The Treasury Program

Objective

The staff years refer to average staffing levels over the entire financial year. The figures represent the full-time equivalent of all staff paid during the year, including paid inoperative staff and part-time staff. Aggregate Departmental staffing figures in Appendix A refer to operative staff and paid inoperative staff as at 30 June 1999.

Detailed financial information for 1998-99 is contained in the Financial Statements and detailed staffing information is contained in Appendix A.

• monitoring economic conditions, trends and prospects and financial market and economic developments;

• developing, coordinating and overseeing the preparation of economic forecasts;

• maintaining liaison with external contacts within international fora, State governments, the Reserve Bank of Australia (RBA), the Australian Bureau of Statistics (ABS), financial markets, companies, employer groups, unions, research institutes and other government departments;

• preparing advice on monetary and fiscal policy, labour market and general macroeconomic issues;

• undertaking policy-relevant research and analysis to improve the quality of policy advice and to contribute to the public debate and understanding of macroeconomic issues; and

• undertaking internal review and evaluation of processes and outcomes.

Subprogram 1.2 International Economy

Objective

To promote Australia

’s international economic interests, including its economic links with the Asian region, and to assess the implications of international economic developments for the Australian economy.

Description

The program involves participation in policy discussions on economic and financial issues in various international institutions and fora, managing Australia

’s relations with international institutions and monitoring and analysing the implications for Australia of international economic developments and policy trends. Following a reorganisation during the year, the program is now undertaken by staff in the International Economy Division and International Finance Division, together with Treasury representatives in Beijing, Jakarta, London, Paris, Tokyo and Washington.

Table 3: Financial and Staffing Resources Summary
Subprogram 1.2 International Economy

Note: The Other Program Costs and Adjustments result from our transactions with the international financial institutions of which Australia is a member. Treasury publishes annual reports on Australia's relations with the International Monetary Fund, the World Bank and the Asian Development Bank which provide details of our transactions with those organisations.

Strategies

Strategies to achieve the objectives of the subprogram include:

Performance Indicators

Performance indicators for this subprogram include:

• the quality and impact of the contribution made to economic policy formulation and forecasting of the Australian economy;
• the quality and impact of the contribution made to international discussion of economic policy issues, including the policies of the international financial institutions and APEC;
• the range and effectiveness of external contacts; and
• the quality and impact of the contribution made to public debate, and understanding of, overseas economies and international economic issues, including in the Asian region.

Performance Outcome for 1998-99

International Financial Crises

As with last year, much of the program

’s work during the year was focussed on the international financial crises, the responses made to the crises by the inter
national financial institutions and the support provided by Australia.

Three countries in the region continued their IMF-supported economic adjustment programs (Thailand, Indonesia and Korea) following their crises in 1997-98. Australia participated in financial support arrangements for each of these programs and undertook to provide support of up to $US1 billion in each case. Australia

’s support for Thailand is through a central bank currency swap. The support for Indonesia and Korea would be provided, as necessary, through government-to-government loans.

In the 1998-99 Budget, the subprogram was allocated an additional $505 million to help support the above mentioned economic adjustment programs associated with the IMF. These funds were not required in 1998-99.

Prime Minister’s Task Force on International Financial Reform

In October 1998, the Prime Minister commissioned a Task Force, chaired by the Treasurer, on international financial reform. The Task Force was requested to draw on the expertise of public and private sector members. Consistent with its terms of reference, the Task Force focussed on the contribution Australia can make towards strengthening the international financial system to reduce the risk of future crises and ensure greater stability in capital flows.

The International Economic Policy Group

The International Economic Policy Group (IEPG) was formed in early 1999 to facilitate a coordinated ‘whole of government’ consideration of international economic developments and policy issues. The IEPG meets approximately every six weeks, or as needed. The IEPG comprises high level officials from the Departments of the Prime Minister and Cabinet, Foreign Affairs and Trade, Treasury and the Reserve Bank, with other economic departments attending as required.

International Financial Institutions

Treasury participated in, and provided briefing for, Australian Ministerial and official delegations to the IMF/World Bank Annual Meetings in Washington on 4-6 October 1998, the IMF/World Bank Spring Meetings in Washington on 27-28 April 1999, the ADB Annual Meeting in Manila on 30 April-2 May 1999 and the EBRD Annual Meeting in London on 19-20 April 1999. It also prepared briefing for Australia

’s representatives at the IMF, World Bank, ADB and EBRD on a wide range of policy issues throughout the year.

