7152

CABINET-IN-CONFIDENCE

Memorandum 7 152

C A B I N E T M I N U T E

Canberra, 25 June 1990

No. 13865

Furthering State Involvement in Microeconomic Reform

The Cabinet noted the Memorandum.

Copy No. 48

Secretary to Cabinet

This document is the property of the Australian Government and is not to be copied or reproduced

CABINET-IN-CONFIDENCE

[1]

Title

Date

Originating Department(s)

CABINET -IN-CONFIDENCE

~ FOR CABINET MEMORANDUM No __ 71j.j --~

COPY No.··········-······ .. . ..

FURTHERING STATE INVOLVEMENT IN MICROECONOMIC REFORM

15 June 1990

Treasury, Finance, Prime Minister and Cabinet and Industrial Relations

Cabinet Minute No 13682 (SA) of 1 May 1990 requested a further paper on progressing State

._..I . ..:l.....,,\UJ-"'jjoo,( ...,._,_ . , .· • • .., reform.

Legislation

Consultation: Departments consulted

Is there agreement?

Cost: . This fiscal year . year 2 . year 3

o examine Commonwealth options to progress State microeconomic reform and to describe a ~ strategy for consideration involving fiscal and ~ non-fiscal aspects.

Attorney-General's Department (A-Gs) advises that no legislation is needed to give effect to the conclusions. (A-Gs prepared ATTACHMENT Don the Commonwealth's non-fiscal legislative · powers.)

N/A

N/A

N/A

------~----------------------------~ 11067/85 This document is the property of the Australian Government and is not to be copied or reproduced

CABINET-IN-CONFIDENCE . II&.

[2]

\.UUIIItH ·111-\.0iliiU~nUJ

2

BACKGROUND

Ministers have examined Cabinet Memorandum No 7012 of

27 April 1990 which discussed the importance of encouraging

the States and Territories in further microeconomic reform

(major points summarised at ATTACHMENT A).

2. As a result, Ministers agreed (Minute No 13682 (SA) of

1 May 1990) that the Departments of Treasury, Finance, Prime

Minister and Cabinet and Industrial Relations undertake

further work on Commonwealth options to progress State

microeconomic reform through both consultation and more

material measures. This Memorandum examines those options

and describes a strategy to involve the States in further

reform.

3. The strategy involves a mix of fiscal and non-fiscal

levers. The evidence of the last few years is that placing

the States under fiscal pressure has necessitated their

undertaking some microeconomic reform. Officials also felt

that there was considerable scope to use non-fiscal levers to

pursue State microeconomic reform, focusing on existing

consultative and other suitable fora, in particular the

Industry Commission, and perhaps extending to a special

Premiers' Conference on microeconomic reform after the

Commonwealth budget.

STATE REFORMS

4. Details of the States• initiatives to enhance the

performance of a number of their GBEs are contained in

ATTACHNEBT B. In an overall sense New South Wales is

currently involved in the most far-reaching program of

reform, covering grain handling, the railways, electricity

generation, ports, urban transport, and rural water supply.

States such as Western Australia and Tasmania do not appear

to be pursuing change as actively as the rest, while Victoria

and South Australia have undertaken some limited reform of

electricity generation, the ports and water supply. Victoria

has also undertaken some rationalisation of its

non-metropolitan rail services.

Cabinet -In-Confidence

[3]

.. La brnet -In-Confidence 3

5. At the individual industry level, most current change

seems to be taking place in the ports where, under the weight

of the Commonwealth's waterfront initiatives, the States more

generally are engaged in activities to reform pricing

structures, rationalise workforces, improve profitability and

manage their assets more efficiently. Nationally, further

scope for change exists in most States in the areas of

electricity generation, the railways, urban transport, water

supply and land development reform (with local government).

Even in New South Wales there is considerable distance to

travel on the reform path.

What is inf luencing the refoPD process at the State and

Territory l e v e l?

6. Factors advancing the pace of reform:

(a) the States are beginning to see the need for reform and

to recognise that microeconomic reforms are themselves

worth pursuing for their net benefits;

(b) fiscal discipline by the Commonwealth has encouraged

the States to seek efficiencies in their activities;

and

(c) Commonwealth reforms have provided a lead (but further

Commonwealth reform is essential to maintain the

momentum).

7. Factors impeding the pace of reform:

(a) there are inherent difficulties faced by both the

Commonwealth and the States in unwinding entrenched

interests and inefficiencies;

(b) there is residual resistance to change because of the

perGeived difficulties in capturing electoral credit

for reforms when the costs are immediate but the

benefits accrue slowly; and

(c) the scope for concerted reform is not sufficiently

understood.

Union attitudes

8. The States need to adopt industrial relations

strategies that address the key issues in achieving improved

efficiency in the workplace and secure the involvement and

co-operation of the trade union movement. Trade unions have

Cabinet -In-Confidence ,

[4]

Cabinet -In-Confidence 4

demonstrated a willingness to co-operate in the reform

process: where they are effectively involved in the planning

and implementation of labour restucturing programs; and

where the benefits of reform are clear to the union

membership in terms of skill enhancement, better training,

improved career prospects and appropriate mechanisms for

dealing with displaced employees. ATTACHMENT C provides

further detail.

Consti tut i onal Limitat i ons 9. The Constitution limits the scope of the Commonwealth

to take direct action in engaging the States in reforms

within areas of State responsibility. The Commonwealth does

not possess plenary power over the economy (including over

microeconomic reform). However, it possesses a number of

powers, ranging from the 'Territories' to the 'Defence'

power, to pursue (either directly or indirectly)

microeconomic reform in certain areas within State control.

The formulation of practical and politically acceptable

policies utilising these powers is, of course, another

matter. And the regulatory approach implicit in examples

that come to mind is antithetical to micro reform.

10. Existing legislation such as the Pr ices Su rve illance

Act 1983 and the Tr ade Practices Act 19 47 could be amended to

cover the States and State GBEs, subject to relevant

Constitutional prohibitions and guarantees. However, as

evidenced by the States' strong resistance to any application

of the Trade Practices Act to their activities, any such

extensions would face strong opposition. But the States

could tap into the expertise of, say, the Prices Surveillance

Authority on an informal basis.

11. ATTACHMENT D provides more detail.

COMMONWEALTH OPTIONS

FISCAL .MEASURES

12. When the Treasurer brings forward his submission on the

offer to the .states at the Premiers' Conference for consideration, Ministers may wish to consider the incentive

and pressure which might be exerted on the States to

accelerate the process of microeconomic reform. The level of


[5]

\.UUII1tii-UI-\.UIIIIU~IIl6

5

both grants and borrowings can influence the States. Options

to continue the progress achieved by using the Commonwealth

fiscal leverage over the States in recent years are discussed

below.

A. Continuing the degree of general fiscal restraint when

providing general purpose payments to the States.

(i) This would maintain pressure on the States to

improve the efficiency of their business

enterprises. Subsidies paid by the State

general government to their business

undertakings totalled $2.4 bil)ion in 1987-88 -

at around 5 per cent of general government

outlays this provides a measure of the potential

for improved efficiency of States' business

undertakings to benefit the States' financial

position.

(ii) One option could be to justify a real reduction

in general revenue grants in 1990-91 by

specifically referring to the scope for enhanced

efficiency in State enterprises and to

foreshadow modest real declines in general

purpose payments over the medium term on these

grounds.

(iii) The Treasurer's Premiers• Conference/Loan

Council submission will address these and

related issues.

B. Instruct the Commonwealth Grants Commission to exclude

certain State business undertakings (not so far

excluded) from the scope of fiscal equalisation.

