Lynch, N McGarrity and G Williams, use of aviation and maritime transport. Inside Australia’s anti-terrorism laws and trials, Sydney, 2015.

Recent developments G Brandis, Meeting of Attorneys- In the area of telecommunications security, General on post-sentence the Government is further pursuing the preventative detention, information sharing and obligations between meeting communique, government and telecommunications Canberra, 5 August 2016. carriers and carriage service provides to

178 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT National security—cybersecurity Nicole Brangwin, Foreign Affairs, Defence and Security

around 260 per cent (from 313 incidents in 2011 to 1,131 in 2014). These incidents Key Issue involved Australian Government and other networks of national interest. The cybersecurity environment is a constantly evolving and complex issue that affects numerous Needless to say, the cyberthreat is vast, sectors. Strategic level policies and traversing many jurisdictions—and it is not just programs are struggling to keep up a technical ICT (information, communication with threats as technology rapidly and technology) issue. Effective threat advances. The Cyber Security mitigation requires action across sectors Strategy released in April 2016 is including government (not just defence and Australia’s response to the threat but policing, but all government entities); industry its implementation is now urgent. (large, medium and small businesses); academia and science (research and development) and the community (personal security awareness), just to name a few. What is cybersecurity? In simple terms, cybersecurity involves What is being done? the protection of computer systems As a policy issue, concerns about Australia’s connected to the Internet. cyber resilience were initially raised in the Howard Government’s 2000 Defence White Entities such as government, business Paper, Defence 2000: our future defence and organisations, as well as millions force. A number of initiatives flowed from of individuals in Australia, rely on this policy including cooperation among key these connections every day. national security agencies to assess and deal with emerging threats. In the 2009 Defence White Paper, Defending Australia in the What are we protecting these Asia Pacific century: Force 2030, the Rudd systems from? Government elevated the cyberthreat to According to the Government’s Australian one of national security priority, and in 2010, Cyber Security Centre (ACSC), threats established the Cyber Security Operations might include cyber espionage that Centre (CSOC) within the Defence Signals gathers intelligence in support of state- Directorate (now ASD). In 2013, under the sponsored activities; cyber attacks that Gillard Government, the CSOC evolved into aim to destroy critical infrastructure; or the Australian Cyber Security Centre as criminals using the Internet as a means ‘the hub of the government’s cyber security to defraud, or steal individual identities. efforts’. The 2013 Defence White Paper recognised that dealing with cyberthreats requires not only a whole-of-government How serious is the threat? approach, but industry involvement as well. According to the ACSC Threat Report, from 2011 to 2014, the number of cybersecurity The Department of Defence continues incidents to which the Australian Signals to play the primary role within the ACSC, Directorate (ASD) responded rose by which also hosts the Attorney-General’s

179 Computer Emergency Response Team Offensive capabilities Australia (CERT Australia); the Cyber Espionage Branch of the Australian Security Given the escalation of cyber attacks Intelligence Organisation; components of and Defence’s role in responding, it is the High-Tech Crime Operations unit of unsurprising to learn that Australia has an the Australian Federal Police; expertise offensive capability. However, this was not from the Australian Criminal Intelligence publicly acknowledged until the release Commission (formerly the Australian Crime of the 2016 Cyber Security Strategy. No Commission) and key industry participants. further details about Australia’s offensive capabilities are publicly available, but ASD now openly recruits for offensive Is Australia prepared? and defensive cyber specialists. In September 2011, the Gillard Government announced the development of a cyber white Could this lead to cyberwarfare? paper, which was meant to address issues ranging from safety, crime, and consumer Debate surrounds the exact nature of protection, to national security and defence. cyberwarfare as a sole undertaking. The The initial impetus eventually morphed into 2016 Defence White Paper highlights an overarching update of the National Digital the ‘complex non-geographic threats’ in Economy Strategy, released in June 2013. cyberspace and space, and how military capabilities can be adversely affected. The Australia-United States alliance Following the 2013 election, cybersecurity was also acknowledged these threats during not part of the Abbott Government’s public Ministerial talks in 2011 (AUSMIN) where it focus on national security issues until the was agreed that the ANZUS Treaty could cybersecurity review announced in November be invoked in response to a cyber attack. 2014. The review was originally intended to But when does a cyber attack constitute take six months but it was not until 17 months an armed attack? The US considers, on later when, under the Turnbull Government, a case-by-case basis, the ‘nature and Australia’s new cybersecurity strategy was extent of injury or death to persons and the finally announced—effectively replacing destruction of, or damage to, property’. the 2009 cyber security strategy. While the The threshold for, say, an armed response 2016 strategy recognises cybersecurity as a to a cyber attack is not clear or publicly strategic issue for Australia’s economy and discussed by Australian or US officials. national security, the emphasis placed on this issue appears less significant than in 2009 when cybersecurity was considered ‘one of Australia’s top tier national security priorities’. Further reading The Government’s commitment to the Department of the Prime Minister strategy is demonstrated by the April and Cabinet, ‘Australia’s cyber 2016 announcement of an Ambassador security strategy: enabling innovation, for Cyber Issues (yet to be appointed), growth & prosperity’, Australian a Minister Assisting the Prime Minister Government, April 2016. on Cyber Security (Dan Tehan) and a Special Advisor to the Prime Minister on Australian Cyber Security Centre Cyber Security (Alastair MacGibbon). (ACSC), ‘ACSC 2015 threat report’, Australian Government, July 2015.

