Output 1.1—Economic and industry policy

Page Index

• Feedback on performance
• Key results

Feedback on performance

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

The assessment of our performance by our key stakeholders helped us to refine our systems, procedures and work practices and to determine priorities.

As in previous years, feedback also indicated satisfaction with our role in providing advice and support for the effective operation of COAG.

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Key results

The year 2004–05 presented a range of challenges to the two divisions responsible for Output 1.1, the Economic Division and the Industry, Infrastructure and Environment Division. As the following sections describe, the department continued to meet and exceed expectations in delivering advice and supporting the formulation and implementation of economic and industry policy.

Economic Division

The Economic Division is the Prime Minister’s principal policy adviser on macroeconomic, financial sector, budget, taxation, superannuation and workplace relations issues.

Economic conditions and analysis

The Economic Division contributed to the development of sound macroeconomic policy through briefing the Prime Minister and the departmental Executive on Australian and international economic conditions and prospects, and on the potential implications for the domestic economy of specific policy proposals. The Economic Division’s briefings were also an input to advice on public policy prepared by other divisions of the department.

The division prepared detailed economic forecasts as part of its participation in the Joint Economic Forecasting Group (JEFG). The JEFG is chaired by the Department of the Treasury and includes the Reserve Bank of Australia, the Department of Finance and Administration and the Australian Bureau of Statistics. The group’s forecasts form the basis of the estimates contained in the budget papers and the Mid-year Economic and Fiscal Outlook.

The division’s activities also included:

• researching current and prospective economic issues, such as the implications of the increase in Australia’s terms of trade
• bolstering the division’s analytical expertise to make our economic forecasts and policy advice more robust, including through improvements to our economic-modelling capabilities
• upgrading our programme of liaison with the private sector to deepen our understanding of economic developments.

Financial sector policy

The division advised the Prime Minister and the departmental Executive on a number of financial sector policy matters.

In 2004–05, the division continued to be closely involved in medical indemnity insurance matters, including the government’s commissioning of an independent review of competitive neutrality in the sector.

The division also provided advice to the Prime Minister on corporate governance reforms, including:

• a package of measures designed to facilitate shareholder participation in corporate governance while avoiding excessive costs to companies and their members
• the adoption of International Financial Reporting Standards on 1 January 2005, including a three-year transitional period for the purposes of the thin capitalisation regime.

Work on the interests of investors and consumers and on business compliance costs included:

• financial literacy initiatives, including the recommendations of the National Consumer and Financial Literacy Taskforce
• public liability and professional insurance matters, including the April 2005 ministerial meeting on insurance issues, held in Darwin and attended by an officer of the division
• compliance costs associated with recommendations of the Financial Action Taskforce on Money Laundering.

Fiscal policy

The division advised the Prime Minister on fiscal strategy and the budget outlook. The division continued to work with other divisions to ensure that the department’s advice in all policy areas followed the appropriate budget processes and was consistent with the government’s fiscal priorities.

Key areas of policy advice included the Future Fund, Commonwealth–state financial arrangements, and funding for Australia’s response to the Indian Ocean tsunamis crisis.

The division played a significant role in the 2005–06 Budget process by advising the Prime Minister and senior ministers on expenditure and revenue options and by supporting the Prime Minister in his role as Chairman of the Expenditure Review Committee of Cabinet. To assist the government in delivering its election commitments, the division supported a special meeting of the committee in late 2004 to consider those commitments that were due to start in 2004–05.

In consultation with other divisions and the Prime Minister’s Office, the division conducted an evaluation of the 2004–05 Budget process, and contributed to a broader evaluation conducted with the departments of Finance and Administration and the Treasury. The results of the evaluations were taken into account in planning for the 2005–06 Budget.

Taxation policy

During the year, the Economic Division provided advice to the Prime Minister on a wide range of tax matters, including:

• developing and implementing the government’s small-business election commitments
• further reforming Australia’s international tax arrangements, culminating in the announcement of new measures in the 2005–06 Budget
• reforming and simplifying the petroleum resource rent tax and associated gas transfer price regulations to provide greater certainty for taxpayers
• introducing a new mature-age worker tax offset to encourage and reward mature-age participation in the labour force
• reforming the income tax law to ensure that deductions are not allowed against income derived from criminal activities
• introducing a compensation package and legislative changes to preserve and promote the capacity of charities and non-profit organisations to carry out their work
• implementing the reforms to fuel taxation and business credits announced in Securing Australia’s Energy Future (the Energy White Paper) on 15 June 2004
• implementing the election commitment for a 30 per cent child care tax rebate to cover families’ out-of-pocket child care expenses.

Superannuation policy and demographics

During the year, the division provided advice to the Prime Minister on:

• implementing the government’s choice of superannuation fund policy
• reforming Australian Government superannuation arrangements, including by moving to a fully funded accumulation scheme for employees commencing from 1 July 2005, and implementing choice for those employees
• abolishing the superannuation surcharge.