(i) This will ensure individual States bear the full

consequences of their inefficient business

undertakings.

(ii) This is, however, not something that can be

implemented immediately or in the near term,

without overturning a timetable agreed at the

1989 Premiers' Conference for regular reviews of

Grants Commission methodology. The Grants

Commission is examining this issue in its


[6]

lu o1ne1 -ln-lonnaence 6

current inquiry into methodology. After the

Commission's report is received in June 1990 the

Commonwealth and States will discuss the terms

of reference for the Commission's next major

review of general revenue grant relativities.

One option will be for the terms of reference to

direct the Commission to exclude business

undertakings from its assessment with effect

from the beginning of the next quinquenium

1993-94. This option will need to be considered

in the context of the Grants Commission's

overall conclusions and recommendations, but

Commonwealth ~nterest in this proposal could be

foreshadowed in the Premiers' Conference context

as the Commonwealth's tentative position in the

expectation that this would provide an incentive

to the States to accelerate their GBE reforms.

C. Provide a certain amount of money for specific purpose

grants tied to micro-reforms in specific areas - eg

finance redundancies, develop infrastructure, training.

(i) This option would provide States with more

capacity and incentive to undertake micro-reform.

(ii) Although the financial pay-offs for the States

of micro-reforms can be substantial they may

emerge slowly, whereas the present costs of

reforms can be significant. Any additional

funding would desirably contain "sunset clauses"

so the commitment is not open-ended.

(iii) However, dangers in the Commonwealth's adopting

an interventionist approach and attempting to

'buy• reform from the States include: it

encourages the perception that the Commonwealth

is responsible for reform, rather than the

States. Joint Commonwealth/State involvement

may also mean no Government accepts

responsibility for the success or failure of reform . It involves the Commonwealth in

detailed administration of reform - eg which


[7]

lODtner -ln-Lontldence 7

projects would be eligible for funding -

something which is best left to the States.

Each State will demand a 'share' of the

assistance regardless of whether all have high

priority projects warranting funding.

(iv) If the specific purpose grants were an addition

to general revenue assistance otherwise payable

to the States there would be a cost to the

Commonwealth's Budget and to macroeconomic

policy settings and less financial pressure on

the States to undertake micro-reform in the first place. If the specific purpose grants

were funded from a further reduction in general

revenue grants the impact on some, particularly

the smaller States, could be large and it would

reduce States' Budget flexibility.

(v) There should not be any need to buy

microeconomic reform, as it should provide its

own fiscal benefits to the States. Providing

grants would doubly reward the States. However

costs tend to be up front, and benefits can be

slow to accrue, which suggests the need to

finance reform. Financing reform through

borrowings has the added benefit that it

encourages the States to ensure that the

benefits of reform are attained to fund its

financing.

D. Tie a certain amount of the Global Borrowing Limit

allocated to States to micro-reform in specific areas.

(i) This option also provides States with more

capacity to finance micro-reform where the major

pay-offs are in the future.

(ii) It has the advantage, relative to grants, that

States have to ensure that the reform can pay

its way. It means that there is less danger of

States undertaking projects simply to get a

Commonwealth hand-out and less requirement for

the Commonwealth to closely administer access to

funds. Any special Global Limit allocation for

this purpose could be temporary.


[8]

\.UUIII~I-UI•\.UIIIIU~IIlt:S

8

(iii) States currently allocate their global limits

according to their own priorities - including

projects which are directed at micro-reform.

Individual States can also seek special

additions to their global limits from Loan

Council, if they have large reform projects

which cannot be accommodated within their

existing limit. The Treasurer's Premiers'

Conference/Loan Council submission will be

considering the level and distribution of the

States' global borrowing limit.

(iv) Establishing a special category of global limits

for micro-reform:

(a) may lead to pressures for a significant

expansion of the overall Global Limit,

something which may be inconsistent with

the requirements of macroeconomic policy;

(b) would decrease States' flexibility to

allocate their total borrowing program

between the "best" projects; and

(c) would give the States the incentive to

spend the money on relatively less

worthwhile projects since it is not

available for other purposes (although this

should be moderated by the need to finance

the borrowings) perhaps needing to apply

lower rates of return to proposals for

borrowings for reform.

NOH-FISCAL MEASURES

13. The Commonwealth could take a number of non-fiscal

measures to encourage further progress.

Premiers • Conference/Loan Counci l (PC/LCl

14. The Prime Minister's letter to the Premiers advising

them of the date of the PC/LC noted that some initial

discussion of microeconomic reform at the Conference could

usefully promote co-operation on these matters. As the Prime

Minister's letter suggests, PC/LC processes would need to be

limited to a general scene-setting discussion of micro reform

which could:


[9]

9

(a) acknowledge the importance of micro reforms in the

Commonwealth and State Government economic strategy and

for the future wellbeing of the community; and

(b) emphasise the need for Commonwealth/State co-operation

and that we can learn from, and assist, each other.

Speci al Pre miers • Conference o n Micro reform

15. An additional option is for the Prime Minister to

invite the States, if there are indications of sufficient

interest, to participate in a special Premiers' Conference on

micro reform. One of the States could host the Conference

while others could lead on chosen items, but the Commonwealth

would need to be in the Chair. Attendance would be limited

to heads of Government - ie this would not be a "Summit" with

business, unions, etc participation but focus on State

governments.

16. A number of States could be invited to present papers

on their experiences with micro reform to expose best

practices and, indirectly, bad practices or laggards and to

draw on each other's experiences. States could also be

invited to suggest agenda items for discussion and for future

Commonwealth/State consideration and co-operation. Attention

would need to be given to reform of strategic industry

sectors within State areas of responsibility, while placing

the onus upon the States to bring forward reform proposals.

However, areas where joint Commonwealth/State action is

imperative (especially road/rail reform) could also be

covered.

17. The States will have a number of criticisms of

Commonwealth policy towards them with efficiency implications

which they may want to see put on the agenda, for example:

(a) duplication by the Commonwealth of State regulation,

taxation and administration; and

(b) the poor and distorting revenue bases the Commonwealth.

leaves to the States.

18. The objective of such a Conference should be largely to

raise community awareness of the need for micro reform and

the issues involved. It would need to be clear that it could

not reopen the fiscal parameters already established for

1990-91 (indeed State budgets would largely be bedded down by


[10]

LODiner -ln-lonfidence 10

the time of any special conference). Nevertheless, it is

inevitable that States will see the occasion as a platform

for discussing financial needs. A Commonwealth overview

paper (together with other papers on specific issues) could

be distributed well before the Conference which could set its

parameters.

Other Commonwealth/State Consultative Mechanisms

19. There are various major consultative committees,

consisting of Ministers and senior officials, in areas

targeted for microeconomic reform. These are listed in

ATTACHMENT E. They could be further utilised for promoting

the importance of structural reform to the States, for

drawing attention to State advances in micro reform, and to

allow comparisons of progress between the States. In

particular, they provide avenues for addressing a wide range

of regulatory impediments to efficiency brought about by

unco-ordinated activities and objectives of the Commonwealth

and the States. Ministers have, for example, recently

addressed a better way of handling food regulation.

Economic Planning and AdVisory Council

20. There are ongoing opportunities to utilise EPAC

meetings and EPAC research to provide informed public debate

on structural reform. For example, as well as its recent

paper on microeconomic reform, EPAC has in train a discussion

paper entitled "Federal/State overlap in functions and

regulations", which will seek to bring together the views of

State and Commonwealth agencies. If there were to be a

Special Premiers' Conference EPAC could be asked to

contribute a paper (or papers), eg drawing on its recent

publications.