180 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Money laundering and terrorism financing Cat Barker, Foreign Affairs, Defence and Security

The Act applies to ‘designated services’ provided by financial institutions, bullion Key Issue dealers and the gambling industry, as well as designated remittance service providers. The Two major reviews of Australia’s obligations imposed on these organisations anti-money laundering and counter- include registering with Australia’s regulator, terrorism financing regime, released in the Australian Transaction Reports and 2015 and 2016, identified continuing Analysis Centre (AUSTRAC); conducting risk weaknesses in the current framework. assessments and maintaining a program to respond to identified risks; undertaking One of these is the lack of coverage customer identification and due diligence; of a range of non-financial businesses and reporting certain transactions and and professions that can be matters to AUSTRAC. In its other role exploited to launder illicit funds and as Financial Intelligence Unit, AUSTRAC support terrorism. Consultations analyses the information contained in those on laws to extend the regime to reports, along with other inputs, to develop include them began in 2007, but financial intelligence that it shares with the work was later put on hold partner agencies, including law enforcement and a Bill is yet to eventuate. agencies, the Australian Taxation Office and international counterparts.

Money laundering is the processing of the proceeds of crime to disguise their origins, making the funds appear to have been legitimately obtained. It is a key enabler of serious and organised crime and can undermine the financial system and distort the economy.

Australia’s anti-money laundering efforts are guided by international legal obligations and the International Standards Source: United Nations Office on Drugs and Crime on Combating Money Laundering and the Financing of Terrorism & Proliferation (FATF Recommendations) developed by Draft legislation to extend the coverage of the Financial Action Task Force (FATF), of the AML/CTF Act to include all ‘designated which Australia is a founding member. non-financial businesses and professions’ (DNFBPs), as required by the FATF The Anti-Money Laundering and Counter- Recommendations, was released for Terrorism Financing Act 2006 (AML/CTF Act) public consultation in 2007. This would and related regulations and rules provide have brought real estate agents, dealers the framework for the Australian regulatory in precious metals and stones, lawyers, regime aimed at preventing and detecting accountants and trust and company service money laundering and terrorism financing. providers under the scheme. However, the

181 process was put on hold to allow time for in place, including effective national recovery from the Global Financial Crisis coordination and international cooperation, and appears not to have recommenced. but that improvements were required in While other improvements have been made several key areas. Overall, Australia was in the meantime, these outstanding reforms found to be compliant with 12 standards, represent a significant gap in Australia’s largely or partially compliant with 22 and anti-money laundering and counter- noncompliant with six. The six standards terrorism financing (AML/CTF) regime. included those relating to DNFBPs, not-for- profit organisations, correspondent banking, and transparency and beneficial ownership Exploitation of DNFBPs of legal arrangements (such as trusts). AUSTRAC has stated that high value goods such as real estate are a While several of the eight priority actions significant money laundering channel identified for Australia can be addressed in Australia, and also that laundering at the operational level, others may require through commercial and residential real legislative amendments. Extending the estate is relatively simple compared to regulatory regime to all DNFBPs would many other methods. Its typologies and require amendments to the AML/CTF Act. case studies reports outline some of the Other priority actions that could result specific methods it has uncovered. in legislative amendments include:

Reports by AUSTRAC and the Australian  ensuring supervision of financial Criminal Intelligence Commission have institutions’ compliance with targeted also highlighted a trend towards the use of financial sanctions professionals such as lawyers, accountants  a targeted approach to preventing the and company and trusts service providers abuse of not-for-profit organisations by to (knowingly or unwittingly) facilitate money terrorist financing and laundering. Criminals have been using increasingly complex and sophisticated  measures to improve transparency and money laundering schemes to evade information about ‘beneficial ownership’ detection, drawing on the specialised skills of legal structures. and advice of these professionals to do so. Beneficial ownership refers to the Media reports over several years have individual who ultimately owns or controls pointed to the use of Australian real estate a customer, or on whose behalf a and professional facilitators to launder transaction is being conducted. Misuse illicit funds obtained through corruption of corporate vehicles can be reduced in other countries in the region, including where accurate information is available on Papua New Guinea and Malaysia. both their legal and beneficial owners.

The Coalition Government undertook The FATF’s report to take account of FATF’s findings in FATF released its third evaluation of the the statutory review outlined below. effectiveness of Australia’s AML/CTF measures, as assessed against the FATF Recommendations, in April 2015. FATF found that Australia has strong legislative, enforcement and operational measures

