Special Premiers' Conference Communiqué
Sydney, 30 July 1991
INTRODUCTION
Heads of Government of the Commonwealth, States and Territories of Australia, and representatives of Local Government in Australia have held the second of a series of far reaching discussions with the aim of reforming intergovernmental relations.
This Communique sets out the agreed outcome of those discussions.
At the October 1990 special Premiers’ Conference, leaders and representatives agreed on a framework for improving the workings of the Australian Federation and set out a wide ranging agenda for reform directed towards developing a more efficient and competitive economy through maximising intergovernmental co-operation in the interests of Australia as a whole. They agreed to hold two further meetings in 1991 to advance this agenda.
At this July meeting, leaders and representatives continued their discussions in the same spirit with its focus on the national interest rather than the particular interests of individual jurisdictions.
Leaders and representatives noted that the decisions to be taken at the special Premiers’ Conference scheduled for November 1991 would be fundamental to the overall success of the reform agenda. In particular, that meeting will be considering the crucial and inter-related issues of reform of Commonwealth-State financial arrangements including reviewing the distribution of taxation powers to reduce vertical fiscal imbalance and a clearer definition of the roles and responsibilities of the respective governments in the areas of program and service delivery (and the associated commitment to reverse the current trend to increasing reliance on tied grants). Leaders and representatives considered progress reports in these areas.
Discussions at this meeting focussed on measures to increase national efficiency and international competitiveness and to move towards a single national economy. The focus was on micro-economic reform in the areas of regulatory reform; road and rail transport’ electricity generation, transmission and distribution; and reform of Government Trading Enterprises.
- COMMONWEALTH-STATE FINANCIAL ARRANAGEMENTS
- DUPLICATION OF SERVICES
- MINCO-ECONOMIC REFORM AND EFFICIENCY ISSUES
- ROADS – PROVISION, CHARGING AND REGULATION
- GOVERNMENT TRADING ENTERPRISE REFORM AND RELATED MATTERS
- ENVIRONMENT AND RESOURCE SECURITY
- INFRASTRUCTURE
- OTHER
- Attachment A
- Attachment B
This Communiqué sets out the agreed outcome of those discussions.
COMMONWEALTH-STATE FINANCIAL ARRANAGEMENTS
Financial Premiers’ Conference/Loan Council Meetings
Leaders and representatives noted the successful implementation, at the May 1991 Premiers’ Conference and Loan Council meeting, of the new arrangements for the conduct of these meetings agreed at the October 1990 special Premiers’ Conference. This involved enhanced consultation and exchange of information and the provision of the Commonwealth’s offer to the States for other bodies, recommended by the Tied Grants Working Group, had also been used for the May Financial Premiers’ Conference and Loan Council Meeting. Leaders and representatives agreed that these practices should continue to be followed for future Premiers’ Conference/Loan Council meetings.
Review of Commonwealth and State Government Taxation Powers
Leaders and representatives restated the commitment made at the October special Premiers’ Conference to address the question of vertical fiscal imbalance with a view to reducing that imbalance while recognising the necessity for the Commonwealth to have adequate means to meet its national responsibility for effective macroeconomic management. Consistent with the requirements of the October special Premiers’ Conference Communique, the Working Group on Taxation Powers presented a Report on Progress – endorsed by all Commonwealth, State and Territory members of the Tax Powers Working Group – to the Conference. The Australian Local Government Association also participated in the work of this group.
Leaders and representatives noted that work is progressing as planned for the final report to be presented to the November special Premiers’ Conference. Although the examination of issues is not yet complete, some preliminary conclusions are:
- a very large reduction in the existing degree of vertical fiscal imbalance between the Commonwealth and the States could be made before the existing arrangements for horizontal fiscal equalisation would be called into question. Nevertheless, the possible implications would need to be taken into account when considering specific options for redressing vertical fiscal imbalance;
- there have been concerns that reducing the degree of vertical fiscal imbalance would lessen the flexibility of the Commonwealth to achieve its macroeconomic policy objectives. However, the medium term focus of macroeconomic policy suggests that changes to taxation arrangements (depending on the specific options) could be manageable depending on arrangements being in place to address concerns about the co-ordination of fiscal policy; and
- the need to avoid administrative complexities and duplication in both assessment and collection should have a high priority in assessing possible options to reduce vertical fiscal imbalance.
Leaders and Representatives also re-affirmed their commitment to reducing overlap and duplication in service delivery by rationalising and co-operatively developing better ways of integrating the legitimate policy interests of the Commonwealth, States, Territories and Local Government and achieving more integrated and more effective delivery of programs to citizens. They noted that, as set out in the October 1990 Communique, Ministerial Councils had established review processes in a wide range of areas, with the objective of identifying appropriate and efficient roles and responsibilities to achieve the best outcomes for citizens. These reviews include the priority areas nominated for decision at the November 1991 special Premiers’ Conference.
Leaders and representatives noted, as set out in the October 1990 Communique, that in considering the roles of Commonwealth, State and Local Governments, it is important that there is proper consultation with the non-government sector, which has strong interest in the service delivery area.