Responses to the international financial crisis, and its lessons for the future, dominated much of the business of the international financial institutions during the year.

’s relations with the IMF, the World Bank and the ADB. These reports outlined Australia’s response to the Asian crisis in conjunction with these international financial institutions. They also discussed other global issues, including debt relief and the HIPC Initiative and the Multilateral Investment Guarantee Agency. The reports contribute to the public debate on Australia’s relations with the organisations and improve the understanding of their operations.

Manila Framework Group

Treasury attended, and played an active role in the outcome of, the third Manila Framework Group meeting in Kuala Lumpur on 7-8 November 1998. Treasury hosted the fourth Manila Framework Group meeting in Melbourne on 26-27 March 1999.

Six Markets Group

On 25 February 1999, a meeting of the Six Markets group was held in Tokyo. The meeting was attended by senior officials of the Finance Ministries, Central Banks and/or Monetary Authorities of Australia, China, Hong Kong SAR, Japan, Singapore and the United States. Participants discussed international financial reform issues, particularly those issues concerning hedge fund oversight and private sector involvement in crisis management.

G26 Meeting and G7 Seminars

In conjunction with the 1998 Annual Meetings of the IMF and World Bank, the United States convened a meeting of Treasurers/Finance Ministers and central bank governors from 26 economies. The Assistant Treasurer and the Governor of the RBA attended the meeting. The meeting examined issues relating to the stability of the international financial system and effective functioning of global capital markets. Reports of the three working groups that had been established at the G22 meeting earlier in the year were presented at the meeting. Treasury represented Australia on the group that examined transparency and accountability issues.

New Arrangements to Borrow

The New Arrangements to Borrow (NAB) are credit arrangements under which 25 members, or their institutions, stand ready to provide loans to the IMF to increase the resources it has available for use in emergency situations. For its first year of operation, Australia is the chair of the NAB.

Multilateral Investment Guarantee Agency

On 10 February 1999, Australia became a member of the Multilateral Investment Guarantee Agency (MIGA), part of the World Bank Group. MIGA’s purpose is to encourage foreign investment in developing countries by providing investment guarantees against the risks of currency transfer, expropriation, and war and civil disturbance. MIGA also provides advisory services to developing member countries on means of improving their attractiveness to foreign investment.

Asia-Pacific Economic Cooperation

Economic Leaders

The onset of international financial crises saw this topic at the centre of discussions among APEC economic leaders at their annual meeting in Kuala Lumpur in November 1998. In the lead-up to that meeting, the Secretary to the Treasury, as the Prime Minister’s Special Envoy, led an interdepartmental team to a number of Asian capitals to discuss Australia’s proposed approach to the leaders’ meeting.

Finance Ministers

Treasury provided policy advice and briefing for the Treasurer’s participation in the Sixth APEC Finance Ministers’ meeting held in Langkawi, Malaysia, in May 1999. The meeting pursued efforts to reform the international financial system and secured a commitment by member economies to improve prudential supervision in the banking and securities sectors by better training of supervisors. It also continued to advance the strengthening of corporate governance in the region.

Investment Experts Group

Treasury was active in APEC’s investment liberalisation, facilitation and cooperation activities through leading Australia’s representation in the APEC Investment Experts Group. Treasury worked to ensure that the Group remained focused on investment liberalisation and facilitation rather than investment promotion activities. A major output of the Group was a ‘menu of options’ for investment liberalisation and business facilitation from which economies may voluntarily select any of a number of options to make progress toward creating a free and open investment regime. The Group has also begun updating the APEC Investment Guidebook, which provides comprehensive information on the investment regimes of member economies.

Economic Committee

Treasury led Australia’s representation on APEC’s Economic Committee. Treasury worked to improve the quality of the Committee’s output and to ensure that the activities of the Committee met the needs of Leaders, Ministers and other APEC fora. The major outputs for the year included the annual APEC Economic Outlook, work on research projects analysing APEC economies after the financial crisis, a report on Costs and Productivity Trends and Patterns of Specialisation in APEC, and a survey on Trade-Related Environment Measures and Environment-Related Trade Measures.

