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Output 1.1 - Economic and Industry Policy

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Output 1.1 Economic and industry policy
Performance indicators
Advice and support to the Prime Minister and assistance in coordination of government policies on economic, industry, infrastructure and environment issues,* including on presentation of the government’s decisions in these areas.

Manage and coordinate the work programme of the Council of Australian Governments.
Quality: The degree of satisfaction of the Prime Minister, the Prime Minister’s Office and the departmental Executive, as expressed through formal and informal feedback mechanisms, with the quality and timeliness of advice and the achievement of key tasks.

Annual evaluation of Budget preparation and coordination process and ad hoc internal evaluation of major policy advising activities.

Cost of outputs - $9.6m

* Administrative responsibility for natural disaster relief was transferred from International Division to Industry, Infrastructure and Environment Division on 22 November 2002.

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Qualitative assessment

Methodology

The Prime Minister, the Prime Minister’s Office and the departmental Executive provided feedback on Output 1.1. The assessment of our performance by these key stakeholders assisted us to refine our systems, procedures and work practices and determine priorities.

The group adopted a flexible approach to the allocation of responsibilities and resources, allowing us to manage a number of highly complex issues simultaneously, while maintaining the throughput of day-to-day work.

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Feedback

Output 1.1 was assessed as having provided effective and timely advice, briefing and support on economic, industry, infrastructure, environment and resource policy issues.

Feedback from our key stakeholders indicated that Economic Division played an important role in the development of the 2003-04 Budget. In particular, the division supplied early strategic advice on budget processes and priorities and, with the Cabinet Secretariat, supported the consideration of budget proposals by Cabinet and the Expenditure Review Committee of Cabinet.

Feedback also indicated that we played an important role in the development of the government’s medical indemnity reform package and in ministerial meetings on insurance sector reform. As in previous years, feedback also indicated satisfaction with the role we played in providing advice and support for the effective operation of COAG, and our secretariat support to the Sustainable Environment Committee of Cabinet and the Strategic Investment Coordinator.

Broad satisfaction was indicated with the work of Industry, Infrastructure and Environment Division across the gamut of industry, environment and infrastructure matters.

Feedback indicated that the work of the Energy Taskforce Secretariat has assisted ministerial consideration of a number of key energy policy areas.

Formal individual performance reviews provided further feedback at all levels. Additional feedback was provided through regular meetings, formal discussions with the Prime Minister’s Office and contact with the departmental Executive.

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Key results

Economic Division

Financial sector policy

In 2002-03, the Economic Division advised the Prime Minister on a number of significant reforms to the financial sector.

The division played a particularly significant role in the development of the government’s medical indemnity package. The department chairs the Medical Indemnity Taskforce that coordinates policy development and advises ministers on options for addressing the affordability and adequacy of medical indemnity insurance.

More broadly over 2002-03, problems in the general insurance market were impacting on the provision of important community and private sector services. The division advised the Prime Minister on reforms to improve the affordability and availability of public liability and professional indemnity insurance. The Australian, state and territory governments met on a number of occasions and introduced a significant number of such reforms. We advised the Prime Minister on the Australian Government’s role in promoting national consistency in tort law reform among state jurisdictions, a major determinant in reducing pressure on premiums. Our advice also extended to insurance coverage against loss caused by acts of terrorism.

The division advised the Prime Minister on the HIH Royal Commission recommendations and the preparation of the government’s response. We also advised the Prime Minister on reforms to address community concerns about auditor independence and corporate disclosure. This work included analysis of proposals contained in the ninth instalment of the Corporate Law and Economic Reform Programme legislation, to claw back directors’ bonuses paid in the lead-up to a company becoming insolvent, and disclosure of executive remuneration.

The division continued to provide advice on reforms to the prudential framework for superannuation in response to the findings of the Superannuation Working Group.

We also participated in the Review of the Commonwealth Government Securities Market process, which reported in the 2003-04 Budget, and advised the Prime Minister on the range of options it presented to government.

Economic conditions and analysis

This year was a particularly testing one for the Australian economy in the face of the worst drought in a century, global economic weakness, the war in Iraq and other international tensions. The division provided economic assessments and advice for the Prime Minister with respect to those issues and their impact on the Australian and international economies. The division also conducted analyses of domestic developments such as the outlook for consumption, household wealth, business investment and the housing cycle.

On a quarterly basis, we continued to conduct macroeconomic forecasting of the Australian economy as part of our participation in the Joint Economic Forecasting Group (JEFG). The JEFG is an interdepartmental committee that provides economic forecasts and assessments to the government. The JEFG forecasts formed the basis of the Mid‑Year Economic and Fiscal Outlook in November 2002 and the 2003-04 Budget.

Fiscal policy

Economic Division provided advice to the Prime Minister on fiscal strategy and the budget position, and worked with other divisions to ensure the consistency of the department’s advice in all policy areas. We also provided advice on the achievement of the government’s strategic policy framework within overall fiscal objectives.

In addition we advised on debt management policy, on Commonwealth-State financial arrangements and on emerging public financial management issues such as private financing of public infrastructure.