They also re-affirmed their commitment to a substantial reduction of tied grants as a proportion of total Commonwealth grants with a view to increasing State budgetary flexibility, while ensuring that agreed national objectives are met through agreements satisfactory to governments.
Leaders and representatives noted the interim reports of the Working Group on Tied Grants and reaffirmed that:
- its financial report should be provided to the November 1991 special Premiers’ Conference; and
- its further work would run parallel to, and take account of, the various examinations of roles and responsibilities that are proceeding separately.
With respect to both the Ministerial Functional Reviews and the reviews being considered by the Tied Grants Working Group, leaders and representatives restated their commitment to significant reform and agreed that all reviews should consider the full range of options. Such options should include assumption of responsibility by the States and absorption into Financial Assistance Grants; broadbanding by combining a number of specific purpose payments; lessening conditions within the existing structure of payments; and assumption of full financial and administrative responsibility by the Commonwealth. In particular, where shared responsibility options are developed. consideration should be given to the possibility of alternative approaches (including joint planning or consultative mechanisms) not tied to Commonwealth funding.
Leaders and representatives also agreed that Commonwealth involvement in specific project approval can unnecessarily restrict administrative flexibility, inhibit effective co-ordination and lead to duplication of effort by all spheres of government. In considering shared responsibility programs which include specific project approval by the Commonwealth, options should reflect the principle that Commonwealth involvement in operational management should be reduced to the greatest degree possible consistent with ensuring that agreed national objectives are met.
Leaders and representatives agreed that matched funding arrangements can restrict State budgetary flexibility where they have been imposed by one level of government as the condition for receipt of funds. Matched funding arrangements are appropriate where they have been agreed by the respective parties on a co-operative basis. Where this has not been the case, the Ministerial Functional Reviews and the Working Group on Tied Grants should provide options to the November special Premiers’ Conference that do not involve the kind of matching arrangement. It was also noted that when matched funding arrangements are required of Local Government, it experiences similar difficulties.
Home and Community Care Program
Leaders and representatives noted the report of the Combined Council of Health and Social Welfare Ministers on broad directions for reform of the Home and Community Care (HACC) Program. They agreed that further work by the Functional Reviews of Health and Aged Care proceed with a view to rationalising and integrating community care services for the aged, post-acute and palliative care and younger people with disabilities into the broader service sectors of aged care, health services and disability services respectively. Leaders and representatives considered that this arrangement could allow a better allocation of resources to meet the needs of these groups, avoiding unnecessary competition between types of recipients and cost shifting between programs, but they agreed to take a final decision at the November special Premiers’ Conference in conjunction with decisions on roles and responsibilities in the areas of acute health and aged care.
Leaders and representatives also noted the report of Ministers for Vocational Employment, Education and Training on the work underway on the future arrangements for TAFE and training in Australia.
Leaders and representatives agreed to proceed with the rationalisation of roles and responsibilities for disability services. Discussions on this issue had commenced prior to the October special Premiers’ Conference and consequently reform has not be pursued through the processes of the Tied Grants Working Group or the functional reviews being conducted by Ministerial Councils.
Nevertheless, leaders and representatives agreed on significant rationalisation of services for people with disabilities.
The key features of the agreements are:
- States will enact legislation complementary to the Commonwealth Disability Services Act;
- the States will assume responsibility for accommodation support services while the Commonwealth assumes responsibility for the employment related services for people with disabilities;
- the Commonwealth and States will co-ordinate the strategic planning of the respective services, particularly in the delivery of services in country areas;
- the Commonwealth will provide funding to the States to cover the net additional costs of the transferred services, to provide for growth in those services and to assist the States to upgrade them. The final method of funding will be decided in the context of the decisions taken at the November Conference in relation to vertical fiscal imbalance , tied grants and functional reviews; and
- the Commonwealth will consider the States’ capacity to meet clients’ needs in the context of any realignment of Commonwealth-State financial arrangements flowing from the November 1991 special Premiers’ Conference.
The Commonwealth acknowledged that these specific arrangements should in no way be viewed as a precedent for reforms that may be developed through processes of the special Premiers’ Conference.
An agreement is being signed subject to review and, as necessary, amendment of its provision before the end of the first year to reflect consistency with the principles determined at the November special Premiers’ Conference in relation to vertical fiscal imbalance, tied grants and functional reviews.
MINCO-ECONOMIC REFORM AND EFFICIENCY ISSUES
The October 1990 special Premiers’ Conference agreed on a framework for continuing high priority attention to the rationalisation of the regulatory activities undertaken by different governments. In particular it agreed to a framework for examination of the area, including the principle that mutual recognition of regulations and standards for both goods and occupations would apply where uniform national standards are not essential. This represents a vital element in the micro-economic reform agenda of all Australian governments. For Australia to be an integrated and more internationally competitive national economy, it is essential to overcome the regulatory differences that needlessly inhibit interstate mobility of goods and labour.
Leaders and representatives have now agreed in principle on models for implementation of mutual recognition for both goods and occupations.