182 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Statutory review  strengthening the reporting regime for cross-border movements of cash and The Government commenced a statutory bearer negotiable instruments (12.1–12.7) review of the AML/CTF Act and associated and rules and regulations in December 2013  simplifying secrecy and access provisions and reported in April 2016. The review to facilitate improved sharing of AUSTRAC considered the FATF’s findings; submissions; information. (14.1). consultations with representatives from industry groups, private and not-for-profit organisations and government agencies; While the review produced a long list and the fit of the AML/CTF regime with of recommendations, many of them broader policy considerations such address only what should happen, not as the ‘better regulation’ agenda and how. This provides a clear framework for responding to national security threats. modernising the AML/CTF regime, but means that a lot of work remains to be done before amendments to implement The detailed review produced the recommendations are ready to be 84 recommendations designed to strengthen brought before the Parliament. A staggered the regime and ensure it can be responsive approach might be one way to act quickly to future challenges, and also simplify on priority issues while work continues to and streamline the framework. The report address the remaining recommendations. includes several general recommendations, including simplifying the AML/CTF Act, simplifying and rationalising the associated rules, embedding the principle of technology neutrality and reviewing Further reading counter-terrorist financing measures Attorney-General’s Department, in light of international developments. Report on the statutory review of the Some of the key recommendations Anti-Money Laundering and Counter- on more specific matters include: Terrorism Financing Act 2006 and associated rules and regulations,  bringing additional high risk services Australian Government, April 2016 and payment types and systems within the regulatory scheme, including FATF, Australia: mutual evaluation developing options for bringing the report, FATF, April 2015 remaining DNFBPs within the scheme and conducting a cost-benefit analysis D Heriot, ‘Australia’s anti-money of those options (Recommendations laundering report card: could do 4.6–4.10) better’, FlagPost, Parliamentary  reconsidering the current inclusion of Library blog, 28 April 2015 some services that are now lower risk (such as travellers cheques) (4.1–4.2)  simplifying obligations relating to ‘correspondent banking’ (provision of banking services by one financial institution to another) and bringing them into alignment with FATF standards (10.1–10.3)

183 Corruption and integrity issues Cat Barker, Foreign Affairs, Defence and Security

misconduct (Australian Public Service Commission), detecting and investigating Key Issue law enforcement-related corruption issues (Australian Commission for Law Enforcement Corruption and integrity issues Integrity (ACLEI)) and preventing, detecting remained in the spotlight during the and investigating serious corruption that may last two parliaments amid continued constitute an offence under Commonwealth revelations of corrupt conduct and law (Australian Federal Police (AFP)). misconduct across various sectors. Recent measures to improve public Issues for the new parliament will sector integrity have tended to focus on include continued consideration law enforcement, border protection and of a national integrity commission immigration agencies, which face particular and other potential agencies, corruption risks due to the nature of their improvements to foreign bribery and work. ACLEI’s jurisdiction has gradually public interest disclosure laws, and expanded since it began operations in 2007, Australia’s international obligations. most recently to include the Department of Immigration and Border Protection (DIBP) from July 2015. The Australian Customs and Border Protection Service (now the Australian Australia continues to be perceived as Border Force, part of the DIBP) commenced one of the least corrupt countries in the reforms in 2013 to improve integrity and world. Its score of 79/100 in Transparency better combat corruption that have since International’s latest Corruption Perceptions been rolled out across the DIBP as part Index gave it a ranking of 13 out of 168 of its professional standards framework. countries. However, its decline on this index in recent years (from a score of 85 and a rank The Parliamentary Joint Committee on the of seven in 2012), and continued revelations ACLEI recommended in May 2016 that of corrupt conduct in the public and private ACLEI’s jurisdiction be further expanded sectors and some unions, highlight the to include the whole of the Department need for continued attention to Australia’s of Agriculture and Water Resources, anti-corruption and integrity framework. and that an independent assessment be undertaken to determine whether ACLEI Public sector and parliamentary should also oversee the Australian Taxation integrity Office. The Government-chaired committee considered it preferable for ACLEI to retain Unlike each of the Australian states, which its law enforcement focus instead of being have established dedicated standing anti- expanded into an agency with anti-corruption corruption agencies, the Commonwealth oversight of the whole public sector. has taken a multi-agency approach to However, it was open to ‘further examination combating corruption within or affecting of the advantages and disadvantages of a the public sector. Within this system, a broad-based federal anti-corruption agency’. range of agencies have complementary roles. These include promoting integrity across the public service and investigating