Indust~ Commission

21. As the Commonwealth's major review and inquiry body on

industry matters, the Industry Commission is set to play a

key role as a catalyst for structural change in Australia.

The Commission's current work program - which extends to the

end of 1991 - includes a number of references which involve

significant State interests, particularly the recent

references sent to the Commission dealing with energy


[11]


generation and distribution, rail transport, and statutory

marketing arrangements. The States a~d Territories have been

consulted on the terms of reference for these three important

inquiries. The full work program of the Commission is at

ATTACHMENT F.

22. The Industry Commission can be used as an educational

tool and to exert persuasive pressure for reform on the

States . The potential for the Commission to involve the

States in reform could be increased:

(a) by inviting the States to propose topics for inclusion

in the Industry Commission's rolling forward work

program (next considered by Ministers in July/August

for announcement by ~he Treasurer in the Budget

context). The Prime Minister could write to States and

Territories accordingly;

(b) in its yearly review of microeconomic reform in various

sectors of the economy, the Industry Commission could

provide information on progress by the States and

Territories. This would expose States to pressure to

match progress made by other governments;

(c) Commission resources could be made available at a

State's request to provide particular expertise on

specific microeconomic reforms;

(d) staff interchange arrangements could be formalised; and

(e) the States could be approached to propose names of

experts that could be seconded to the Commission, on

the understanding that individuals would be considered

on their merits and not employed/appointed in a State

representative capacity.

Microeconomic Reform in t he Medi um Te rm

23. There may be more scope for the Commonwealth to take

additional measures to encourage the States to undertake

microeconomic reform in the period beyond the current

budgetary cycle.

(a) The Industry Commission is scheduled to report in 1991

on statutory marketing arrangements for primary

products, energy generation and distribution, and rail


[12]

\.U UII n:a -ui-\.UIIIIUtill\.ti

12

transport. The Commonwealth may have scope to assist the States, if necessary, in the implementation of some

of the more difficult and costly recommendations that

may flow from these reports.

(b) The States could also be asked to develop specific

proposals which could be considered on their respective

merits at next year's Premiers' Conference, ie not at

the proposed special Premiers' Conference.

(c) Pressure will continue in the medium-term for the

Commonwealth to "seed" reform through specific purpose

grants. This is likely to come to a head in addressing

the proposal for a national freight initiative for

rail. Further, road funding may, as recommended by the

Inter-State Commission report, involve changes to the

way in which the Commonwealth and States share revenue

raising and expenditures. If the Commonwealth were in

a position to announce (eg in the next Budget) in

principle decisions on those matters, then the detail

of fiscal commitments would need to be worked out for

future years. These aspects are in addition to the

medium term impact of the fiscal options.

CONCLUSIONS

24. Given the key and significant role of State business

enterprises in the economy outlined in the previous

Memorandum No 7012, officials are of the view that the

package of measures along the lines discussed in this

Memorandum has much to commend it. On balance the measures

which officials assessed as meriting the consideration of

Ministers are:

(a) maintaining the fiscal pressure on the States through

the Premiers' Conference and the Loan Council. It

would be more appropriate for pressure to continue to

be exerted through grants, with sufficient room left in

borrowings to allow the funding of reform. It should

be made clear to the States that the needs of

microeconomic reform have been taken into account in

setting the global limits;


[13]

r...oolneT-In-lonTiaence 13

(b) encourage microeconomic reform through existing

consultative fora, including EPAC, by making the

resources of the Industry Commission available to the States, and through a special Premiers' Conference on

microeconomic reform, the objective being both to make

the benefits of reform more transparent, and to assist

the States in implementing reform;

(c) offering the States access to the services of the

Prices Surveillance Authority on an informal basis.

25. Officials felt that it would not be wise to attempt to

set agendas for the States. States need to make their own

difficult choices, and face the trade-offs between reforms

with high rates of return, and those with wider microeconomic

benefits.

26. The Premiers' Conference presents an ideal opportunity

to raise further the profile of microeconomic reform, and to

impart some momentum:

(a) the Treasurer may consider emphasising the need for

microeconomic reform in his scene-setting remarks, and

making a very close link between the offer to the

States and their major role in the reform process:

(i) to be followed up by the usual haggling process,

and the consideration of 'special additions' to borrowings;

(ii) it would also present an opportunity to ~ the

Commonwealth's interest in pursuing the

efficiency issues currently the object of the

Grants Commission's methodology, eg the

exclusion of GBEs from the relativity

calculations;

(iii) it would also be an opportunity to signal the

Commonwealth's desire to encourage and assist

the States in the reform process through

appropriate consultative mechanisms.

27. The Commonwealth could indicate that its support

extended to participating in a special Premiers• Conference

on the strategy and mechanics of microeconomic reform should

the States want it:

(a) on the understanding that the fiscal parameters would

not be up for renegotiation;


[14]


(b) the aim of the conference would oe to focus on

strategic industry sectors to exchange information on

best practice issues;

(c) officials felt that if such a conference was held, the

Commonwealth would need to have tight control over the

agenda;

(d) one of the States could be invited to host the

conference with the Commonwealth retaining the Chair.

28. In the medium-term, once in-principle decisions are

made on road and rail reform, the detail of fiscal

arrangements will need addressing.


[15]


ATTACHMENT A

MAJOR POINTS OF RELATED CABINET MEMORANDUM

Cabinet Memorandum No 7012 noted that:

the States - and especially their GBEs - have a very significant impact on the national economy and the success of the Commonwealth's structural reform program depends in an important way on State participation;

unwinding entrenched interests and inefficiencies is no easier for the States than it is for the Commonwealth. And reform can bring adjustment costs. But the net benefits of microeconomic reform in terms of overall resource allocation and national welfare are substantial:

the IAC has estimated that microeconomic reform could raise Australia's real GDP over time by 5 per cent (even without allowing for dynamic benefits). Reforms at the State level contribute significantly to achieving these gains;

the pursuit of broad-based structural reform, with its advantages in lowering net adjustment costs (as each sector finds adjustment easier to the extent it benefits from efficiency gains in other adjusting sectors) and in achieving equitable burden sharing (so that no one sector feels it is being singled out for adjustment) is enhanced by State participation in reform processes.


[16]

ELECTRICITY GENERATION AND SUPPLY

Corporate structure/ ministerial oversight

r"\ Q a::r -· :::s CD ~

I -:::s I ,...._

ElecUCJtity pricing

= ...... -· c.. CD ~ ~ CD

New South Wales

The Electricity Commission (Elcom) is responsible to the Minister for Minerals and Energy for power generation and its bulk transmission throughout New South Wales. 25 local governnent authorities distribute electricity within their areas of responsibility except to several large industrial consumers and the SRA which are supplied direct by Elcom. Moves are afoot to corporatise Elcom and to rationalise the county councils' operations.

Elcom charges a uniform bulk rate tariff to the local government authorities regardless of the cost of supply to particular areas. Local government authority charges are approved by the Minister and take account of each authority's different cost structure.

Victoria

The State; Electricit'y Commission is a body corporate operating under the State Electricity Conmission Act. Conmissioners, appointed by the Minister for Industry Technology and Resources, are responsible for the operations of the Conmission.

Generally uniform tariffs within classes regardless of the cost of supply. Steps are, however, being taken to reduce the cross-subsidisation of domestic and rural consumers. The average increase in prices is not to exceed the Melbourne CPI increase for the previous year.

Queensland

The Queensland Electricity Commission (QEC) set up under the Electricity Act and reporting to the Minister for Resources is responsible for the generation and transmission of electricity to seven electricity boards and certain major customers. The Minister for Resources recently announced an inquiry into QEC, the first since 19n.