Goods legally produced for sale in accordance with the standards of the State or Territory of production would be free to be sold throughout Australia. A jurisdiction would be able to impose a particular emergency requirement if the purpose was to protect health or safety. Such a law would be valid for one year during which time negotiations would occur on development of national standards. Leaders and representatives have agreed that there are certain products that need be exempted from mutual recognition because a national market in those products may not be desirable. Such products could include pornography, gaming machines, fireworks and firearms. Genuine quarantine restrictions would continue to apply.
In relation to food standards, leaders and representatives confirmed the October 1990 commitment to a national system administered by the National Food Authority which will commence operation next month. As with mutual recognition, a jurisdiction will be able to impose a particular emergency requirement if the purpose is to protect health and safety. The imposition of this requirement would trigger an urgent review by the National Food Authority which would report to the National Food Standards Council within six month on whether the requirement should continue. The operation of this provision would be reviewed by the Food Advisory Committee for report to governments in eighteen months.
With regard to occupations, a two stage process would occur. Initially, a person would be automatically deemed to be registered to carry out an occupation or profession in another State or Territory once he or she notifies the responsible body in that State or Territory that they are registered to undertake an occupation in the home jurisdiction is substantially the same. There would be limited provision for registering bodies to seek a court declaration that an occupation as regulated in another jurisdiction is not substantially equivalent.
Leaders and representatives noted that Ministers for Vocational Education, Employment and Training and Ministers for Labour had done considerable work on resolving significant differences between States and Territories in the regulation of occupations. This work involves the co-operative development of administrative arrangements and national competency standards for occupations. greed that this work should be accelerated with a view to developing national competency standards for all registered occupations and professions by the end 1992. The Ministerial Council will report on progress made to the November 1991 special Premiers’ Conference.
The models accepted for both goods and occupations will have wide-ranging effects on individuals, unions and corporations. For this reason, leaders and representatives have agreed that there be a process of public consultation on the proposed models before the next special Premiers’ Conference in November 1991. A Discussion Paper describing the models in detail will be released today and a series of public seminars will be held to give further opportunity for interested parties to explore the impact of the proposals.
Following the consultations, it is expected that a formal agreement between the Commonwealth and the States and Territories can be concluded at the November 1991 special Premiers’ Conference. The aim is to enact legislation in the first half of 1992 and implement mutual recognition of good and occupations from 1 January 1993.
In recent years the Australian and New Zealand economies have become more strongly linked through the Closer Economic Relationship. The people of our two nations have long enjoyed freedom of travel and our two countries are rapidly becoming one market. Leaders and representatives have therefore agreed that New Zealand be invited to participate (as an observer) on the committee of officials advising them on the process of regulatory reform.
ROADS – PROVISION, CHARGING AND REGULATION
Heavy Vehicle Registration, Regulation and Charging
Leaders and representatives noted a report from officials and (with the exception of the Northern Territory) signed an Inter-governmental Agreement establishing a national heavy vehicle registration, regulation and charging scheme. The integrated packed of reforms is designed to overcome a number of serious problems in the road transport sector, the main ones being varying regulations across Australia and charging systems which bear little relation to costs which users impose on the road network.
The focal point for the new scheme is the establishment of a National Road Transport Commission to regulate heavy vehicles on a nationally uniform basis and develop a heavy vehicle charging regime. An interim Commission will be established by September 1991, pending enabling legislation, to assist in developing legislation and to begin work on regulation, registration and charging arrangements. The Commission would report to a Ministerial Council, comprising of Federal, State and Territory Ministers nominated by respective Heads of Government. Recognising its extensive road responsibilities, Local Government would have observer status at meetings of the Ministerial Council.
Planning is to commence immediately to inter-link the existing set of motor registries, allow for the automatic exchange of defect notices, allow a simplified number plate system and facilitate the development of registration procedures so that information on all heavy duty vehicles is available nationally by July 1992. In addition, the Federal Interstate Registration Scheme is to be subsumed into the national heavy vehicle scheme.
Leaders and representatives agreed that the following areas should be included in the nationally uniform regime:
- heavy vehicle construction requirements (new construction and in-service modification), including dimension and weight limits and vehicle emission standards;
- aspects of traffic codes relating to heavy vehicle;
- vehicle roadworthiness and inspection standards;
- driver licensing standards and procedures;
- special codes of practice covering heavy vehicles, (e.g. loading codes, permit conditions);
- enforcement levels and sanctions for breaches of regulations, noting the need to provide a meaningful deterrent and maintain consistency of penalties in this area between all jurisdictions; and
- aspects of operator controls, particularly affecting heavy vehicles (e.g. freight and public passenger vehicle licensing) but excluding economic regulation.
As an early priority, the new system will allow the operation of B-Doubles and road trains under nationally uniform conditions. While their operation will continue subject to certain limitations such as designated routes, this will lead to significant increases in productivity for some freight operations.
The Northern Territory decided not to sign the Agreement at this time. The Northern Territory, however, supports the establishment of the Commission and will mirror in its jurisdiction non-charging regulations implemented under the new scheme to achieve uniform regulations throughout Australia.