Relations with Asia

Treasury’s representatives in Tokyo, Beijing and Jakarta continued to be active in maintaining and developing relations with Treasury’s counterparts in Japan, Korea, China, Ho
ng Kong SAR, Taiwan, Indonesia, Singapore, Malaysia, Thailand and the Philippines. Treasury’s overseas representatives continued to contribute significantly to the overall monitoring of economic conditions in these economies and to assessments of their major economic policy challenges. In particular, these contacts have aided our understanding of events that have unfolded in Asian financial markets over the last two years. Visits to Australia by official delegations and by Treasury officers to the East Asian region have also contributed to an improved understanding by Treasury of Asian economies and have encouraged greater cooperation between Treasury and its counterparts in East Asia. During 1998-99, Treasury together with its overseas representatives, organised programs for visits by several official delegations from East Asia.

Relations with Pacific Economies

South Pacific Forum Economic Ministers’ Meeting (FEMM)

The Assistant Treasurer attended the second FEMM in Nadi, Fiji in July 1998. Following the adoption of the FEMM Action Plan of economic liberalisation at its inaugural meeting in 1997, FEMM confirmed its commitment to economic reform as the key to improving the climate for private investment in the region and raising sustainable levels of growth. Encouragingly, considerable progress has been made by a number of member economies.

Organisation for Economic Co-operation and Development

Treasury staff participated in the work of OECD committees relevant to their responsibilities in the fields of macroeconomic and microeconomic policy, forecasting, taxation, competition policy, investment and capital markets. In June 1999, Treasury participated in consultations with a visiting OECD team in preparation for the OECD

’s regular review of the Australian economy.

Overseas Policy Lessons

Reporting by overseas posts and analysis conducted during the year maintained a close focus on international economic developments and on overseas experience of relevance to domestic economic policy formulation. In particular, contacts made by overseas posts aided understanding and analysis of events that have unfolded in Asian financial markets and economies over the past two years and their global implications. Reporting and analysis of developments in major economies contributed to our understanding of macroeconomic conditions and likely policy developments in these economies. For example, the impact of global developments on the Australian economy requires a balanced assessment of the continuing strong growth in the United States against the weak condition of the Japanese economy, and the likely influence of policy prescriptions adopted in those countries. European reporting has also contained useful macroeconomic policy insights from developments such as the progress of the European Economic and Monetary Union, and microeconomic reporting on issues such as labour market reform, corporate law and competition policy issues. The work and discussion taking place in the OECD continues to be of major interest.

Subprogram 1.3 Structural

Objective

To promote more efficient and sustainable use of resources and improved structural competitiveness and productivity of the Australian economy.

Description

Structural Reform Division provides advice on:

Table 4: Financial and Staffing Resources Summary
Subprogram 1.3 Structural

Strategies

Strategies to achieve the objectives of the subprogram, which are reflected in the Division

’s Operational Plan, include:

• provision of advice to the Government, other departments and agencies identifying emerging issues and undertaking forward-looking analysis of options;
• contributions to policy development, both directly and through interdepartmental processes;
• coordinating and liaising with Commonwealth and State Departments, other relevant agencies and industry;
• implementing policy decisions taken by the Government including the preparation of amendments to relevant legislation;
• effective contribution to public debate, including through policy-relevant research and analysis, publications, submissions to inquiries, speeches and contact with industry members; and
• internal review and evaluation of processes and outcomes.

Performance Indicators

Performance indicators for this subprogram include:

Performance Outcome for 1998-99

Implementation of National Competition Policy

The Division coordinated implementation of the National Competition Policy (NCP), which provides a framework to progress a broad range of microeconomic reforms.

’s competitive neutrality arrangements that are designed to improve resource allocation by ensuring that government business activities have no net competitive advantage simply as a result of their government ownership.

In liaison with the Office of Regulation Review in the Productivity Commission, Treasury coordinated the further progress of the Commonwealth

’s legislation review arrangements as outlined in the Commonwealth Legislation Review Schedule of June 1996. The Schedule lists all legislation that restricts competition or imposes costs on businesses. Legislation on the Schedule is reviewed to assess whether restrictions are necessary to meet the Government’s objectives and are in the public interest. Proposals for new legislation are assessed against similar criteria through the Regulation Impact Statement process.

Commonwealth progress against competition policy reform benchmarks was reported in the Commonwealth National Competition Policy Annual Report 1997-98. The Annual Report outlined progress on regulation review and the implementation of competitive neutrality principles as well as structural reform of public monopolies; access arrangements for significant infrastructure facilities; prices oversight; legislative exceptions from the application of Part IV of the Trade Practices Act 1974; and progress in the related reform areas of gas, electricity, water and road transport.