The QEC is required to set 'fair and reasonable prices' and to seek to equalise progressively prices throughout the State within particular tariff groups. QEC has a goal of limiting tariff increases to half those of the CPI until 1994.

Western Australia

The State Energy Conmission of Western Australia (SECWA) is responsible to the Minister for Economic Developnent and Trade for the supply of electricity and gas in Western Australia.

SECWA is to have regard to the special needs of persons who reside outside the cities and the townships. Uniform tariffs within classes apply regardless of the cost of supply. SECWA plans to hold tariff increases below the level of increases in the

Perth CPl.

South Australia

The Electricity Trust of South Australia (ETSA) set up under its own Act is responsible to the Minister for Mines and Energy for the prodJct ion and distribution of electricity in South Australia.

Some restructuring of tariffs took effect from 1 July 1988 following a review of energy pricing and tariff structures. Nonetheless, uniform tariffs within classes apply, regardless of the cost of supply continues.

ETSA has sought to restrain tariff

increases below the increase in the CPI in recent years.

Tasmania

The Hydro-Electric Conmission is a statutory body administered by a Board of Conmissioners responsible to the Minister for Resources and Energy.

Prices are set to encourage industrial and commercial activity in Tasmania. Uniform tariffs within classes regardless of the cost of supply. Tariff increases have been held below increases in the CPI in recent years. A review of tariffs is being

considered, however, given the parlous position of Tasmania's finances.

Northern Territory

The Power and Water Authority (PAWA) is responsible for the generation and supply of electricity throughout the Territory. It reports annually to the Minister in accordance with the provisions of the Financial Administration and Audit Act.

Uniform tariffs within classes

-· :::s C'D .....

I -::s I ,...._

0 :::s ...... apply, regardless -· of the cost of C.. supply. Electricity~ prices have been ~ restrained since C'D 1986.

t

' t • • . c

[17]

Employment and work practices

t "~ n Clate of return :Grgets .and :::alit.n t lrlg

~tices ::::(..,

'""' CD

New South Yates

Elcom is hoping to complete a 30 per cent reduction in its workforce over the past two years by 30 June. It is considered that there is scope for further staff reductions and irrproved efficiencies through the elimination of restrictive work practices and revised shift work arrangements. Some contracting out has been t.ndertaken and greater use of private colleries is being made for fuel supplies.

No explicit financial targets have been set for Elcom except that it should endeavour to reduce costs in real terms and achieve an appropriate return on assets. It is required to pay a dividend to the State Government . Its accounts are based on historical cost conventions and are constructed on an accrual basis.

Victoria

Some sl ighi: reductions were made in employment levels in the five years to the end of 1988-89. The Conmission has pi ans to shed a further 3000 workers by 30 Jt.ne 1990.

The SECV is required to achieve a real rate of return on the wr i tt en do1«1 replacement cost of assets of 4 per cent and pay a dividend of up to 5 per cent of public equity.

Queensland

Errployment has been reduced by over 30 per cent since the end of the 1983-84 financial year. Restrictive. work practices have been reduced and greater recourse has been had to outside contractors.

At this point in time, QEC is not obliged to meet a financial target or to pay a dividend to the ·State Government.

\~estern Australia

SECYA has increased its workforce in recent years but rising output has seen productivity levels increasing.

A 3 per cent levy applies to specific metered sales of electricity. Apart from this, SEC\IA is not required to meet any other financial target. Its accounts are constructed having regard to historical costs and accrual methods.

South Australia

ETSA has reduced its workforce only marginally in recent years. Indeed, in the middle of the 1980s productivity irrprovements were non-existent.

ETSA is not obliged, at this time, to meet any financial or dividend targets. Consideration is, however, being given to setting it a rate of return target. A levy equivalent to 5 per cent of revenue from electricity sales is paid to the South Australian Treasury.

Tasmania

The HEC has reduced its workforce by over 15 per cent since 30 June 1985. It plans to further reduce its workforce in future years.

A 5 per cent surcharge is irrposed on all retail electricity sales except for pensioner accot.nts. A separate consurrption levy paid to State Treasury applies to major industrial users. No other financial requirements are placed on the HEC.

Northern Territory

PAYA increased its workforce in the year to the end of J~.r~e 1989.

PA\IA is required to strive for full cost recovery. Because it contirues to be unprofitable it is not obliged to remit a dividend to the Northern Territory Government.

[18]

Other measures to enhance performance

....

New South \.lales

The New South Uales GoverllllCnt is plaming to corporatise Elcom ard to draw increasing quantities of power from private sector SLppl i ers as a means of encouraging competition in the SLpply of electricity.

Victoria

Like New South: \.lales, Victori'a is planning to de-commission old plant when Loy Yang B comes on stream to reduce overall costs.

Queensland

The Queensland Government ' has been involved in negotiations to sell the Gladstone Power Station to a private sector operator who, in a move to engender some competition, would then sell some of its output into the State grid •

\.lestern Australia South Australia

lntercomection facilities have been developed between South Australia, Victoria ard New South Uales as a means to sharing the capital costs of meeting their demand for electricity.

Tasmania Northern Territory

PA\.IA has sought private sector involvement in the provision of power lines, etc as a means of containing cost pressures and restricting d~nds on limited public. sector investment funds.

. ;

[19]

RAJ LIJAYS


. r-"\ ca cr -· ::s CD .....

I -::s I

r-"\ 0 ~ -· ca.. CD = s

New South IJales

The State Rail Authority consists of Cityrail (for suburban/inter-urban passenger services) and Colntry link (freight and country passenger services- includes sane bus services). Perfonnance indicators are ptbl ished in the anrua l report. Goverrment approval is required of price changes, while ministerial approval for capital investment is required. The investment of surplus funds is restricted to certain areas. In 1988 the NSW Conmission of Audit identified lack of ministerial support for rationalisation proposals as a reason for lack of progress cllri ng a l"lllliler of administrations.

Victoria

Ministerial control of passenger service prices. Investments over $2m require ministerial approval. For metropolitan services, the 15 year plan, MetPlan was released in 1988. The State Transport Authority Plan (STAP) is still being evaluated.

Queensland

Ministerial control of capital investments. General price schedules require approval from the Governor in Council.

IJestern Australia

Ministerial control of capital investments. Price schedules and tendered freight rates must be approved by the Minister. There is currently a public consul tat ion process to develop a 25 year plan. Westrail is exempt from company tax, sales tax, vehicle registration and stamp duty on equipment leases.

[20]

Pricing/quality of service

.r'\ Q cr -· = CD ......

I -= I ~ 0 = ........ -· c::a.. CD :::1 s

New South Wales

The NSW Commission of Audit found that in the absence of adequate information on costs, the prices for freight and passenger services could not be set on a rational basis. Moreover, the full ext~t of i~l icit slhsidies camot be determined. Since 1988 there has been a withdrawal from uneconomic rural services, including line closures. Also, buses have replaced some existing rural passenger services. Cost recovery levels have, however, been low. Nonetheless, SRA is better than V-Line in freight and better than all other systems in metropolitan. It lags, however, in the country passenger area. The NSW government has said that although Booz Allen and Hami ton had "recommended an increase in fares, this was a matter for the government". Transport of coal and minerals will continue to be the major source of revenue, and, as such, attracts significant capital expenditure. The SRA is aiming to reduce coal freight rates by up to 2 per cent real a year over the next three years. It will also progressively eliminate cross-subsidisation in coal freights.

Victoria

Uneconomic non-urban passenger services have been replaced by bus services in some instances. There has also been an injection of capital to modernise rolling stock. Patronage on non-urban passenger services has increased significantly.