Other leaders and representatives agreed that a charging structure be implemented comprising a nominal administration charge, a road use charge component of Commonwealth diesel excise and a registration (or mass-distance) charge for vehicles which do not meet their road costs through fuel payments alone. The Commission will also consider an access charge to avoid any significant interface problem between vehicles above and below the 4.5 tonne level and to facilitate introduction of the new charging regime.
The road use part of diesel excise is to be structure to avoid the administratively cumbersome imposition of registration (or mass-distance) charges on a significant proportion of the vehicle fleet. The registration charge is to be applied to heavy vehicles where it would be inequitable (i.e. it would involve significant over recovery for other vehicles) if they covered their road costs by fuel charges alone.
Leaders and representatives agreed that charges are always to be set:
- to recover fully distributed road costs, thereby achieving full recovery of all road costs while minimising over-recovery from any vehicle class;
- adopting a common methodology;
- to determine and collect charges in a way that achieves a reasonable balance between administrative simplicity, efficiency and equity in the charging structure;
- to improve pricing, leading to a better allocation of resources, with investment decisions being based on more relevant demand signals; and
- to minimise the incentive for operators to ‘shop around’ for lower charges and undermine the integrity of the national charging system.
Until it is recommended otherwise by the Commission, charges are to be set:
- using the PAYGO methodology for determining what expenditure is to be recovered;
- using expenditure on roads, as assessed by the National Commission:
- using the average of two years’ actual and one year’s budgeted expenditure, indexed; and
- excluding from the PAYGO base self-financed road expenditure programs, such as toll roads or fuel franchise fees where nominated by a State or Territory as a road user charge; and
- using a methodology based, in the first instance, on the ISC model but enhanced with further research currently being undertaken by the Australian Road Research Board.
Registration charges and the road use charge component of Commonwealth excise on diesel are to be adjusted in future by the National Road Transport Commission in line with the amount of national road systems costs attributable to heavy vehicles. Accordingly, State fuel franchise fees and the taxation component of Commonwealth diesel excise are to be separately identified and adjusted in future by separate mechanism.
In regard to treatment of alternative (especially gas-based) transport fuels, it was acknowledge that these are broader energy policy issues which need to be taken into account. For this reason, it was agreed that road track costs should not be attributed to these fuels at this stage.
Existing concession to road users which are not related to the level of road use are to be provided independently of the road user charging system through transparent budgetary means. In other words, the new charging system is to clearly differentiate between social-welfare oriented “concessions” and valid distance-related “rebates”.
The new National Road Transport Commission is to determine and recommend the road use charge component of Commonwealth diesel excise by March 1992 so that it can apply from a date no later than 1 January 1993.
Regarding registration charges leaders and representatives noted but did not endorse the schedule of indicative charges in the officials’ report. Charges to be recommended by the National Road Transport Commission will be phased in as follows:
- the first instalment of new charges is to be determined and recommended by march 1992 so that it can apply from a date no later than 1 January 1993;
- the phasing in of full cost recovery charges is to be determined by the National Commission and it to take account of:
- the impact of varied charges on the road transport industry and industry generally;
- the impact of varied charges on particular regions, such as some in remote Australia; and
- the different levels of charges that currently exist in each jurisdiction;
- the phasing should seek to implement charges that reflect full cost recovery as soon as is appropriate given the three considerations above and in any event by not later than 1 July 1995 for all vehicles except road trains;
- for road trains full-cost recovery mass distance charges should be implemented with up to a 50% discount at latest by 1 July 1995 and be fully implemented at latest by 1 July 2000;
- in the early years, the National Commission is to concentrate on the charges using average distance while approving valid distance-related rebates where appropriate; and
- over time, and in consultation with industry, the National Commission is to move to reliance on a more discrete approach to distance measuring within vehicle classes wherever feasible and justifiable.
Leaders and representatives agreed that it was essential that consultation occure with industry on all issues taking into account Australia’s geographic differences and the diverse structure of the road transport industry.
Zonal Road Charging Arrangements
Leaders and representatives agreed that there will be two zones for the purpose of setting registration (or mass-distance) charges. Zone A shall comprise NSW, VIC, TAS and the ACT and shall include the Commonwealth as a decision-making member. Zone B shall be QLD, WA and SA. The new Commission shall determine registration (or mass-distance) charges for each zone in accordance with the above principles, subject to disapproval by fifty per cent or a majority of Ministers from jurisdictions covered by the relevant zone. The Commission shall also advise on any possible zonal change but agreement to any new zonal structure shall require approval of three quarters of the Ministerial Council.
Vehicles moving from low cost into high cost zones must pay any difference in the registration (or mass-distance) charge. An appropriate mechanism for administering this is to be developed by the Commission.
Leaders and representatives also agreed to ask officials to provide in November 1991 regulation, registration, charging, distribution and expenditure determination proposals on the feasibility and desirability of including light vehicles (i.e. vehicles 4.5 tonnes and below) in the system. Work is to be done in full consultation with the Working Group on Tax Powers.
Road Responsibilities and Funding
Leaders and representatives agreed that the Commonwealth should concentrate its involvement in roads program delivery by more clearly defining its program to remove ambiguity in terms of which tier of government is responsible for which roads.