The division played a significant role in the 2003-04 budget process by again supporting the Prime Minister in his role as Chairman of the Expenditure Review Committee of Cabinet, and provided coordinated advice to the Prime Minister and senior ministers on expenditure and revenue options.

The division conducted an evaluation of the 2002-03 budget process, in consultation with other divisions and the Prime Minister’s Office, and contributed to a broader evaluation conducted with other central agencies. The results of the evaluations were taken into account in planning for the 2003-04 Budget.

Taxation and superannuation policy

The division provided advice to the Prime Minister and his office on a wide range of tax issues throughout 2002-03, including:

  • revenue proposals in the context of the 2003-04 Budget
  • personal income tax cuts
  • the Review of International Taxation Arrangements by the Board of Taxation
  • the government’s business tax reforms (primarily in relation to consolidation and the simplified imputation system)
  • goods and services tax issues as they emerged.

The division also made a significant contribution to the Energy Taskforce Secretariat’s consideration of fuel excise reform and to the deliberations of the Work and Family Taskforce. We also provided advice on philanthropy related tax issues raised by the taxation subcommittee of the Prime Minister’s Community Business Partnership.

We continued to provide advice on a number of the government’s superannuation related election commitments, including choice of superannuation, portability of superannuation, the reduction of the superannuation surcharge and the government co‑contribution for low-income earners. The division also contributed to the government’s response to the High Court’s decision in Austin & Anor v. The Commonwealth of Australia (2003),which dealt with the application of the superannuation surcharge to state judicial officers.

Workplace relations policy

In 2002-03, the division prepared advice for the Prime Minister on the government’s workplace relations reforms, including the government’s response to the Royal Commission into the Building and Construction Industry, the expansion of the Commonwealth’s unfair dismissal scheme, and the Australian Industrial Relations Commission’s role in the Safety Net Review.

We continued to brief the Prime Minister on issues relating to the operation of the General Employee Entitlements and Redundancy Scheme and contributed to the government’s submission to the Australian Industrial Relations Commission 2002-03 Safety Net Review of wages.

Demographics

Responding to the challenges of an ageing society is one of the government’s strategic priorities. Economic Division coordinated the department’s advice to the Prime Minister on the development of policy to respond to the ageing of Australia’s population and participated in the interdepartmental taskforce focusing on challenges posed by an ageing society, which was chaired by the Treasury. In this context, advice was provided to the Prime Minister on retirement incomes, workforce participation (with a particular focus on mature age workers), and managing expected increases in government spending in areas affected by demographic change.

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Industry, Infrastructure and Environment Division

Strategic reorganisation

In an address to the Committee for Economic Development of Australia in November 2002, the Prime Minister identified areas that are key whole-of-government strategic policy issues for the medium term. These included issues on which the Industry, Infrastructure and Environment Division provides core policy advice and analysis: science and innovation; sustainable environment; energy; rural and regional affairs; and transport.

To reflect the government’s strategic approach to those issues, the Industry, Infrastructure and Environment Division was reorganised during 2002-03 to enhance effort on natural resource management issues - particularly water and vegetation management. A new Natural Resource Management Branch replaced the Rural and Environment Branch. Responsibility for rural issues, previously handled by the Rural and Environment Branch, was transferred to the Infrastructure and Regional Policy Branch. Changes were also made within the Industry Policy Branch to establish a specialist area to deal with competition and energy policy issues.

Regional and rural policy

The division undertook activities of particular significance to regional and rural Australians during 2002-03, including:

  • assisting with implementing a series of drought relief measures, including changes to Exceptional Circumstances assistance, the provision of one-off income support, and other drought initiatives such as small business interest rate relief
  • assisting in the development of the Sugar Industry Reform Programme, designed to assist cane growers and help ensure the industry’s long-term viability
  • participating in Exercise Minotaur, the national simulation of a foot and mouth disease outbreak.

We also provided advice on a range of policies aimed at improving services in rural and regional Australia.

Natural disaster management oversight

Responsibility for the department’s oversight role in relation to natural disaster management was transferred during 2002-03 from International Division to the Infrastructure and Regional Policy Branch. The division chaired the annual meeting of the Commonwealth Counter-Disaster Taskforce in December 2002, as well as meetings held with relevant departments and agencies in the wake of the bushfires that occurred in January 2003 - particularly those in Canberra and surrounding regions. We were also involved in the development of the Disaster Mitigation Australia Package, aimed at reducing the economic and social costs of natural disasters.

Communications policy

The division provided advice on communications and information technology issues, including issues surrounding the implementation of the social bonus programmes funded by the partial sale of Telstra, and the government’s consideration of the November 2002 report of the Regional Telecommunications Inquiry.

Transport policy

In the transport policy area, we advised the Prime Minister on:

  • measures to improve the provision of road and rail services across Australia, including the development of the Auslink Green Paper, which aims to achieve better integration of land transport infrastructure
  • reform of the Civil Aviation Safety Authority to strengthen its accountability and improve the levels of industry consultation
  • other policies and programmes to improve the efficiency and safety of transport networks across Australia.