Queensland

Uneconomic services such as branch lines and certain

commodity freight is cross-subsidised by coal freight revenues. The pricing of coal includes a substantial royalty c~nt. In the year to June 1989 coal freight revenue was $780m

(70.4 per cent of total revenue). Most capital expenditure has been in the area of coal freight.

Western Australia

Prices for regulated freights are set at rates "which road

transport would charge ••• , assuming charges covered road track costs". Charges for large users are often set by

direct negotiation with the user (for exa~le, grain freight).

1\J 0

r c: c -( . . . . t c •

[21]

Errployment

Financial targets and

· accounting practices, etc

~ Q cr -· ::s CD .....

I -::s I

~ 0

~ -· c.. CD = s Other measures to enhance the commerci al environment

New South Wales

Since 1988 the workforce has been cut by 9, 000 ~l oyees. The current aim is to reduce the workforce by an additional 17,000 (45 per cent) in the next four years. This is presently underway.

The aim is to minimise revenue supplements. The government directly funds community service obligations. Accrual accounting on a historical cost basis. Arn.lal reports are on a commercial basis, by segment, including depreciation. The SRA recoups interest charges on capital from the Consolidated Fund. Debt has tended to be rolled over into new loans. No economic cost-benefit analysis was undertaken for either the XPT or Tangara.

S2.6b is being spent over four to five years on capital rehabilitation. This is an average annual increase of some $150m on the capital investment program for 1987-88. S2b will go to City Rail. Th is will be

spent on capi tal works, upgrading rolling stock, s ignalling, refurbishing stations and graff i t i/vandal ism crackdowns.

Victoria

In the past four years V/Line has shed 4,500 employees. By 1992 4,000 more will be shed (leaving 5,900). A substantial reduction in the suburban rail workforce may also take place in the near future. Notwithstanding a significant improvement in productivity, the lAC has found V/Line to have the lowest productivity of the four State rail systems.

The objective is to meet annual budget targets. The government directly funds community service obligations. Accrual accounting on an historical cost basis.

Queensland

In 1988 there was a reduction of 1,700 employees, and in 1989 1,605 employees were shed (down to 21,645). This was achieved through natural attrition.

Queensland Railways seek to achieve financial balance. No provision is made for depreciation. The government directly funds some passenger concessions and 1reight rates. There is a lack of segmentation in the reporting of operating results (for example, freight, urban, country passenger).

Western Australia

In the year to June 1989 there has been no real change in staff levels although in the five years to 30 June 1989 labour productivity increased by over 40 per cent.

Westrail has been required to achieve a profit on commercial activities in the shortest possible time. Community service obligations are directly funded.

t c t • • . c .

[22]

PORI AUTHOR I I JES


Port authority pricing

New South \lales

Minister oversees corporate goals and financial targets. Maritime Services Board is n~de up of four, largely autonanous, business units. The first corporate plan under current legislation outlines strategy, objectives and

targets for the three years from Jut y 1 1990. Senior ~nagement has recently been replaced.

A revised pricing structure based on user·pays principles will be introduced on July 1 1990. Reform will be gradual.

Victoria

Minister oversees strategy and major investments (and some day·to·day adninistrative matters). Each port authority has a corporate plan. Board members are chosen from interest groups.

A revised pricing structure will be

gradually introduced starting July 1 1990 at Melbourne. Other ports are reviewing their pricing and leasing structures.

Queensland

New government is reviewing the structure and operations of port authorities. The board and senior management of the Port of Brisbane Authority have been changed. Ministerial oversight has been on an ad hoc basis.

A consultant was retained to review pricir.s and leasing at all ports. The relevant task force has since been been disbanded.

South Australia

Department of Marine and Harbours is made up of business and support divisions, a strategic planning group and a regulatory/safety division. Each has objectives and perfor~nce

targets. Minister agrees to annual perfor~nce

(financial, ~rketing and service) targets.

User-pays principles are expected to be adopted in 1990·91.

Yestern Australia

Minister controls pricing, ~jor investments and rate of return targets. Each port authority has a corporate plan. Legislation is being prepared to allow ports greater commercial freedom.

fremantle is a iming to introduce a use•··pays system on July 1 1990. There is a review of other ports'

policies.

Tasmania

Authorities are highly independent (only increases in prices and capital investment funded by loans require government approval). New legislation would let the Minister control corporate planning and major capital investn~nts

of ports and amalga~te the B11rnie and Launceston authorities.

No specific review of pricing is being undertaken Rt present.

Northern Territory

Minister controls strategy, pricing guidelines and

major investments. Darwin Port Authority has a corporate plan.

No specific review of pricing is being undertaken at • present.

[23]

Enployult!nt

Rate of return targets and

accounting practices

c ~ :£' -:::f, ;,·a ' ...• . -'· ::::J . .. : .r-\ ·0 :' :S ...... ..... _..

CL. CD ::s s

Since 1986 there has been a

reduction in staff

of 14 per cent (to a full-t ime equivalent of 2974 in 1989).

Historical cost account ing. No rate of return target has been set. A dividend to the governnent of 6 per cent of revenue is paid.

Lorge decreases in port workforces in

the past tw~ years

have occurred (mainly because He l bourne has reduced its dredging operations and is rationalising its workshop). In 1988·89 Melbourne cut its workforce from 1424 to 1300 (-8.7 per cent).

Melbourne uses both historical cost and

current replacement cost accounting. Its target rate of return is 4 per cent real . The Port of Portland and the Port of Geelong authorities will be required to report on a real rate of return from 30 June 1990. Ports can be required to pay a div idend (maxirrun of 5 per cent).

-Staff at Brisbane In the five years has been cut fran to 30 June 1988 432 in 1976 to 251 there has been a

in 1989 red.Jct ion in staff (·42 per cent) . The from 789 to 690 situation in other (mostly at ports is unknown. Adelaide). A

further cut of

Historical cost accounting. No target rate of return has been set . Brisbane pays a levy on revenue to the governnent of 5.5 per cent.

24 per cent over the next four years is expected.

Current replacement cost accounting is being adopted. A target rate of return of about 8 per cent real is to be reached by

the end of 1992-93.

In the five years to 30 June 1988 there has been growth in staff

nunbers from 660 to 725 <largely at Fremantle). The Public Service Board has in the past cut workforces.

Historical cost accounting. The target rate of return is 3 per cent. A dividend may be paid to the Minister.

In the five years to 30 June 1988 there has been a

red.Jction in staff

from 419 to 345 (mainly at Launceston).

Historical cost accounting. The Harine Board of Hobart publishes its achieved rate of return (2.1 per cent nominal for 1989).

There was a reduct ion of one enployee in the . f ive year period to

30 June 1988 at Darwin.

Historical cost accounting. No rate of return target.

[24]

Other measures to enhance comncrc ial envi ronnent in

ports

r"'. Q

(:_¥ ~

* I

~ a -· g. = '""' .. CD

There is a rev iew of the possible sale of

unproductive assets and land (for example, the recent sale of i ts head office for $65m). Sane operations <pilotage) may be contracted out. Obsolete facilities have been redeveloped (example, Darling Harbour). The government directly stbsidises community service obligations.

Melbourne is rev iew ing its future land _.

requirements. It has been trying to sell the IJorld Trade Centre. In do ing so it has incurred substantial finance costs (for example, in the three years to 30 June 1989 finance charges were 5109.2m). It has reduced its dredging operations, is using contractors and rationalising its workshop operations. There are discussions over the rail-port interface (there is currently truck queues).

-At present there is no specific review into either asset

rationalisation or contracting out. They may be examined in a general government review. There is a review into land transport links.