It was agreed that the Commonwealth’s responsibilities should be concentrated on national highways and other roads of national significance. The precise delineation of the Commonwealth’s involvement would be settled in preparation for the November special Premiers’ Conference.
It was noted that the Better Cities Program could involve land transport considerations.
In any event, leaders and representatives agreed that a minimum of $350m in current SPPs would be untied, with the distribution mechanism for those funds to be settled at the November special Premiers’ Conference. It was agreed that the standard of Australia’s road infrastructure needed to be maintained within this process and that action by the States to continue to lift the efficiency of their road construction authorities was vital to this objective.
Leaders and representatives today signed an Agreement which will formally establish the National Rail Corporation. For the first time, Australia will have a single, commercially operating company responsible for interstate rail freight across the nation from Brisbane to Perth. SA supports the establishment of the Corporation and proposes to sign the Agreement after a range of issues under it Railways Transfer Agreements with the Commonwealth are resolved through bilateral negotiations.
The Commonwealth, New South Wales, Victoria and Western Australia will provide the initial equity funds for the Corporation, estimated to be in excess of $400 million over the next five years.
While Queensland and South Australia did not wish at this stage to become an equity participant in the organisation, both governments fully supported its establishment. The Queensland Government will contribute assets to the Corporation. Both committed themselves to providing the Corporation with every assistance to enable it to have control over the interstate rail freight network.
The Shareholders’ Agreement signed today provides for these States to become equity participants at a later stage.
The initial $400 million equity investment in the National Rail Corporation in conjunction with the commercial borrowing program is expected to lead to the elimination of the existing and continuing interstate rail freight deficits of around $375 million a year.
Immediate steps will be taken by the shareholders to finalise appointments to the Board of the Corporation and these will be announced shortly. First priorities for the Board will be to establish a management team, develop financial, investment and implementation strategies and negotiate an enterprise award with the unions.
From a customers’ point of view, the Corporation will have its first impact early in 19921 through it becoming the marketer of interstate freight. No longer will customers have to deal with up to five separate rail authorities to transport freight across the nation.
Leaders and representatives noted that the Corporation would, for the first time in the history of Australia, ensure that investment decisions were taken on a commercial basis with the needs of a national network paramount. The problems of the past, which led to three different track gauges, differing signalling technologies and standards and varying work practice across the nation, will not be permitted to continue.
The Corporation will assemble over the next three years, an asset base comprising terminals, tracks, signalling systems and rolling stock sufficient to ensure its commercial viability. Where ownership is not commercial proposition, leasing or other arrangements will be entered into.
In additional to taking on assets from existing rail systems, leaders and representatives noted the Corporation will also be investing in the order on $1.5 billion in rail infrastructure over the next 10 years.
The National Rail Corporation is envisaged as a commercial venture. It is expected to break-even within three years and become totally self-supporting after five years. At that time, the Corporation will be fully capitalised and the special arrangements in the Shareholders’ Agreement catering for the transition to profitability will cease.
Leaders and representatives emphasised that the Corporation is to be commercially run company. Only on this basis will it become a fair and competitive alternative carrier to road transport.
The National Rail Corporation will re-invigorate interstate rail freight and ensure a future for its workforce. Leaders and representatives are confident that rail unions will welcome the Corporation as a commitment by all governments to a continuing role for rail freight without the stigma of massive losses.
To ensure rail’s competitiveness, revised work practices must accompany new investment so that its full benefits can be realised and large efficiency gains made. Leaders and representatives noted that studies had already identified that average productivity gain of at least 35 per cent could be obtained.
It will be the responsibility of the Corporation management and the unions to negotiate improved working arrangements so that the Corporation can market itself as an efficient and reliable freight carrier. The establishment of the Corporation and its success is dependent on satisfactory agreement being reached on workplace reform.
As a commercial organisation, the Corporation will only take on the workforce it needs. Leaders and representatives noted that there may be further redundancies in existing rail systems of shareholders as a result of the establishment of the Corporation and agreed that each system would continue its responsibilities for displaced workers.
Electricity, Generation, Transmission and Distribution
Leaders and representatives agreed to establish a National Grid Management Council to encourage and co-ordinate the most efficient, economic and environmentally sound development of the electricity industry in eastern and southern Australia having regard for key National and State policy objectives. The represents an important step forward in advancing co-operation in the electricity industry, the absence of which has cost the nation dearly in terms of excessive generation capacity, inappropriate plant mix and inflexibility of fuel use.
The Agreement is entered into on a co-operative basis.
The Council will encourage open access to the eastern and southern Australian grid and free trade in bulk electricity for private generating companies, public utilities and private and public customers. It will also co-ordinate planning of the generation and inter-connected transmission systems and encourage the competition sourcing of generation capacity and the use of demand management.