184 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The Senate Select Committee on the legal academics, the Greens and other Establishment of a National Integrity crossbenchers have included a code of Commission was established in February conduct covering all Members of Parliament, 2016 to consider that very issue. However, an independent parliamentary ethics adviser, it was only able to produce an interim report and a Parliamentary Integrity Commissioner ahead of the dissolution of the Senate to investigate breaches of the code. in May 2016. Citing shortcomings in the existing framework in addition to risks and challenges, the majority recommended in Foreign bribery that report that the Government support Australia moved relatively quickly to ratify research into potential anti-corruption the OECD Convention on Combating Bribery systems appropriate for Australia. In of Foreign Public Officials in International additional comments, Coalition Senators Business Transactions (Anti-Bribery disagreed that any shortcomings had been Convention) and implement it domestically demonstrated. Shortly before the election, through legislation. However, Australia the Leader of the Opposition stated that has lagged behind other countries in its the Australian Labor Party would reconvene enforcement of the Convention. Increased the Committee if it won government. priority and resources given to foreign bribery investigations since 2013 appear The proposal to establish a national integrity to be having some impact. However, the commission along the lines of those issue has been of continued interest to the operating in the states have resurfaced Parliament. An inquiry commenced by the periodically since the 1980s. While it does Senate Economics References Committee in not have unanimous support, it has been June 2015 had not yet reported at the time backed by several prominent anti-corruption of the dissolution of the Senate in May 2016. experts and organisations. The Australian Greens introduced legislation to establish Australia’s first prosecutions for foreign bribery such a commission in 2010, 2012 and 2013. were initiated in July 2011. In 2012, the The 2013 Bill was the first to be debated, in OECD expressed serious concern at the low 2014 and 2015, but it was not voted on. level of enforcement action in Australia and included a long list of recommendations in an Debate on a possible national integrity evaluation of Australia’s compliance with the commission has included discussion of Anti-Bribery Convention. Australia has since parliamentary standards and ethics. There stepped up its efforts. This has included the are currently codes of conduct covering AFP reopening several previously finalised ministers and parliamentary secretaries, investigations, entering into a memorandum ministerial staff and lobbyists, but no code of understanding with the Australian Securities covering Members of Parliament. At the and Investments Commission (ASIC) and end of the 43rd Parliament, the House of establishing the interagency Fraud and Representatives endorsed a draft code of Anti-Corruption Centre. Legislation has also conduct, but did not consider the proposed been enhanced with the Parliament passing changes to Standing Orders and resolutions amendments in 2015 and 2016 to clarify the required to give effect to the code before the scope of foreign bribery offences and create House was dissolved in August 2013. The new false accounting offences, respectively. Senate did not endorse a code of conduct as ‘a meaningful and workable method As at April 2016, there were 18 active foreign of addressing parliamentary standards’. bribery cases, including two before the The issue was not considered during the courts and four with the Commonwealth 44th Parliament. Recent proposals by Director of Public Prosecutions. Foreign

185 bribery cases tend to be complex and Public interest disclosure lengthy, so increased enforcement can (whistleblowing) schemes take some time to produce results. Laws to facilitate disclosure of misconduct The Senate Economics References and other wrongdoing, and to protect those Committee was considering, amongst other making such disclosures, are an important things, whether alternative or additional component of a broader integrity framework. enforcement options such as those used in the United Kingdom and United States The public interest disclosure scheme that should be adopted in Australia. These applies to the Commonwealth public sector include, for example, deferred prosecution was updated and considerably expanded in agreements (on which the Government 2013, with the changes taking effect from also released a consultation paper in January 2014. The former head of ACLEI, March 2016) and suspension or exclusion Philip Moss, completed a statutory review from eligibility for government contracts of the scheme’s operation and provided on the basis of corrupt conduct. a report to the Government in July 2016. The Public Interest Disclosure Act 2013 requires that the Government table the Registered organisations report in parliament within 15 sitting days. The Royal Commission into Trade Union Governance and Corruption reported Legislative protections for private sector in December 2015 and made 79 whistleblowers in Australia, first introduced recommendations for policy and legal in 2004, are much less comprehensive reforms. The Commission identified than the public sector scheme and not ‘widespread misconduct’ and made often used. Treasury released an options 93 referrals for possible legal proceedings paper on the issue in 2009, but the against individuals, unions, companies review was discontinued in 2010. and a charitable organisation. Taskforce Heracles, a joint federal and state police In its June 2014 report on the performance taskforce initially attached to the Royal of ASIC, the Opposition-chaired Senate Commission, was extended to the end Economics References Committee made of 2016 to continue investigating the several recommendations about improving potential criminal matters referred by the protections for corporate whistleblowers. Commission and any related allegations. They included immediate legislative amendments to expand the scope of the It is likely that the new parliament will be whistleblower provisions in the Corporations asked to consider legislation proposed Act 2001 and a broader review with a by the Government to respond to the view to further enhancements that would Commission’s findings, in particular, Bills bring protections afforded to private to re-establish the Australian Building sector employees into line with their public and Construction Commission, establish sector counterparts. In its October 2014 a Registered Organisations Commission response, the Government noted the and introduce a significantly expanded recommendations and stated that ASIC penalty regime for breaches of duties by had agreed to set up an Office of the officers of registered organisations (which Whistleblower. The Office has since been include unions). The repeated rejection of established, but the other recommendations the relevant Bills by the Senate in the 44th do not appear to have been addressed. Parliament provided the double dissolution trigger for the 2016 federal election.