’s particular responsibilities for the application of competition policy and its wider responsibility for advising on microeconomic issues more generally. Reform in each of these areas has the potential to lead to significant benefits in terms of enhanced productivity and the provision of higher quality and more diverse services. These benefits are particularly significant in the fields of communications and energy services, which are critical inputs for the whole economy.

Telecommunications reforms have played an important role in improving the competitiveness and productivity of the economy, and will continue to do so. During the year, the Division liaised with Department of Communications, Information Technology and the Arts (DoCITA) on proposed amendments to the telecommunications industry provisions in Parts XIB and XIC of the Trade Practices Act 1974.

Productivity Commission

The Productivity Commission (the Commission) is the Government

’s principal advisory body on microeconomic reform.

The broad charter of the Commission is to hold inquiries into industry, industry development and productivity matters referred to it by the Treasurer. Other key functions are to undertake research and promote public understanding of such matters; and investigate and report on competitive neutrality complaints about Commonwealth Government businesses and business activities.

’s responses to Commission reports.

During 1998-99 Treasury coordinated and finalised eight wide-ranging inquiry references to the Commission. The references were: Nursing Home Subsidies; Progress in Rail Reform; Implementation of Ecologically Sustainable Development by Commonwealth Departments and Agencies; Australia’s Gambling Industries; Impact of Competition Policy Reforms on Rural and Regional Australia; International Telecommunications Market Regulation; International Liner Cargo Shipping: A Review of Part X of the Trade Practices Act 1974; and Broadcasting.

General Policy Advice and Other Activities

The Division provided advice to the Treasury portfolio Ministers and engaged in policy development processes on a wide range of issues relating to industry policy. For example, this included advice on implementing the new Part VB of the Trade Practices Act 1974 which gives the ACCC the power to monitor prices and issue notices against businesses it considers are engaging in price exploitation during the transition to the New Tax System. It also included advice on Australia’s position on competition and regulatory policies and law at international fora including APEC and OECD. In addition to the Productivity Commission the Division provides oversight of the Commonwealth Competitive Neutrality Complaints Office, the Office of Regulation Review, the National Competition Council, the Australian Competition and Consumer Commission, and the Australian Competition Tribunal.

Subprogram 1.4 Taxation

Objective

To develop taxation policies which contribute to the reform of the Australian taxation system in terms of efficiency, equity and administrative simplicity.

Description

Budget Group is responsible for assessing and advising on the general structure of the taxation system and its components, in relation to economic efficiency, equity, income distribution, budgetary requirements and economic feasibility. The Budget Group Divisions involved in this subprogram were Business Income and Industry Policy Division; Business Entities and International Tax Division; Indirect Tax and Payment Design Division; and Retirement and Personal Income Division. In 1998-99, Treasury provided officers and support for the Taxation Task Force which assisted in the production and implementation of the Government’s tax reform plan A New Tax System. Treasury also provided officers and support for the Secretariat of the Review of Business Taxation.

Table 5: Financial and Staffing Resources Summary
Subprogram 1.4 Taxation

Strategies

Strategies to achieve the objectives of the subprogram include:

Performance Indicators

Performance indicators for the subprogram include:

Performance Outcome for 1998-99

Policy Focus

In August 1998, the Treasurer released the document Tax Reform: Not a new tax, a new tax system which set out the shortcomings of the existing taxation arrangements and proposed a range of reforms. Reforms included: replacing the wholesale sales tax and a number of State and Territory taxes with a modern broad-based goods and services tax; an overhaul of Commonwealth-State financial relations; reforms to tobacco and petrol excise; substantial income tax cuts; a families package; and a range of administrative reforms, including a new collection and payment system.

A New Tax System

On 26 October 1998, the Treasurer appointed the Tax Consultative Committee to assist the Government through a consultation process to finalise the Goods and Services Tax (GST) design for health, education, religious services and the non-commercial activities of charities. The Committee was also asked to make recommendations on transitional arrangements relating to motor vehicles and to report by 13 November 1998. Treasury provided the Secretariat for the Committee.