Each participating Government will nominate a representative to the Council which is to have an independent chairperson. The Governments represented on the Council will be the Commonwealth, New South Wales, Victoria, Queensland, South Australia, Tasmania and the ACT. However, should these initiatives develop into more formal arrangements involving the ownership or joint operation of transmission or generation systems assets, the membership of the continuing organisation will be reviewed. The current membership arrangements should not be taken as a precedent for future arrangements. These Governments have agreed to contribute the resources required for the Council without establishing a separate new organisation with overhead costs.
The Council is to oversee the preparation of a draft protocol covering the planning, operation, development, monitoring and extension of the eastern and southern Australia grid. In preparing the draft, which is to be submitted to participating Heads of Government for consideration in November, the Council is to seek and encourage external input and comment.
Leaders and representatives noted that extensions to the current interstate grid linking New South Wales, Victoria, South Australia and the ACT were technically feasible and economically justified. They asked that the more detailed technical appraisals of the proposed links to Queensland and Tasmania continue with a view to the results being available by the November special Premiers’ Conference. On present indications, a link to Tasmania could be operational by the mid to late 1990s and extension of the grid to Queensland possibly from 1997.
In setting in place these arrangements, leaders and representatives noted the potential that they contain to deliver cheaper electricity and a more rational use of the nation’s resources and to better position Australia in the international market for electricity supply.
GOVERNMENT TRADING ENTERPRISE REFORM AND RELATED MATTERS
National Performance Monitoring
Government Trading Enterprises (GTEs) use a significant quantity of the nation’s resources. The efficiency with which these resources are deployed is fundamental to the nation’s economic performance and to assisting in many areas our international competitiveness.
Recognising these factors, leaders and representatives have agreed that a framework for national performance monitoring be established for GTEs. The system will initially concentrate on a core of larger and more significant enterprises in each jurisdiction.
At the State/Territory level the enterprises will include those involved in energy, rail, water, major ports and urban public transport. Commonwealth enterprises to be covered include Telecom/OTC, Australia Post, Australian National Line, the Federal Airports Corporation and the Pipeline Authority. The core group will be expanded progressively once the system is operational and may, in due course, extend to Local Government enterprises.
A range of performance indicators are to be used included accounting, economic and non-financial indicators. The focus initially will be on providing accounting and non-financial measures of performance.
The Industry Commission, under the auspices of a Commonwealth-State Steering Committee, is to prepare a preliminary version of national performance indicators for 1990-91 concentrating on accounting and non-financial measures of performance. The Steering Committee will consider:
- preparation and publication of performance indicators for 1991-92 by the end of 1992; and
- the appropriate agency to undertake the task on an on-going basis.
In the meantime, the Public Sector Accounting Standards Board and other bodies are to be requested to give priority to refining national accounting standards for GTEs, including standards for asset valuation.
Leaders and representatives also noted the progress that had been made on Loan Council issues that had been raised in their October communiqué. Following consideration of a Commonwealth/State Officers’ Report on this matter, Loan Council agreed at its 31 May 1991 meeting that the Global Approach resolution be amended to provide scope for government business enterprises which operate in competition with private sector firms or in contestable markets and deal with parent governments on an arms lengths basis to be exempted from global borrowing limits. In essence, GTEs operating in a commercial environment and having either an established record of fully commercial performance or substantial private equity and a clear commitment to commercial performance, will meet these criteria. A copy of the officers’ report, which spells out the criteria for exemption, is publicly available.
It was also noted, consistent with the agreement reached at the October 1990 special Premiers’ Conference, that flexibility is required under the Global Approach to finance worthwhile microeconomic reform and that a number of State had been provided with special temporary additions to their borrowing limits at the Loan Council’s 31 May 1991 meeting to finance public sector and GTE restructuring.
Leaders and representatives noted the paper prepared by the Commonwealth Treasury and the Australian Taxation Office concerning the income tax arrangements that would apply where there were changes in the ownership of government enterprises. In particular, they noted that the Commonwealth had accepted the principle of compensation for loss of State revenue involved in these transfers of ownership. The Commonwealth’s policy on such compensation is set out in a paper being made available.
In this context, leaders and representatives also asked that a paper be prepared for the November special Premiers’ Conference to allow decisions to be taken at that time on the application of the sales tax law to government enterprises.
Leaders and representatives agreed that a national approach to competition policy be considered with a view to ensuring that consumers and users of goods and services benefit fully from the structural adjustments now underway in the traded and non-traded sectors as a result of initiatives taken in the special Premiers’ Conference and other reform programs. They agreed competitive markets would achieve a more efficient allocation of resources within the economy and noted the role national competition policy could play in underpinning the effective functioning of those markets.
Leaders and representatives therefore agreed that a Working Group of Official, chaired by the Commonwealth, would review the appropriateness of current competition policy, including the application of the Trade Practices Act, to the following areas within Commonwealth, State and Territory jurisdictions: (1) Government Trading Enterprises; (2) Marketing Authorities; (3) unincorporated bodies; and (4) Government procurement by Commonwealth, State Territory and local governments.
Leaders and representatives agreed that, in examining the four areas set out above, the Working Group should establish the nature of, and reasons for, the exclusions identified in each case. The Group will prepare papers for the November 1991 special Premiers’ Conference containing substantive recommendations, including;
- whether the Trade Practices Act’s application should be extended to the above areas; and
- whether alternative approaches within the scope of a national framework of competition policy and law might be more effective.