186 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT Perhaps due to the lack of government UN Convention against Corruption action, the Senate Economics References Committee released an issues paper in Assessments of compliance with the United April 2016 as part of its inquiry into scrutiny Nations Convention against Corruption take of financial advice, seeking submissions place over review cycles. A summary of on several possible improvements to the findings on Australia’s compliance with current framework. That inquiry lapsed upon the chapters on criminalisation and law dissolution of the Senate in May 2016. enforcement and international cooperation was released in June 2012. The findings were largely positive, but also identified International engagement several areas for improvement, including whistleblower protections and development G20 corruption agenda of a national, anti-corruption plan (which was The Anti-Corruption Working Group has been underway at the time, but did not eventuate). preparing the 2017–18 G20 Anti-Corruption A review of Australia’s compliance with the Implementation Plan for endorsement at chapters on preventative measures and the September 2016 Leaders’ Summit asset recovery is due to begin in 2017–18. in Hangzhou. China has flagged anti- corruption measures as a priority for its presidency, particularly the development of principles on tracking down high-level Further reading fugitives and establishing a research C Barker, ‘Corruption and centre on fugitives and stolen assets. As integrity issues in Australia—are part of its latest anti-corruption campaign, we heeding the lessons from the China has pushed for greater cooperation past?’, Off the Shelf, Parliamentary from other countries, including Australia, Library, Canberra, March 2014. in repatriating persons alleged to have engaged in corruption, and their assets. OECD Working Group on Bribery, Australia: Follow-up to the Phase A proposed extradition treaty between 3 report and recommendations, Australia and China was tabled in OECD, April 2015. parliament on 2 March 2016. The Joint Standing Committee on Treaties commenced consideration of the Senate Select Committee on the treaty, but its inquiry lapsed upon the Establishment of a National Integrity dissolution of parliament in May 2016. Commission, Interim report, The Senate, Canberra, May 2016. Open Government Partnership Transparency International The Turnbull Coalition Government and the Australia (TIA), ‘Australian former Labor Government both committed political parties out-of-step with to finalising Australia’s membership of the voters’, TIA website, 2016. Open Government Partnership as soon as practicable. Australia was due to finalise its membership in July 2016, but preparation of the required National Action Plan was put on hold when the election was called.

187 Same-sex marriage Mary Anne Neilsen, Law and Bills Digest

During the 44th Parliament the debate about same-sex marriage further intensified, Key Issue triggered, in part, by international developments in the United Kingdom, Same-sex marriage remains on the New Zealand, the United States and political agenda with the debate Ireland where same-sex marriage is now now focused on the Government’s permitted. The debate was spurred on by commitment to hold a plebiscite. the introduction of a raft of private members Bills and, finally, by the Coalition party room decision in August 2015 to reject a policy change allowing a conscience Same-sex marriage has been on the political vote on same-sex marriage adopting, agenda in Australia for several years, as instead, a proposal to put the matter to part of the broader debate about the legal a popular vote after the 2016 election. recognition of same-sex relationships. The right to marry remains the one significant area of difference between the treatment of A popular vote by plebiscite same-sex and heterosexual relationships. Since the election, Prime Minister Advocates of marriage equality argue it is Turnbull has stated that, in keeping with important to move quickly to remove this the Coalition’s election commitment, last remaining obstacle to full legal equality. the Government will introduce into the However, while there has been a shift in Parliament a Bill for the holding of a plebiscite community and political opinion, for some on same-sex marriage as soon as is the issue of same-sex marriage remains practicable and most likely in early 2017. complex and controversial raising human rights, social and religious questions. In Australia, the terms ‘plebiscite’ and ‘’ have quite distinct meanings. The Marriage Act 1966 (Cth) defines marriage At national level, a referendum is a vote to as ‘the union of a man and a woman change the Constitution, subject to strict rules to the exclusion of all others, voluntarily set out in section 128 of the Constitution entered into for life’. This definition was and with a binding outcome. Legally a inserted into the Marriage Act in 2004. referendum to decide the Commonwealth’s power over same-sex marriage is not Since the 2004 amendments 18 Bills dealing necessary. The High Court has determined with marriage equality or the recognition of that, in the Same-sex marriage case, the overseas same-sex marriages have been federal Parliament has the power to legislate introduced into the federal Parliament. with respect to same-sex marriage. No Bill has progressed past the second reading stage and, consequently, no Bill In contrast, a national plebiscite is a vote has been debated by the second chamber. by citizens on any subject of national All 18 Bills have been private members’ significance but which does not affect Bills, introduced by members of Parliament the Constitution. Plebiscites are normally from across the political spectrum. advisory and do not compel a government to act on the outcome. There have only

188 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT been three national plebiscites – two on point to its potential to be divisive and incite conscription during World War I and one homophobic hatred. They also argue human on the choice of a National Song in 1977. rights issues affecting a minority should be decided by a representative Parliament The Government has not yet announced the and that Parliament has not in the past and full details of the framework for the plebiscite. should not now, abrogate its responsibilities The enabling Act for the plebiscite, expected on important human rights issues. to be introduced later this year, would most likely set out the purpose of the plebiscite The ALP is opposed to a plebiscite and and enable a vote to be conducted by the went to the election promising to introduce Australian Electoral Commission. The Act a Marriage Equality Bill within 100 days may specify any actions expected of the if elected to office. Opposition Leader Government as a result of the plebiscite. It Bill Shorten has left open the option of may set out the rules for approval such as bringing a private member’s Bill to push whether it must be approved by a simple for a conscience vote rather than a majority of votes nationally, or by a double plebiscite. Independents and minor parties majority—meaning it must win the majority have expressed a range of views. The of votes nationally AND win in a majority of Australian Greens, Senator Xenophon, the states. The enabling Act should also Mr Wilkie, Ms McGowan and Mr Hinch specify whether voting will be compulsory or support same-sex marriage, preferring a voluntary, although there has been debate parliamentary vote rather than a plebiscite. about whether a compulsory plebiscite may Mr Katter, Senator Lambie and Senator be subject to a constitutional challenge. Hanson oppose same-sex marriage. Some argue that the Act should specify the actual question to be put to the electors. Prime Minister Turnbull has indicated that The Attorney-General Senator Brandis has Coalition members will not be bound by the indicated that, in his view, and subject to outcome of the plebiscite. However, he is cabinet approval, the question will be kept in no doubt that, if the plebiscite is carried, simple to avoid confusion. Voting would be an overwhelming majority of Members and compulsory, and counting the vote would Senators will vote for the subsequent Bill be by electorates with a majority of votes that would permit same-sex marriage. nationally required to be successful. Decisions about possible public funding of the yes and no case will be a matter for Cabinet. Further reading Public and political opinion D McKeown, A chronology of Public attitudes, gauged in a recent opinion same-sex marriage bills introduced poll, suggest that support for a plebiscite has into the federal parliament: a quick waned, due in part to the realisation of its guide, Research paper series, non-binding nature and the cost involved. 2016-17, Parliamentary Library, Canberra, UPDATED July 2016. Those in favour argue that social issues like marriage should be resolved by means M Neilsen, Same-sex marriage: of direct democracy such as a plebiscite. issues for the 44th Parliament, Those opposed to a plebiscite argue it is an Research paper series, 2015- expensive opinion poll, (its estimated cost 16, Parliamentary Library, being $160 million) with no guarantee that Canberra, 8 September 2015. Parliament will heed the result. Opponents