In the last two years surplus land valued at $30m has

been transferred to other State agencies. Oredging is now carried out by contractors. Accounts separate comnunity service obligations fran coomer c i a l activities _

At present there is no specific review into asset

rationalisation.

New legislation will allow Fremantle to control the provision of towage and other serv ices by licensing . There is a rev iew into land transport links.

At present there is no specific review into either asset rationalisation or

contracting out.

At presL~t there is no specific review into either asset rationalisat ion or

contracting out . Accounts separate community service obligations from conmercial activities.

[25]

STATE GOVERNHENT-I:J.INED GRAIN IIANDLING ENIEI!PRISES

{')

j:, ,.....,. • -=

Corporate structure/ministerial overs ight

Grain handling and storage pricing

, I . 1'""':'\ E mp l oymen t

g ~ -· CL. CD = Q

New !jouth \Jales

The NS\J Grain Handling Authority was replaced by the NS\J Grain Corporation (GrainCorp) on 1 OCtober 1989. GrainCorp is incorporated under the Companies Code (NS\J). Its shares are owned by the Treasurer and four other Ministers ~ni nated by the Premier. The shareholders have appointed nine directors.

GrainCorp pri~es for its •services on a competitive, commercial basis .

Separate charges for domestic storage/handling services and export services were introduced in the f i nanc i a I year ended 30 Septenber 1989 •

Over the three years ended 30 September 1989:

- permanent staff numbers declined from 1089 to 528; and

casual staff numbers dropped from around 1250 to 800.

The new Port K~nbla terminal enploys very few permanent workers con~red wi th its predecessor, the Pyrmont terminal.

Victoria

The Grain Elevators Board (GEB) is a statutory authority and reports to the Victorian Parliament through the State Minister for Transport. The Treasurer of Victoria appoints a non-voting mcnber of the Board of Directors as his representative.

Annual increases in charges must be no greater than the increase in the Consumer Price Index.

GEB is rough! y 75 per cent down the road toward full user-pays pricing.


- permanent staff numbers fell from 611 to 397;

casual staff numbers declined from 151 to 51.

Queensland

Bulk Grains Queensland (BGQ) is a statutory authority and reports to the Queensland Parliament through the State Minister for Primary Industries. An officer of the oversighting department is a member of the Board of Directors.

Charges are reviewed annually .

BGQ policy is to offer conpetitive storage and handling charges.


permanent staff numbers fell from 701 to 472.

[26]

Rate of return ~argets and accounting practices

Other measures to enhance c~1mercial operations

...._, Nt!w South IJales

The ratio of after- tax return on shareholders' funds is considered to be the Corporation's primary indicator of commercial performance. GrainCorp's Statement uf Corporate Intent outlines performance targets for the next three years.

Conventions of historical cost accounting, however, are being adhered to in the preparation of financial statements.

Supplies unaudited accounts every six months to shareholders.

Closure of smaller receival sites.

Maximising the use of casual labour.

Productivity targets.

Market share targets.

Steps to increase revenue from the leasing of sites and the handling of grains other than wheat (diversification).

Victoria

GEB reports are based on both historical and current cost accounting conventions.

Its real rate of return on average assets in service in 1988-89 was negative; the target rate of return

set by the Victorian Government is 4 per cent real.

Greater attention to asset management.

Closure of silos in areas of very low production.

Redundancy packages.

leasing out storages which are surplus to requirements.

Queensland

BGO financial statea~nts are based on conventions of historical cost accounting.

No perforre~nre targets are established.

Marketing measures to attract beef feedlot grain into BGQ storages.

Diversification of handling and storage services.

Greater emphasis on in-house crop forecasting.

Industrial democracy.

Manpower reporting.

[27]

~TER AUTHORITIES · URBAN


r""\ Q c::r -· = CD .....

I

(!f

~ --....... --· ('<Q.. ' CD , ;::::s :S

~ater ' pricing

ref or~

New South Yales

The Minister for the Environn~nt is responsible for the act ivit ies of the Sydney Yater Board in the Sydney, lllawarra and Blue Mountains regions and the Hunter Yater Board in the Newcastle region of the State.

Attempts to introduce •user pays• pr icing have been opposed by the Minister for the Environment, Hr Moore.

Victoria

The Department of Yater Resources has the responsibility of oversighting the activities of 178 water bodies including the He I bourne and Metropolitan Board of Yorks (HHBY).

Some steps have been taken in tariff reform by the HHBY. It now has a fixed rate (based on property values) and an increasing two tier volumetric charge above 150 ld lol i tres. Non -metropolitan agencies, as a whole, have not as yet taken any steps on tar i ff reform. Cononerc i a l consumers continue to subsidise domestic consumers .

Queensland

The Minister for Primary Industries has the responsibility of oversighting the activities of the Queensland Yater Resources Commission (QYRC) and the Brisbane City Council.

A low percentage of residential property has installed meters which has been a significant impediment to the introduction of a rational user pays pricing scheme.

Yestern Australia

The Yater Authority of Yestern Australia is a public organisation responsible to the Minister for Yater Resources operating under the provisions of the Yater Authority Act 1984.

The authority is continuing the process of comprehensively reviewing tariff structures. The desire to move to •users pay•, however, is being balanced against the need to minimise the impact on individual consumers.

South Australia

In accordance with its charter, the Engineering and Yater Supply Department is essentially responsible for the management of the South Australian water industry. A

business plan was approved during the 1988·89 financial year.

Options for simplified charging arrangements have been identified for the water industry. The preferred approach is a system involving a service access charge plus a

pay-for-use component.

Tasmania

The Minister for Resources and Energy has the responsibility of oversighting the activities of the Hobart Regional Yater Board (HRYB) and the Rivers and Yater Supply

Conmission.

Little information avai I able but domestic consumers in Hobart are not metered.

Northern Territory

The Power and Yater Authority (PAYA) is responsible for supplying services • to 56 centres across the Territory. Annual reports, financial statements and

Auditors'·General reports are

submitted to the Minister in accordance with Section 68 of the financial Administration and Audit Act.

No significant steps have been taken on tariff reform. A uniform flat

consumptive rate applies throughout the Territory.

t -· er.. t ·..oft a: ·CD-·-

= '""' CD

[28]

E~loyment/work

pract ices

Rate of return targets and

acCOUlting practices

New South IJales

'oeca i led

information i s not readily ava i lable, however, some considerat ion has been given to contracting out.

There are no rate of return targets set for the water sector in NSIJ . Accrual account ing procedures are used in the preparation of financial statements.

Victor ia

Staff employed by

the MMBIJ have declined by 12 per cent since 1983·84.

In 1987-88 the n~tropolitan sub· sector ach ieved a real rate of return of 4.S per cent wh ich is in excess of the goverm~Cnt•s

target of 4 per cent. financial statements are prepared using both historical and current replacement cos t approaches .

Queensland

Little information

ava i lable regarding employees and work practices.

No rate of return targets are set for the water industry but the Cornni ss ion is exoected to recover the full cost of service except where government subsidies apply.

IJestern Aus tralia

Latest informat ion

on employment suggests only n~rginal reductions in staff in recent years.

No rate of return targets are set for the water industry. However, 3 per cent of gross revenue from the preceding financial year is required to be paid to the State Government and costs are to be recovered where possible. Accrual accounting procedures are used in preparing f inancial statements.

South Australia

Employment in the

Department decl ined by 4.9 per cent during 1988-89. To improve work practices the Department has initiated a program to develop management and an employee performance management system.

The Department in i tiated rate of return targets in July 1988. All f ir.anci al statements are prepared based on accrual accounting procedures in line with the private sector.

TasmJn ia

Little information

available.