Workplace relations

The Economic Division participated in the interdepartmental committee on workplace relations reform and advised the Prime Minister and the departmental Executive on options for further substantial reform of Australia’s workplace relations system, including working towards a single, national system. This work culminated in the government’s A New Workplace Relations System reform package.

The division also prepared advice on implementing the government’s response to the recommendations of the Royal Commission into the Building and Construction Industry affecting government, and on the 2005 Safety Net Review case in which the Full Bench of the Australian Industrial Relations Commission adjusted federal award rates of pay.

Industry, Infrastructure and Environment Division

The Industry, Infrastructure and Environment Division is the Prime Minister’s principal policy adviser on microeconomic, industry, infrastructure and environment and resource issues.

Competition and energy policy

During the year, the division provided advice on a number of competition and energy policy matters, including:

• microeconomic reform issues involving
  • advice leading to the agreement to a review of National Competition Policy (NCP) and development of options for a further microeconomic reform agenda at the 3 June 2005 COAG meeting. The National Competition Policy Review Taskforce commenced work in mid-June. The secretariat comprises senior officials from this department; the departments of the Treasury, Industry, Tourism and Resources, and Transport and Regional Services; and the Australian Competition and Consumer Commission.
  • the Productivity Commission review of NCP reforms
  • the National Competition Council’s 2003–04 assessment of the Australian, state and territory governments’ progress in implementing NCP commitments
• the implementation of measures announced in Securing Australia’s Energy Future, on 15 June 2004
• Productivity Commission work in areas such as the reviews of Part X (international liner cargo shipping) of the Trade Practices Act 1974, the smash repair and insurance industries, and the Australian and New Zealand competition and consumer protection regimes
• trade practices issues, such as the implementation of the government’s response to the Review of the Competition Provisions of the Trade Practices Act 1974 (known as the Dawson Review), and the Senate Economics References Committee inquiry into the effectiveness of the Act in protecting small business
• assistance provided to industry, including applications for assistance through the government’s Strategic Investment Coordination process, an example of this being the assistance provided to Hawker de Havilland for work on Boeing’s ‘Dreamliner’ project
• Australian Government negotiations with the Government of East Timor over maritime boundaries and associated resource access issues.

Industry, science and resources

During 2004–05, the division advised on a wide range of matters concerning industry and research, including:

• the effects of bilateral trade agreements on various manufacturing sectors
• the abolition of the 3 per cent tariff under the Tariff Concession Scheme, announced by the government on 10 May 2005
• the operations of the Prime Minister’s Science, Engineering and Innovation Council.

Tourism and sport policy

The division provided a range of advice on tourism policy, including aspects of the implementation of the Tourism White Paper launched by the Prime Minister on 20 November 2003. We also advised on sports policy matters, including the Australian Government’s contribution to the staging of the Melbourne 2006 Commonwealth Games, drugs in sport, the Building a Healthy, Active Australia initiative to address childhood obesity, and sports-related assistance measures.

Intergovernmental relations

The division coordinated arrangements for the COAG meeting held on 3 June 2005. COAG agreed to initiatives in a range of policy areas, including health, national competition policy, skill shortages, climate change, indigenous affairs, child pornography, infrastructure and the National Water Initiative.

The division also provided advice in other areas of intergovernmental relations, such as the Cross-jurisdictional Review Forum Report on the Evaluation of the Mutual Recognition Agreement and the Trans-Tasman Mutual Recognition Arrangement.

Small business

The division provided advice on policies and programmes to improve the regulatory environment in which small businesses operate, including the $50 million Regulation Reduction Incentive Fund.

Regional and rural

The division advised on the development of:

• the Australian Tsunami Warning System—Indian and Pacific Oceans, which will provide 24-hour surveillance for accurate and early detection and warning in the event of a tsunami threatening the west coast or east coast of Australia, or South-West Pacific nations
• drought relief measures
• the response to the COAG Inquiry on Bushfire Mitigation and Management, which was released on 24 January 2005
• new cost-sharing arrangements for emergency plant pest responses
• responses to the citrus canker plant disease outbreak in Queensland.

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

Transport

In the transport area, the division provided policy advice on various domestic and international aviation, road, rail, maritime and infrastructure matters, including:

• funding and implementation arrangements for AusLink, the Australian Government’s $12.5 billion land transport initiative
• a new national approach to maritime emergency towage arrangements around the Australian coastline
• measures to improve Australia’s search and rescue capability
• the Exports and Infrastructure Taskforce.

Communications and information technology

Our work on communications policy included advice on:

• the possible further sale of the government’s Telstra shareholding
• the regulatory framework for competition in telecommunications
• new price controls to apply to Telstra
• regulatory settings for next-generation networks and emerging voice services, such as voice over internet protocol services
• the policy framework for the introduction of digital radio
• the statutory reviews of various elements of digital television regulation.