189 The Commonwealth’s role in animal welfare Claire Petrie, Law and Bills Digest

Neither the Code nor the legislation specifically bans any form of testing, Key Issue including cosmetic testing. The states and territories have primary The Industrial Chemicals (Notification and responsibility for animal welfare issues. Assessment) Act 1989 (Cth) (ICNA Act) However, the Commonwealth’s role provides national standards for cosmetics in this area continues to be a source imported into, or manufactured in Australia. of debate, particularly in regards to The Cosmetics Standard 2007, issued the regulation of animal testing of under the ICNA Act, requires imported or cosmetic products and ingredients, manufactured cosmetics and cosmetic and the development and policing ingredients to be registered with the of animal welfare standards. National Industrial Chemicals Notification and Assessment Scheme (NICNAS) and undergo assessment for their human health and environmental impacts. Animal welfare is predominantly dealt with at a state level, with animal welfare laws in ACCORD, the association for the hygiene, force for each state and territory. Additionally, cosmetic and speciality products industry, animal welfare codes of practice exist for has stated that animal testing of cosmetic farming and research animals, although products and ingredients is not currently they are not legally binding in most states. undertaken by the industry in Australia. Enforcement of animal welfare laws is generally shared between the RSPCA and state and territory government agencies. Proposed ban on cosmetic testing As part of its policy platform for the 2016 The Australian Constitution does not refer election the Coalition announced its intention specifically to animals (except fisheries) and to ban cosmetic testing on animals from 1 therefore the Commonwealth’s responsibility July 2017. The proposed ban will apply to for animal welfare issues arises largely in the testing of finished cosmetic products and relation to international trade and treaties. cosmetic ingredients on animals in Australia To date, this has primarily encompassed and the sale of products and ingredients quarantine, wildlife protection, health and tested on animals outside of Australia. the live export trade (see ‘Regulating live exports’ elsewhere in this briefing book). The Coalition’s policy announcement brought it in line with that of the ALP and the Greens. Regulating cosmetic testing The ALP’s Ethical Cosmetics Bill 2016 on animals was introduced as a private member’s bill following a public consultation process. This A complex array of Commonwealth and bill and the Greens’ End Cruel Cosmetics state laws regulate animal testing for Bill 2014 sought to insert new offences cosmetic products. The use of animals relating to the testing and sale of cosmetics in scientific testing is regulated by state tested on animals into the ICNA Act, but and territory laws which are underpinned both lapsed without being debated. by the Australian Code for the Care and Use of Animals for Scientific Purposes.

190 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT An independent office of National animal welfare standards animal welfare Until 2014 the Commonwealth contributed The administration and promotion of animal funding to the Australian Animal Welfare welfare laws is currently the responsibility Strategy (AAWS). The AAWS was originally of administrative bodies in each state and endorsed in 2004 by the then Primary territory, typically located within the relevant Industries Ministerial Council, and was aimed agriculture or primary industries department. at creating a more consistent and effective Federally, the Department of Agriculture and animal welfare system. Following a 2005 Water Resources (DAWR) is responsible for review of Model Codes of Practice for the animal welfare issues arising in regards to Welfare of Animals, the AAWS was tasked live export and international agreements. with replacing these with national, legally enforceable standards and guidelines. Concerns that the current regulatory approach gives rise to possible conflicts The Australian Government ceased funding between the interests of primary industry the AAWS as part of its 2014–15 Budget and animal welfare, have led to calls for an measures. Animal Health Australia, a independent, federal animal welfare body. not-for-profit public company, has been Prior to the 2016 election, the ALP promised commissioned by DAWR to manage the to establish an independent Office of Animal process of developing the Australian Animal Welfare, responsible for providing advice Welfare Standards and Guidelines. and oversight on a broad range of animal welfare issues, with equal involvement from The Productivity Commission’s draft the Commonwealth, states and territories. report on the regulation of Australian agriculture, released in July 2016, found In June 2015 the Greens introduced the a national approach to the setting of Voice for Animals (Independent Office of animal welfare standards, with sufficient Animal Welfare) Bill 2015, which sought to flexibility to address local circumstances, establish an independent statutory authority to be desirable. It recommended the focusing on Commonwealth-regulated establishment of an independent body to activities such as the live export trade. develop national standards and guidelines. A 2015 inquiry by the Senate Standing Committee on Rural and Regional Affairs and Transport recommended that the Bill not be passed, finding that the substantive functions Further reading of the proposed body were already achieved R Dossor, ‘Cessation of animal through existing mechanisms. The Coalition welfare assistance in destination supported this recommendation, stating countries and Australian Animal that an independent office would result Welfare Strategy’, Budget in significant cost to the Commonwealth, Review 2014–15, Research requiring enabling legislation, relocation paper series, Parliamentary costs and ongoing specialist expertise Library, Canberra, 2014 whilst adding a layer of bureaucracy.