Non-Bank Financial Institutions
Leaders and representatives noted that the May Financial Premiers’ Conference had reached agreement on the introduction of a uniform national State-based system of prudential supervision of permanent building societies and credit unions. Arrangements for the implementation of this decision are currently being developed, and there will be a report on other non-bank financial institutions, including friendly societies, trustee companies, co-operative housing societies and related financial processes.
ENVIRONMENT AND RESOURCE SECURITY
Leaders and representatives reaffirmed the desirability of an Intergovernmental Agreement of the Environment, and instructed the Working Group charged with the task of drawing up the agreement to progress this work as far as possible and provide a report by the November special Premiers’ Conference.
Leaders and representatives also agreed on the need for effective national arrangements for setting consistent environmental standards across Australia, and that the establishment of such arrangements would be a crucial component of the Intergovernmental Agreement on the Environment. Accordingly, the Working Group on the Intergovernmental Agreement has been instructed to report to the November special Premiers’ Conference on appropriate and effective arrangements for standard setting and implementation (including a possible national Environmental Protection Agency and its roles and relationship with Commonwealth, State and Territory agencies).
Leaders and representatives recalled at their October 1990 meeting that, in expectation of the reports of the Ecologically Sustainable Development (ESD) Working Groups being finalised in sufficient time, their reports should be considered at the special Premiers’ Conference in November 1991. Leaders and representatives agreed on the need to address the results of the Reports in finalising the Intergovernmental Agreement. Leaders and representatives, therefore, further agreed that the existing Working Group should prepare an initial report for the November special Premiers’ Conference on the policy issues arising from the final ESD Reports and the appropriate processes for the final form of an Intergovernmental Agreement.
Leaders and representatives agreed that Local Government has a legitimate interest in a range of environmental issues and that Local Government should be involved in the drawing up of the Intergovernmental Agreement.
Leaders and representatives recognised the significant benefits of major new industrial timber growing and wood processing projects within proper environmental controls. They noted that, since their last meeting in Brisbane, the Commonwealth has taken a decision to introduce resource security legislation to respond to concerns about uncertainty of access to resource in the forestry industry. They also noted that subsequent consultations between the Commonwealth and the States have elaborated important aspects of the Commonwealth scheme, including the eligibility criteria for a project, the Integrated Assessment of projects, and security of usage of forest resources.
Leaders and representatives emphasised the importance of close Commonwealth-State co-operation in assessing projects, in concluding arrangements to cover them and in ensuring the smooth functioning of those agreements. In this context, they attached major importance to assessments being so designed that the necessary information is obtained with minimum duplication. Also, to the maximum extent possible, relevant work already undertaken at the State and Commonwealth level such as the Tasmanian Salamanca and Forestry Industry Strategy processes should be accredited. For example, an assessment of all heritage values within the project catchment area should recognise studies undertaken to date rather than require a fresh start in each case. Should those studies meet Commonwealth requirements, they should be accepted.
Leaders and representatives noted that the Commonwealth intends to introduce resource security legislation in the budget sittings and that Commonwealth officials have developed and discussed with the States and outline of the legislation for consideration by the Commonwealth Government. Further consultation will be held with the States and Territories before the legislation is introduced.
It was agreed that it is the responsibility of the States, together with industry proponents, to bring forward projects for assessment and for those States wishing to utilise the Commonwealth scheme to put any necessary State legislation in place. Leaders and representatives noted that the details of the Integrated Assessments of wood processing projects will need to take account of any relevant decisions arising from work on an Intergovernmental Agreement on the Environment.
Leaders and representatives noted that State and Federal Governments share the objective of phasing out woodchip exports from native forests in favour of downstream processing of the resource (pulp and paper mills) by the year 2000, such projects being subject to environmental and economic assessments. Woodchip export approvals will be considered on a case by case basis with full regard to the objective of ensuring that Australia achieves the fullest possible return of it forest resources.
Report on Patterns of Urban Settlement
Leaders and representatives welcomed the Report of the Working Group on Patterns of Urban Settlement and endorsed the three broad strategies proposed by the Working Group to improve the efficiency and equity of the operation of Australian cities.
While work has been done in this area, they agreed that progress had been slow and insufficiently substantive to prevent further deterioration of Australian cities.
Leaders and representatives especially welcomed the fact that the Report’s recommendations had been agreed not only by States-Territories and the Commonwealth but also by representatives of Local government. It was acknowledged that the role of local authorities in implementing many of the Report’s recommendations would be crucial to its success.
It was agreed that many of the- more intractable and long term urban problems need to be addressed in a coherent and integrated way by all three spheres of government, and that the Report had provided concrete suggestions for doing this. It was considered that the strong role now being taken in these issues by leaders and representatives should continue, to ensure greater progress in urban reform.
Leaders and representatives agreed that urban consolidation should be promoted, planned and supported, that an intergovernmental approach should be adopted to achieve more efficient and equitable provision, charging and financing of urban infrastructure and that government mechanisms for the planning and co-ordination of urban development should be improved.