No rate of return targets are set for the Tasmanian water industry . Accrual aCCOUlting procedures are used in the preparation

of f inancial statements .

Nor thern Terr i tory

PAIJA en~loyment

increased by 2.3 per cent in the 12 months to JU'Ie 1989.

There are no rate of return targets. All financial statements encompass accrual accounting procedures in

accordance with standards set down by Australi an

accounting bodies.

~

~ IV a c:c

fl; "'! -· •. .. .• Ci -·-e --f' c

[29]

Other measures to

enhance performance

New South llalcs

·The introduction of

business units is be ing encouraged as a means of inproving performance.

Victor ia

The KHBY in~roduced

a business planning system in 1987 to encourage forward planning on a long-term basis. It is hoped its introduction will promote efficiency and effectiveness in the delivery of water services and increase the Board's level of autonomy.

Queens land

The introduction of

business units is being encouraged as a means of emancing performance.

-Uestcrn Australia

The introduction of

business units is being encouraged.

South Australia

An economic model

has been developed with the primary objective of providing information for the Department's strategic and business planning processes.

Tasman ia

The introduction of

business units is being encouraged.

Northern Jerritory

A strateg ic management directorate has been establ ished to inprove long·term planning and allow • the rest of the organisation to concentrate on the running of existing day to day operations.

-c ct --,.. a

[30]

~TfR AUTHORITIES - NON · URaAN


\later pricing reforms

n 0 :J

E~loyment/work

practices

t'"""\ c c:r -· ::s CD ....

I -= I

t'"""\ 0 = ....... -· Q., CD = ""' CD

New South Uales

The Department of \later Resources oversights the water bodies in eight regions of the State and is accountable to Part iament.

Comnercial pricing was introduced in 1988·89 based on 'user pays' principles. All operating expenses, debt charges etc are to be met by u_sers and all cross subsidies are to be

eliminated.

Some recent discussions on contract labour to replace salaried staff and handing responsibility of riv~r management back to the irrigators.

Victoria

The Rural \later Comnission is responsible for rural water agencies in the State.

A heavy reliance on general rates based on property values • A two part tariff involving a fixed charge plus a volumetric charge may, however, soon be introduced.

The Rural \later Comnission has reduced its staff levels by 32 per cent since 1983-84.

Queensland

The Minister for Primary Industries has the responsibility for overseeing the activities of the Queensland \later Resources Coamission.

Significant att~ts are being made to raise the contribution to capital costs, particularly for new schemes.

Some attention ~as been given to award restructuring and IWlti·skilling.

Ucstern Australia

The Minister for \later Resources is responsible for the activities of the \later Authority of Uestern Australia (UA\JA).

No significant steps have been taken in tariff

reform but UA\JA will not receive any subsidies during the 1990-91 financial year.

Some attention has been given to award restructuring and multi-skill ing.

South AustralIa

The Minister for \later Resources is charged with the responsibility for overseeing the activities of the Engineering and \later Supply Department.

The department is moving towards a two part tariff.

Some attention has been given to award restructuring and multi-skill i ng.

Tasmania

The Minister for Resources and Energy is responsible for the activities of the Rivers and \later Supply Coamission.

No information ava i lable.

Some attention has been given to award restructuring and

multi·skilling.

Northern Territory

The Minister for Minerals and Energy has the responsibility for oversighting the activities of the Power and \later Authority.

A uniform flat consumptive rate applies throughout

the Territory.

Some attention has been given to award restructuring and

multi·skilling.

[31]

l ;

I I I I 1

Rate of return

targets and 8CCOlXl t i ng practices

Other measures to enhance performance

Nell South IJ<~Ies

There are no rate

of return targets set for the water sector in NSIJ but regional bodies are expected to optimise financial management to cater for infrastructure maintenance, refurbishment and replacement. Accrual accounting procedures are used in the preparation of financial statements.

Two consultancy studies prepared tor the Hinist<'!r rec0111nend changes to work pract ices and greater use of contract labour.

Victor ia

The Conmi s!ii on is

required to earn a zero real rate of return on the wr i tt en do~~n current replaccn~nt cost of assets for existing farm services. And to earn a 4 per cent real rate of return on the written down current replacement cost of assets for new investments and services. Financial statements are prepared and based on accrual aCCOlXlting procedures in I ine with the private sector.

In add i tion to the business planning system, the Rural Yater Comnission has introduced a t i nanc ial nklnage1nent strategy.

Queensland

No rat~ of return

targets set for the industry but the Conmission is expected to recover the full cost of service except where goverrment subsidies apply. Accrual accounting procedures are used in the preparation of financial statements.

The introduction of business un its is being encouraged by the Austral ian IJater Resources Council to enhance performance.

llestern Australia

No rate of return

targets set tor the industry. Accrual account ing procedures are used in the preparation of financial statements.

The introduction of business units is being encouraged by the Austral ian llatcr Resources Council to enhance performance.

South Australia

Haves are afoot to

set rate of return targets for the industry. Accrual accounting procedures are used in the preparation of financial statements.

The introduction of business units is being encouraged by the Austral ian llater Resources Counc i I to enhance performance.

Tasman ia

No rate of return

targets set for the industry. Accrual accounting procedures are used in the preparation of financial statements.

The introduction of business units is being encouraged by the Austral ian llater Resources Council to enhance performance.

Northern Terr i tory

No rate of return

targets set for the

industry. Accrual accounting

procedures are ~s~ in the preparation of financial statements.

The introduction of business units is being encouraged by the Australian llater Resources Counci I to enhance performance .

[32]


ATTACHMENT C

LABOUR MANAGEMENT ISSUES

An essential element in microeconomic reform is the implementation of processes to improve productivity and efficiency in the workplace. The active participation of State Governments in this area of microeconomic reform is vital given their role as employers and the prevalence of State awards.

The key industrial relations issues to be addressed include:

rationalisation of award and union coverage to simplify the bargaining process and consolidate the plethora of awards in State based industries;

greater complementarity between Federal and State industrial tribunals;

development of more efficient management and work practices, developments of training programs and improved careers structures as part of award restructuring and an increased emphasis on participative work practices and occupational health and safety;

processes to adjust employment levels to the requirement of the organisation and payment of ?PPropriate benefits to displaced employees.

The resolution of these key industrial relations issues will be facilitated by the cooperation of the trade union movement. Unions have demonstrated a willingness to cooperate in reform processes where they are effectively involved in the planning and implementation of labour restructuring programs and where the benefits of reform are clear to the union memebership in terms of skill enhancement, increased investment in training and retraining programs and improved career prospects in more satisfying and diverse jobs.

The Commonwealth is taking action to support labour market reform both generally and in specific key industries. This has been undertaken through wages policy, providing the right institutional framework through legislative changes to facilitate programs for employers and unions undertaking approved projects. State Governments might be encouraged by. the Commonwealth to similarly assist labour market reform processes in defined areas of microeconomic reform. These issues can be advanced at the Conference of Commonwealth and State Labour Ministers and the Departments of Labour Advisory Committee.

\.G b1net -In-Confidence

[33]

labinet -In-Confidence 33

A'ITACHMENT D

LEGISLATIVE POWERS OF THE COMMONWEALTH TO PROMOTE MICRO-ECONOMIC REFORM IN THE STATES AND TERRITORIES

This paper focuses primarily on the Commonwealth's non-fiscal legislative powers.

CONSTITUTIONAL POWERS

2. The Commonwealth does not possess plenary power over the economy (including micro-economic reform). However, it possesses a number of powers that would enable it to encourage or impose (either directly or indirectly) micro-economic reform in certain areas otherwise within State control. The formulation of practical and politically acceptable policies utilising these powers is, of course, another matter.