Productivity Commission, Regulation of agriculture—Draft report, Canberra, July 2016, (Chapter 5)

191 Regulating live exports Claire Petrie, Law and Bills Digest and Rob Dossor, Economics

Regulatory regime Key Issue The export of live animals is regulated by the Australian Meat and Live-stock Industry Act In the 44th Parliament the 1997, the Export Control Act 1982 and the Government worked to streamline regulations and instruments issued under the regulatory regime for live animal these Acts. The Export Control (Animals) exports and to establish and re- Order 2004 sets out the conditions for export open export markets. However, and requires the exporter to hold a livestock evidence of supply chain breaches export licence and permit and provide a has sustained debate about Notice of Intention for export. Exported the efficacy of the system and livestock must meet importing country enforcement role of the Department requirements. This may include mandatory of Agriculture and Water Resources. pre-export quarantine and the issuing of a health certificate confirming the animal meets health protocol requirements as negotiated between Australia and the importing country. Why export live animals? According to the UN Department of Economic Exporters must also comply with the and Social Affairs, Australia is the largest Australian Standards for the Export of seaborne exporter of live cattle and second Livestock and have in place an approved largest exporter of live sheep. The question Export Supply Chain Assurance System arises as to why Australia exports live animals, (ESCAS). The ESCAS was initially rather than as chilled or frozen meat. implemented for Indonesia following the 2011 live export ban and subsequently Generally speaking, countries with large rolled out to all countries. The system Islamic populations often require meat imports requires the exporter to establish a system to comply with halal certification. While many of control for transporting livestock to a Australian abattoirs have this certification, particular country, including tracing all importers often choose to import live animals livestock through an independently-audited and rely on domestic abattoirs for processing. supply chain up to the point of slaughter. A number of countries also use live imports as a form of industry development, as it enables Compliance with the system is primarily the importing country to keep the added monitored through independent audits, value in their country. Cultural preferences, which are submitted to the Department such as the demand for freshly slaughtered of Agriculture and Water Resources meat (purchased in ‘wet’ markets, which (DAWR) during the year at a frequency are generally open and non-refrigerated) dependent on the facility’s risk rating. dictate that the animal is slaughtered locally and recently. Similarly, availability of Enforcement refrigeration in some countries which import livestock is limited, requiring animals to be A 2015 Departmental review found imported live and slaughtered locally. the system to be an ‘administratively burdensome regulatory arrangement’, but nonetheless effective in improving animal welfare outcomes. It noted the inherent

192 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT difficulty of requiring exporters to oversee The Government has also focused on off-shore entities not subject to Australia’s establishing new export markets in China, regulatory requirements. The review Cambodia and Thailand, and has reopened recommended greater industry responsibility trade to Bahrain, Iran, Lebanon and Egypt. for managing risks within supply chains, and clearer non-compliance guidelines. Continuing concerns In response to non-compliance findings, Reports of incidents on livestock carriers DAWR can: suspend or revoke an export and documented cruelty in importing licence or use of a facility/supply chain; countries have sustained debate about the impose conditions on an ESCAS approval effectiveness of the regulatory regime and or licence and/or refer the matter to the the future of the livestock export trade. Commonwealth DPP. Animal welfare advocates and some exporters have In June 2016 the ABC broadcast footage expressed frustration with the absence of Australian cattle being beaten with of strong enforcement action by DAWR, sledgehammers in Vietnamese abattoirs. which has primarily responded to non- The industry-run Australian Livestock compliance by imposing conditions on Export Council suspended exports export licences and ESCAS approvals. to three abattoirs and announced an independent inquiry into the systems in In July 2016 DAWR cancelled the licence place to support ESCAS requirements of exporter Frontier International Agri, in Vietnam. DAWR subsequently after a consignment of dairy heifers suspended 21 facilities in Vietnam and sent to Japan tested positive for Bovine directed two Australian exporters to Johnes Disease, causing Japan to cease supply to the Vietnam market. suspend its cattle trade with Australia. The incident prompted debate about Recent developments the Department’s role in responding to non-compliance, with the ALP and Since the 2013 election, the Coalition Greens calling for the establishment of an Government has sought to streamline independent office of animal welfare (see the regulatory scheme by: ‘The Commonwealth’s role in animal welfare’ elsewhere in this briefing book). The Coalition  introducing a risk-based audit framework has resisted such calls, arguing the existing in which audit frequency is determined by regulatory framework is sufficiently robust. the facility type, its inherent risks and the compliance history of exporters  removing the requirement for a Memorandum of Understanding to be in Further reading place for each new export market which C Petrie, Live export: a chronology, sets out the conditions under which the Background note, Parliamentary live trade can proceed and implementing Library, Canberra, 18 July 2016. ‘Approved Arrangements’ between DAWR and an exporter which remove L Ferris, ‘The effectiveness the need for exporters to obtain approval of the Exporter Supply Chain for each consignment. These will be Assurance System’, Flagpost mandatory for exporters from 1 January blog, 24 May 2013. 2017.