We provided advice on copyright policy, including on unauthorised access to, and use of, subscription television broadcasts, and on the review of the 1 per cent cap on licence fees paid to copyright owners for playing sound recordings on radio.

Natural resource and environment policy

The division advised the Prime Minister and the departmental Executive on the development of the government’s natural resource management and environmental policy agenda. We worked closely with other agencies to coordinate and implement this agenda, two major items of which were water reform and the Tasmanian Community Forest Agreement.

Water policy

The department is responsible for whole-of-government coordination of water policy. In 2004–05, the Industry, Infrastructure and Environment Division’s key activities in this area included coordinating implementation of the National Water Initiative (NWI), implementing specific elements of the NWI, advising on water policy issues, and coordinating and participating in whole-of-government policy processes. To perform these tasks, we liaised with officials from the National Water Commission (NWC) and the departments of the Treasury; Agriculture, Fisheries and Forestry (DAFF); the Environment and Heritage (DEH); and Transport and Regional Services. We will continue to play either a direct or a coordinating role as the activities detailed in the NWI plan are implemented.

The division was heavily involved in the establishment of the NWC as a statutory agency within the Prime Minister’s portfolio, which occurred with the passage of the National Water Commission Act 2004, and we coordinated the appointments of commissioners and a chief executive officer to the commission.

The division chaired and provided secretariat support to the Water Trading Group, which is assisting with the implementation of the critical trading provisions of the NWI. The group includes representatives from New South Wales, Queensland, the South Australian and Victorian State premiers’ departments and line agencies, the Murray–Darling Basin Commission, the NWC and DAFF. We coordinate with DAFF and DEH in the areas in which they are lead agencies, including in servicing the Natural Resource Management Ministerial Council, the Murray–Darling Basin Ministerial Council and the Environment Protection and Heritage Council, and in activities associated with the Murray–Darling Basin Commission and the Living Murray initiative.

The division provided advice on programmes under the $2 billion Australian Government Water Fund and liaised with the NWC and DEH on the establishment and implementation of those programmes for which they are responsible.

Tasmanian Community Forest Agreement

The division led the group of Australian Government officials who, together with counterparts from the Tasmanian Government, developed the Tasmanian Community Forest Agreement announced by the Prime Minister and the Premier of Tasmania on 13 May 2005. This involved working closely with senior officials and technical experts from DAFF and DEH to develop advice for the Prime Minister and other ministers, conducting detailed negotiations, and supporting the Prime Minister in the announcement of the agreement.

The division chaired the task group set up by the Prime Minister after the announcement to develop advice on implementing the elements of the agreement relating to the clearing of native forest. The group included officials from relevant Australian Government portfolios, the Tasmanian Government, Tasmanian farmers and graziers, and private forestry interests. The department also consulted other stakeholders.

Other policy advice

The Industry, Infrastructure and Environment Division advised on a range of other natural resource management and environmental policy matters during 2004–05, including:

• progressing the government’s response to the Productivity Commission report Impacts of Native Vegetation and Biodiversity Regulations
• the continued implementation of the $1.4 billion National Action Plan for Salinity and Water Quality and the $3 billion Natural Heritage Trust
• combating illegal fishing in Australia’s Exclusive Economic Zone, including through improved surveillance of northern zone and Southern Ocean fisheries
• fisheries management, including of prawn fisheries in Torres Strait and other northern Australian waters
• marine conservation, including the protection of whales, the ongoing implementation of ocean policy and regional marine planning, and the provision of structural adjustment assistance to fishers affected by changes in zoning in the Great Barrier Reef Marine Park
• protection of historic heritage places, including advice on Commonwealth heritage legislation and policy.

The division provided advice on various domestic climate change matters during the year. In particular, we liaised closely with other agencies on the implementation of the government’s initiatives under Securing Australia’s Energy Future (the Energy White Paper) and on key developments. We advised the Prime Minister in the context of COAG on domestic climate change policy, the development of a regulatory approach to the capture and storage of carbon dioxide, and the Productivity Commission inquiry into the economic and environmental potential offered by energy efficiency. We also prepared advice on Australia’s approach to evolving international discussions about ways to deal with climate change.

The division has been actively involved with key agencies in finalising the proposed National Packaging Covenant and progressing consideration of other waste management policy issues.

Biofuels Taskforce

On 30 May 2005, the Prime Minister announced the appointment of a taskforce to examine the latest scientific information on the impacts of the use of ethanol and other biofuels on human health, environmental outcomes and automotive operations, and to assess the costs and benefits of biofuel production. A small whole-of-government secretariat based in the department was formed to support the taskforce. The secretariat comprises senior officials from this department, the Commonwealth Scientific and Industrial Research Organisation, the Australian Bureau of Agricultural and Resource Economics, and the departments of the Environment and Heritage; Industry, Tourism and Resources; and Education, Science and Training.

The taskforce will report to the government by the end of July 2005.