Review of Business Taxation

On 23 November, the Review released the first of its consultative documents, a discussion paper entitled A Strong Foundation. Following the release of the paper, the Review called for submissions on its proposals and held seminars in all capital cities. Over 70 submissions were received. The round of consultations held by the Review proved to be valuable, with seminar attendees taking the opportunity to raise issues of concern to them on the national objectives and design principles outlined in the paper, and giving broad support to the related processes for policy development.

Feedback from Government and Taxpayers

Budget Group obtained feedback on its performance through industry submissions and consultations and by monitoring factors such as the Group

’s influence on the tax policy debate and tax policy outcomes. This influence can be assessed, to some extent, by the process of issuing discussion papers and receiving submissions; the extent to which recommended positions are adopted by the Government; and the conformity of the adopted measures with principles of efficiency and equity.

1999-2000 Budget

The 1999-2000 Budget extended family assistance to dependent young people up to the age of 21 (both students and job seekers). The measure commences from 1 October 1999 and will apply to existing family assistance arrangements. From 1 July 2000, the measure will form part of Family Tax Benefit, Part A, an element of the new tax system.

Other Consultation with Taxpayers

Treasury and ATO officials consulted with industry representatives concerning taxation relief for managed investment funds that are required to restructure under the terms of the Managed Investments Act 1998 (the MIA). Following the consultations, the Government decided to provide broad relief, for both funds and their members, from the income tax consequences of actions taken to comply with the MIA.

’s taxation policies. Such processes play an important role in informing Treasury’s advice to Government.

Community Education and Information Program

Treasury spent $12.9 million in 1998-99 on an information and education program to inform the public of the nature of the Australian taxation system and changes required to reform it. Budget Group was responsible for this program.

Reporting of Tax Expenditures

Treasury produces the Taxation Expenditures Statement (TES) which provides details of the revenue impacts associated with concessional taxation treatment of specific groups and/or activities.

Other Policy Advice

Budget Group advised the Government in respect of the following four new measures to encourage philanthropy which were announced on 26 March 1999:

Modelling

Budget Group is responsible for three main tax models: the Price, Revenue Incidence Simulation Model (PRISMOD), the Treasury Wholesale Sales Tax and Excise Revenue Price Model (TWERP) and the Interface model. All three models were developed within Treasury.

Ministerial Correspondence

Budget Group handles some 60 per cent of the Treasury’s Ministerial correspondence. From its establishment in October 1998 until June 1999 the Group completed almost 2,800 replies to correspondence.

Legislation and Government Inquiries

Treasury has participated in a number of interdepartmental reviews, including the application of the Petroleum Resource Rent Tax to Liquefied Natural Gas projects (which involved consultation with industry representatives); Pooled Development Funds; and the review of the Division 10BA film tax concession.

Subprogram 1.5 Fiscal

Objectives

To develop fiscal policies, including arrangements for the distribution of resources between the Commonwealth and other levels of government, which are consistent with sustainable public finances and macroeconomic objectives; and to administer efficiently the provision of general revenue assistance to other levels of government.

Description

Within this subprogram, the Budget Policy Division is responsible for advising on Budget policy, with Macroeconomic Policy Division advising on overall fiscal policy and strategy. Commonwealth-State Relations Division is responsible for advice on payments to the States, intergovernmental coordination of public sector borrowing and measures to improve public sector efficiency.

Table 6: Financial and Staffing Resources Summary
Subprogram 1.5 — Fiscal

(a) Other Program Costs relate to general purpose grants made to the States, including safety net arrangements introduced to protect State revenues following a High Court ruling of 5 August 1997.

Strategies

Strategies to achieve this objective include:

Performance Indicators

The quality, timeliness and relevance of fiscal and budget policy advice are key indicators for this subprogram. Assessments of performance against these criteria take into account:

Performance Outcome for 1998-99

Charter of Budget Honesty

The Charter of Budget Honesty Act was passed in 1998. It aims to produce better fiscal outcomes through introducing institutional arrangements to increase public scrutiny of fiscal objectives and performance.

Budget Processes

The Final Budget Outcome 1997-98 was published in September 1998, and a comprehensive mid-year review of the 1998-99 Budget estimates was published in December 1998. These
publications were consistent with the requirements of the Charter of Budget Honesty Act 1998, and provided detailed information on the Government

’s fiscal objectives and performance against those objectives.