193 Family law reform and family violence Mary Anne Neilsen, Law and Bills Digest

Furthermore, where there is a clash between these two interests, the safety of children Key Issue is to be prioritised over the benefits of a meaningful relationship with both parents. Debate about family law has focused on how the system has The effect of these reforms is as yet unclear. dealt with the complex problems However, as Chief Justice Diana Bryant of family violence. The issues are has frequently said, legislative amendment challenging and are likely to remain alone does not suffice and without a focus for the new Parliament. resources these reforms are inadequate.

Reviews and inquiries Recent political debate about family law has The last ten years have seen a plethora of focused on how the system has dealt with reviews and inquiries into family law matters the complex problems of family violence. As including the issue of family violence and various studies have indicated, families with child abuse. In one of the more recent complex needs, including violence, are the inquiries the Coalition Government has predominant clients of the family law system. tasked the Family Law Council to inquire The issues are challenging and important and into Families with Complex Needs and the will continue to keep family law reform on the Intersection of the Family Law and Child political agenda during the 45th Parliament. Protection Systems. Due to be given to the Attorney-General in June 2016, this inquiry Legislative reform is a response to ‘the growing concerns about the separation of the federal family The Australian Parliament has already paid law and state and territory child protection considerable attention to proceedings relating and family violence systems and the risks to family violence in parenting under the to children’s safety associated with this Family Law Act 1975. Amendments in 2012 situation’. One recommendation from the made under the then Labor Government interim report relating to state and territory were significant and intended to place family interim family violence protection orders and violence at the centre of parenting cases. their interaction with parenting orders under Under the Family Law Act judges now have the Family Law Act was implemented in 2015. two primary considerations when assessing what is in the best interests of the child: The Council of Australian Governments (COAG) has also been active. In  the benefit to children of having a recognition of the fact that a whole-of- meaningful relationship with both of their government and community response parents and is required to address family violence,  the need to protect them from physical COAG established an Advisory Panel on or psychological harm, including being Reducing Violence against Women and subjected or exposed to violence. their Children. The Panel delivered its final report to COAG on1 April 2016.

194 PARLIAMENTARY LIBRARY BRIEFING BOOK | KEY ISSUES FOR THE 45TH PARLIAMENT The family courts with a family tribunal made up of people from ‘mainstream Australia’. Respected The recent history of the family courts has members of local community, social and been marked by controversy and criticism health groups would be invited to participate. about their handling of family violence matters (family courts, in this brief, generally Chief Justice Diana Bryant has been drawn refer to the Family Court of Australia and into this debate. While she can see some the Federal Circuit Court of Australia). value in putting minor matters before a tribunal, the Chief Justice argues that the Professor Patrick Parkinson has described One Nation policy is simplistic. As she says, the courts as ‘almost dysfunctional’, noting abolishing the court would raise constitutional that lack of resources and federal funding, issues. In a speech given in 2015 the Chief plus their exponentially increasing workload, Justice articulates clearly the needs of has led to unacceptably long delays. The the courts. On the subject of resourcing courts have also angered fathers’ advocacy she commended the Government’s $100 groups for a perceived bias against shared million Women's safety package aimed at parenting. Criticism has also come from addressing family violence but is concerned women’s legal services who argue the courts that the crucial role of the courts (and the are failing to protect women and children corresponding necessity of resourcing them seeking protection from family violence. properly) has not to date been recognised as part of addressing family violence. In the weeks before the election Rosemary Batty, former Australian of the Year, addressed the issue of violence and family law with the major political parties. In Further reading conjunction with Women’s Legal Services Australia she presented a petition calling J Philips et al, Domestic violence: for reform and urging the political leaders issues and policy challenges, to adopt the following five step plan to Research paper series, 2015–16, prioritise safety in the family law system: Parliamentary Library, Canberra, 24 November 2015.  develop a specialist pathway for cases involving family violence D Bryant, The family courts and family violence, speech  reduce trauma and support victims, presented by the Hon Chief including legislative protections that Justice Diana Bryant AO to the prevent victims from being directly cross- Judicial Conference of Australia examined by their abuser Colloquium, 10 October 2015.  intervene early and provide legal help for the most disadvantaged  support victims to recover financially  strengthen the understanding of all family law professionals on family violence.

More recently the Family Court has received renewed publicity. Pauline Hanson and the One Nation party platform propose that the Family Court be abolished and replaced

195