The Industry Commission will be asked to examine the taxation and financial policies of governments, including pricing policies, which lead to inefficient patterns of urban settlement in Australia. Further studies will be undertaken into strategic long term infrastructure and their financing requirements and into strategic planning and budgetary co-ordination processes between spheres of government.
In order to give practical demonstrations of better urban planning and service delivery and co-ordination within and between levels of government, as recommended by the Patterns of Urban Settlement Working Group, leaders and representatives have agreed to co-operate in a range of programs and projects to improve urban consolidation and the quality of urban life. Funding arrangements are being considered in the Commonwealth Budget context and will reflect the approaches agreed by the special Premiers’ Conference last October and take into account the planning priorities of the States. The projects are expected to demonstrate:
- the advantages of an integrated approach to planning and development;
- the potential to improve the efficiency of cities with consequent savings for all levels of government, industry and individuals; and
- the potential to improve the quality of life of citizens arising from such co-operative approaches.
These programs can be a major contribution to inter-governmental co-operation and a catalyst for change more generally in planning and service delivery that will help Australia’ cities function more efficiently and improve them as places in which to live and work.
Tax Implications for Infrastructure Development
A number of aspects of the taxation system have implications for the viability of private sector provision of infrastructure for the development of our cities and in other areas, and for the choice between public and private sector provision.
Leaders and representatives agreed that a Working Group including Commonwealth and State Treasury officials would prepare a report on the issues in this area, in the light of accepted international taxation principles, for the November special Premiers’ Conference and the Group would consult Local Government on relevant issues. The Terms of Reference are set out at Attachment B.
Co-operation in Industrial Reform
Leaders and representatives noted the progress report on Co-operation in Industrial Relations and called for a further progress report to the November 1991 Conference.
Leaders and representatives agreed to establish a standing committee of senior officials to provide more timely and coordinated assistance to the Commonwealth on the negotiation and implementation of international treaties.
Leaders and representatives also agreed to review the current machinery relating to Commonwealth/State and Territory consultation on negotiation and implementation of international treaties with a view to improving coordination in this area.
Leaders and representatives recognised that greater efficiency for port authorities and coastal shipping are essential components of transport reform given its intermodal nature. They noted the significant reforms now underway on waterfront labour and the progress made in reducing labour costs, improving training and introducing modern vessels as a result of present reform processes.
The Conference endorsed the work of the Australian Transport Advisory Council (ATAC) in examining port reform and sought a progress report from the Council, for considering at the November 1991 special Premiers’ Conference.
Leaders and representatives agreed on the desirability of continuing to improve the efficiency of coastal shipping and requested ATAC to develop a system to monitor progress in both port and sea transport reform.
In progressing these issues, leaders and representatives noted that ATAC should have regard for work that has been undertaken by other groups such as the Shipping Industry Reform Authority. The Commonwealth also agreed to engage in continuing consultations with the States as issues emerge, noting the special interest of Tasmania in coastal shipping.
ATTACHMENT A - Papers Made Available
Paper on Regulatory Reform released for public consultation prior ro the November 1991 special Premiers’ Conference
- A Discussion Paper on Mutual Recognition of Standards and Regulations Australia
Other papers being made available are:
- A Framework for National Performance Monitoring of Government Trading Enterprises.
- Discussion Papers on Performance Indicators for Government Trading Enterprises
- The Use of Financial Accounting Indicators in National Performance Monitoring. *
- Economic Performance Monitoring of GTEs: A Survey *
- Report of Task Force on Other Issues in the Reform of Government Trading Enterprises. *
- Discussion Papers on the Reform of Government Trading Enterprises
- Characteristics of a Fully Corporatised GTE. *
- Checklist for National Stocktake of GTE Reforms. *
- Report of the Electricity Working Group to the special Premiers’ Conference, July 1991.
- Report of the Working Group on Patterns of Urban Settlement.
- Statement of the Commonwealth’s Policy on financial Compensation to States and Territories for loss of tax equivalent payments from privatised formed GTEs.
Also available is “Coverage of the Global Approach”, a report by Commonwealth and State Officers for the 1991 Loan council Meeting.
* Note: Papers marked * are background working papers – not endorsed by Heads of Government.
PRIVATE INVESTMENT IN INFRASTRUCTURE – TAXATION ISSUES
Proposed Terms of Reference for Review
The issues proposed to be investigated include suggestions that the tax system is biased against private sector investment in infrastructure in relation to:
- the treatment of projects with deferred cash flows;
- the treatment of depreciation;
- the tax-free status of many public infrastructure providers, which, it is argued, creates a bias against private investment infrastructure; and
- the treatment of private investment in infrastructure that remains under the ownership or control of the public sector.
The review would consider the validity of these suggestions and the scope for reform when warranted. Its terms of reference would be:
- review of taxation treatment by the Commonwealth, States and Local Governments of private investment in infrastructure; and any proposals canvassed be consistent with internationally accepted taxation principles.
It is proposed that the review report to the November special Premiers’ Conference.