Commonwealth-state relations

The division coordinated arrangements for a COAG meeting held on 6 December 2002. The meeting agreed on significant initiatives in a range of important policy areas, including counter-terrorism, handgun control, public liability insurance, and indigenous child protection.

We also coordinated the establishment of a review of the Mutual Recognition Agreement and the Trans Tasman Mutual Recognition Arrangement.

Sport and tourism

The division provided advice on the development of the Tourism Green Paper released in June 2003. The division was also closely involved from an Australian Government perspective in planning for major international sporting events to be held in Australia, including the 2003 Rugby World Cup, the 2005 Deaflympics and the Melbourne 2006 Commonwealth Games.

Industry, science and resources

As well as general industry policy issues, the division provided advice on a number of major industry, science and resource issues during 2002-03, including:

  • development of new assistance arrangements for the Australian automotive industry for the period 2005 - 06 to 2014 - 15
  • development of a new pharmaceutical research and development programme to replace previous assistance arrangements in 2004 - 05
  • review of the National Biotechnology Centre of Excellence selection process
  • implementation of Backing Australia’s Ability initiatives
  • establishment of the Science and Innovation Committee of Cabinet
  • work of the Prime Minister’s Science, Engineering and Innovation Council
  • establishment of the National Research Priorities
  • restructuring of government support for the Australian Magnesium Corporation.

Competition and energy policy

During the year the division also provided advice on:

  • developing an Australian Government strategy for a joint Commonwealth-state response to the recommendations of the COAG Energy Market Review (the Parer review), and the need for a national energy policy framework
  • establishing the Prime Minister’s Energy Taskforce of officials, and enabling the smooth functioning of the Energy Committee of Cabinet
  • facilitating the Timor Sea Treaty negotiations, which provided a framework for the development of Timor Sea oil and gas resources to the benefit of Australia and East Timor
  • assisting in the preparation of the government’s responses to the Productivity Commission report on the National Access Regime, and the Review of the Competition Provisions of the Trade Practices Act (the Dawson review).

In addition, we advised on the development and implementation of the National Strategic Framework for Attracting Foreign Direct Investment and the restructuring of Invest Australia, and on the future of National Competition Policy and associated payments to the states beyond the expiry of the current agreements that underpin the policy, in 2006.

Natural resources policy

The division provided support and advice in several emerging areas of natural resources policy. We led the development of terms of reference for a Productivity Commission inquiry into the impact on landholders of regulations for the management of native vegetation and other ‘non-water’ natural resources, and the development of an Australian Government position on property rights over natural resources, particularly water. A water taskforce, which includes officials from a number of agencies, was established within the division for the purpose of progressing the issue of water access rights on a whole-of-government basis.

We also led the Australian Government’s participation in negotiations with Queensland over a proposal to reduce land clearing in that state, and to meet the Australian Government’s objectives relating to greenhouse emissions abatement, biodiversity conservation, and reduced land degradation.

The division also provided advice on the:

  • continuing implementation of the $1.4 billion National Action Plan for Salinity and Water Quality agreed to by COAG in November 2000
  • implementation of a $1 billion extension to the Natural Heritage Trust
  • continuing development of a national approach to coastal management
  • implementation of Australia’s Oceans Policy
  • review of the Australian Government’s fisheries policy and issues relating to illegal fishing, particularly in northern Australia and the Southern Ocean
  • development of the Great Barrier Reef Water Quality Protection Plan
  • management of cultural and natural heritage issues.

We continued to provide secretariat support for the Sustainable Environment Committee of Cabinet. With regard to environmental issues, the division also advised on the:

  • Energy Committee of Cabinet’s consideration of the tax treatment of cleaner fuels and measures to encourage the adoption of renewable fuels, including biofuels
  • development of a forward strategy for climate change for Australia, encompassing domestic and international elements, through Cabinet and COAG processes
  • development of climate change action partnerships with the United States, Japan and New Zealand
  • introduction of a new formal consultation process between the Australian Greenhouse Office and the Industry portfolio, on greenhouse issues.

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Energy Taskforce Secretariat

The Energy Taskforce Secretariat was established in January 2003, charged with developing a comprehensive and coordinated national energy policy. The taskforce reports to the Energy Committee of Cabinet and comprises high-level representatives from the department; the Treasury; the Department of Transport and Regional Services; the Department of Industry, Tourism and Resources; Environment Australia; and the Australian Greenhouse Office. It is chaired by Russell Higgins, Associate Secretary, and supported by a cross-portfolio secretariat located in the department. The taskforce is scheduled to conclude its work in November 2003.

During 2002-03 the taskforce played a role in ensuring a high degree of coordination in the development of policies related to energy, and prepared a number of memoranda to be considered by the Energy Committee of Cabinet. One was an overview paper addressing seven broad areas of energy policy: market development; resource and/or industry development; energy security; environment; energy efficiency or productivity; innovation; and revenue. The taskforce also advised on excise reforms, announced in the 2003-04 Budget, which established a transition period for bringing all fuels into the excise net from 1 July 2008.

The Associate Secretary also chaired an industry - government working group responsible for examining ways of improving consumer confidence in ethanol. Secretariat members were also involved in the preparation of advice to ministers on ethanol related policy issues.

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