The Accrual Budget

The 1999-2000 Budget was delivered on 11 May 1999. This was the first Commonwealth budget to be presented in the accrual accounting framework. The implementation of the accrual framework is a substantial advance in public sector budget and financial management and provides a solid platform for future reform. While there remains substantial work to complete the move to accruals, the 1999-2000 Budget represented a major part of that transition. Preparation for the introduction of the accrual framework included the publication of a Treasury information paper entitled Fiscal Policy Under Accrual Budgeting.

Policy Advice on the Fiscal Outlook

During 1998-99, advice was provided to the Treasurer and other members of the Government on the 1997-98 outcome, the fiscal outlook and the 1999-2000 Budget strategy and processes. In formulating this advice, Treasury took into account the impact of policy decisions and changes in the economic outlook. Incorporation of the influence of economic and fiscal conditions in the States and Territories was facilitated by liaison with State and Territory officials.

Major Program Reviews

During 1998-99, officers of the Budget Policy Division participated in a number of interdepartmental committees reviewing a range of major programs. This included work on the Quadrennial Review of Non-Government School Funding, the development of reforms to improve the private health insurance industry, and the renegotiation of the Commonwealth-State Housing Agreement. Treasury

’s contribution to such review processes seeks to ensure that the Government’s social objectives are considered in the context of its broader economic aims and that the outcome improves the effectiveness and efficiency of Commonwealth Government outlays. Treasury also provided advice to the Government on these and other program policy issues.

Reform of Commonwealth-State Financial Relations

The Commonwealth’s proposal for reforming Commonwealth-State financial relations was the subject of a Special Premiers’ Conference on 13 November 1998, where States and Territories provided their agreement in principle to reform the existing financial arrangements. Further discussions of these reforms led to the signature of an Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations by Heads of Government at the 1999 Premiers’ Conference. The Intergovernmental Agreement outlines the Commonwealth, State and Territory governments’ commitments undertaken as part of the reform of Commonwealth-State financial relations.

Premiers’ Conferences

Treasury has primary responsibility for the provision of advice on financial arrangements with the States and Territories. Advice was provided to the Treasurer and Prime Minister in the lead-up to the Special Premiers’ Conference held on 13 November 1998 and the 1999 Premiers’ Conference held on 9 April 1999. The advice dealt with the reform of Commonwealth-State financial arrangements, the provision of general revenue assistance to the States and Territories and the coordination of public sector borrowings through the Loan Council.

Fiscal Reporting Issues

In accordance with the revised Uniform Presentation Framework agreed by the Australian Loan Council in March 1997, for the first time all jurisdictions prepared mid-year budget reports in 1998-99. The primary objective of the Uniform Presentation Framework is to ensure that a common ‘core’ of financial information is provided by Commonwealth, State and Territory governments in their budget papers. In late 1998-99, the Commonwealth, States and Territories began an examination of the implications of the shift to accrual reporting for the Uniform Presentation Framework.

Heads of Treasuries

Heads of the Commonwealth, State and Territory Treasuries meet regularly to discuss matters of mutual interest, such as economic conditions, fiscal reporting, taxation and financial issues, and preparations for the annual Premiers’ Conference and Loan Council meeting. Heads of Treasuries met eight times over the course of 1998-99, a higher than usual number of meetings because of the negotiations between the Commonwealth and the States on the Intergovernmental Agreement on the Reform of Commonwealth-State Financial Relations.

Other Policy Advice

Treasury provides advice on tax policy issues arising in a Commonwealth-State context. Following the High Court decision in Allders International Pty Ltd v Commissioner of State Revenue (Victoria) (1996) 186 CLR 630 (Allders) invalidating the imposition of State taxes on Commonwealth places, Treasury has introduced Commonwealth taxes to mirror State payroll taxes, Financial Institutions Duty, debits tax and stamp duties on activities on or in Commonwealth places. The Commonwealth will remit mirror tax revenues to the States to ensure they are not financially disadvantaged by the Allders decision. Treasury is developing bilateral agreements with States covering the administrative arrangements for collecting and ensuring compliance with these mirror taxes.

Subprogram 1.6 Debt Management

Objective

To raise, manage and retire Commonwealth debt at the lowest possible long-term cost, consistent with an acceptable degree of risk exposure.

Description

Debt Management Office within Economic Group was responsible for advising on, designing and implementing programs in relation to borrowings by the Commonwealth and the management of the Commonwealth

’s debt, including legislative aspects of debt issue.