Terr i tories power ( s . l22)

3. This power would enable the Commonwealth to impose micro-economic reform in relation to any activity:

carried on in a Territory (whether or not carried on by a Territory Government or a Territory body of any kind); or

constituting trade between a Territory and a State or another Territory.

Powe r ove r int e r state and ove r s eas t rade (s.5 l ( i ))

4. Subject to the constitutional prohibitions and guarantees referred to in para.9 below, this power could be used, for example:

to regulate the activities of State GBE's that constitute interstate or overseas trade, for example:

imports or exports by State GBE's could be prohibited outright or subject to a wide range of conditions;

the terms and conditions of transportation of goods in the course of overseas trade could be regulated (eg transportation of coal from mine to loading at a port);

to regulate the terms and conditions of employment of persons employed in interstate and overseas trade (eg on the waterfront); and


[34]

lUDiner -1n-lonr1oence 34

ATTACHMENT D

to take other measures that directly promote (including by removing impediments to) interstate or overseas trade, for example, measures designed to improve the efficiency of the energy and transport industries for the purposes of interstate and overseas trade.

Power over trading and financial corporations and foreign corporations Cs.Sl{xx))

5. Subject to the constitutional prohibitions and guarantees referred to in para. 9 above, this power could be used:

to regulate the conduct by State GBE's which are constitutional corporations of their trading or financial activities~

to give non-fiscal assistance, subject to a wide range of possible conditions, to State GBE's which are constitutional corporations;

possibly, to prevent certain activities taking place unless they were carried on by constitutional corporations.

6. It is arguable that the power could also be used to force State GBE's to change aspects of their organisation and management. However, the constitutional status of laws relating to internal management of trading or financial corporations may be open to some doubt.

Conciliation and arbitration power <s.51 Cxxxv))

7. This power could be used to require the Industrial Relations Commission to take into account specific Commonwealth policies in relation to micro-economic reform. There may be scope for the use of the power to influence more directly the content of awards for micro-economic purposes.

Other non-fiscal powers

8. There are other available non-fiscal powers (eg, the posts and telegraphs power (s.Sl(v)) that are for various reasons likely to be of marginal usefulness for the purpose of influencing micro-economic reform. ·

9. The exercise of the Commonwealth's constitutional powers is generally subject to:

s.92 of the Constitution, which guarantees the freedom of interstate trade (measures could not discriminate against interstate trade if such discrimination also had a protectionist purpose);

s.99 of the Constitution, which prevents the giving of a preference to a State or a part of a State; and


[35]


ATTACHMENT D

implied constitutional immunities which prevent measures that discriminate against a State or tend to undermine its existence.

EXISTING LEGISLATION (INCLUDING POSSIBLE EXTENSIONS)

Prices Surveillance Act 1983 and the Trade Practices Act 1974

10. The Prices Surveillance Act and the Trade Practices Act do not bind a State or a State body (including a GBE) that shares the immunities of the State (ie in practical terms, is subject to a high degree of direction by the State).

11. The constitutional powers discussed above (particularly the trade and corporations powers) could be used, subject to relevant constitutional prohibitions and guarantees, to extend the application of those Acts to the States and State GBEs.

12. If the Trade Practices Act were to apply to the States and State bodies, advantages could flow in such areas as:

its application to any agreements between State marketing bodies which involve anit-competitive practices;

preventing State trading authorities from engaging in false and misleading conduct; and

application of the provisions relating to such matters as price discrimination, exclusive dealing and the misuse of market power.

13. In relation to the extension of the Trade Practices Act, the States have strongly resisted any application of the Trade Practices Act to their activities and will no doubt continue to take that view.

Corporation legislation

14. The scope for reform in corporate regulation has been extremely limited because of the operation of the present co-operative arrangements between the Commonwealth and the States. If the Commonwealth acquires the real legislative capacity to put policy in place (as distinct from an ability to legislate only in relation to those matters agreed to by · the States) it would be open to the Commonwealth to encourage or enforce the observance by State public sector instrumentalities of laws applicable to private sector commercial bodies in areas such as:

the purchase by public sector commercial entities of securities in the market place; and

primary fund-raising and subsequent trading of securities by public sector organisations.

ATTORNEY-GENERAL'S DEPARTMENT 13 June 1990 (a binet -In-Confidence

[36]

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ORGANISATION

Standing Committee on Transport (SCOT)

Australian Transport Advisory Council (ATAC)

Commonwealth/States Committee on Communications

Australian Industry and Technology Council (AITC)

Australian Education Council

Commonwealth-State Tra ining Advisory Committee

Department of Labour Advisory Committee (DOLAC)

DEPT

DTC

DTC

DTC

DITAC

DEET

DEET/DIR

COMMENTS

Senior State and Federal officials group (Departmental Secretaries) Policy advising group to ATAC (see below) A number of State/Federal officials groups report to SCOT, including groups dealing with Road Safety, Marine and Ports, Roads, Railways

State and Commonwealth Transport Ministers Meets annually, or more frequently as required Meeting 25 May discussed national road safety package, heavy vehicle and bus safety and waterfront reform with specific reference to port authorities. A special ATAC meeting is to convened in September to discuss major policy reform reports road cost recovery, options for a national inter-system rail freight organisation and options for the future of rail transport. Normally issues a communique at the end of each meeting

State and Federal officials, together with representatives of communications GBE's Meets twice a year

State and Federal industry Ministers Supported by a Standing Committee of senior officials Consults on industry and technology policy

State and Federal Education Ministers

Senior State and Federal officials

State and Federal Secretaries of Departments Sets agenda for Conference of Labour Ministers (see below) Jointly chaired by DEET and DIR

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ORGANISATION

Conference of Commonwealth and State Labour Ministers

Australian Minerals and Energy Council

Standing Committee of Consumer Affairs Ministers

Australian Health Minister's Conference

Australian Health Minister's Advisory Council

Standing Committee of Commonwealth-State Women's Advisers

DEPT

DEET/DIR

DPIE

FBCA

DCSH

DCSH

PM&C

COMMENTS

State and Federal Ministers for labour market policy Meets twice a year Meeting 25 May discussed the means of promoting industrial relations issues involved in the States' pursuit of microeconomic reform.

State and Federal Ministers A number of specialist working groups report to the Council

State and Federal Ministers for Consumer Affairs Annual meetings Next meeting 20 July 1990 in Perth Officials meet one week earlier to formulate resolutions for Ministers to discuss

State and Federal Health Ministers Annual meeting Next meeting 9 July 1990 in Brisbane

Senior State and Federal officials group (Department Secretaries) Meet twice yearly Next meeting 1 June in Melbourne

meets quarterly

[38]


INDUSTRY COMMISSION FORWARD WORK PROGRAM

Curre nt Inquiries

Aids and appliances for people with disabilities

Product liability

ATTACHMENT F

Fina l Report Due

18 July 1990

18 July 1990

Passenger Motor Vehicles 31 December 1990

Mining and minerals process i ng

Recycling of products

Commercial tariff concession and by-law systems

Statutory marketing arrangements

Construction costs of major projects

Energy generation and distribution

Rail transport

Future Inquiries

28 February 1991

28 February 1991

8 March 1991

19 March 1991

18 April 1991

19 May 1991

19 August 1991

The Government has also decided on an indicative timetable for the remaining inquiries in the Industry Commission's current two year work program, as follows:

References commencing in 1990

Exports of health services

Exports of education services

Dairying·

Raw material pricing for domestic use

Export franchising and distribution arrangements

References commenc i ng i n 1 991

Sugar

Availability of capital

Implications for Australia of firms locating offshore


[39]

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