It was announced in the 1999-2000 Budget that a new specialist agency, the Australian Office of Financial Management, was to be established within the Treasury portfolio as a ‘prescribed’ agency under the Financial Management and Accountability Act 1997, to assume responsibility for the Commonwealth’s existing debt management activities. The Australian Office of Financial Management commenced operations on 1 July 1999.

Table 7: Financial and Staffing Resources Summary
Subprogram 1.6 — Debt Management

(a) Other Program Costs comprise all expenditures made from the Consolidated Revenue Fund, including transactions relating to the servicing of Commonwealth debt. Adjustments comprise receipts offset within outlays, appropriations classified as financing transactions, appropriations from the Loan Fund affecting outlays and trust account transactions affecting outlays. Specific adjustments made include interest receipts from swap counterparties, principal payments to swap counterparties, interest receipts from the States and the Northern Territory and debt repayments made from the Consolidated Revenue Fund.

Strategies

Strategies to achieve the objective of the subprogram, which were reflected in the Office’s Operational Plan, included:

Performance Indicators

Performance indicators for this subprogram included:

• efficient management of the Commonwealth’s cash balances;

• indicators include achievement of the Ministerially-endorsed cumulative average cash balance target as at end year.

• timely calculation of public debt interest (PDI) obligations as an input into budgetary processes;
• meeting all legislative, administrative and accountability requirements for debt issue, repurchase and redemption and the payment of debt assistance related to redemption of Commonwealth Government debt on issue for the States and Territories; and
• efficient administration of debt redemption for the States and the Northern Territory through the Debt Retirement Reserve Trust Account.

Performance Outcome for 1998-99

Debt Management Framework

In common with most entities with significant financial exposures in their balance sheet, the Commonwealth has been moving increasingly in recent years to conduct its debt management activities within an explicit risk management framework. In conducting its portfolio management and debt issuance activities, key risks managed by the Commonwealth include funding risk, market risk and credit risk.

Treasury

’s broad objective with respect to funding risk management was to ensure continued market access on favourable terms such that funding requirements were realised in an orderly and cost-effective manner. Cost-effective debt issuance requires appropriate stock selection; efficient execution of transactions; the maintenance of a diverse investor base; deep, liquid markets; and an efficient yield curve for Commonwealth Government securities. To this end, the practice of concentrating debt issuance into liquid benchmark stocks was continued in 199
8-99. Extensive liaison with financial market participants has been maintained in order to assess market conditions and guide issue decisions.

Market risk, sometimes referred to as portfolio risk, is the risk to the value of the debt portfolio from changes in financial prices such as interest rates and exchange rates. For a number of years Treasury

’s approach has been to establish a carefully-defined hypothetical portfolio benchmark with a trade-off between cost and risks, to serve as a target for the structure of the Commonwealth debt portfolio.

The benchmark, which is the outcome of considerable research and modelling undertaken with input from specialist external advisors, reflects a portfolio composition that, ex ante, can be expected to minimise the cost of Commonwealth debt over the longer term, subject to an acceptable degree of volatility in annual debt service costs. It is within this benchmark framework that decisions relating to the 1998-99 borrowing program were taken, ensuring consistency with the long-term strategy.

Credit risk is the risk that a counterparty of the Commonwealth may default on its obligations. Credit risk was managed by reference to a comprehensive Swap Counterparty Credit Policy, endorsed by the Treasurer, that establishes minimum credit rating criteria for acceptable counterparties and differential market and potential exposure limits for various institutional counterparty types at different ratings points.

The Commonwealth

’s Borrowing Program

As in 1997-98, the Commonwealth maintained a gross new issuance program in 1998-99 even though there was no immediate funding need to do so. The issue program is designed explicitly to meet objectives in regard to maintaining the liquidity of benchmark lines and the efficiency of the yield curve, the length of which continues to be maintained at around 12 to 13 years. Among other considerations, maintenance of an efficient, liquid Commonwealth yield curve will assist the continued growth and development of a range of domestic derivative and related markets and is consistent with the Government’s commitment to the further development of Australia as a centre for global financial services.

Performance indicators for Commonwealth borrowing operations include the range of accepted tender bids and the margin of the weighted average tender yield over prevailing secondary market yields, both of which may be regarded as useful partial indicators of the cost-effectiveness with which borrowing operations have been executed. These indicators provide only a partial guide to how well debt issuance has been targeted to market demand as external factors can also influence these measures. Nonetheless, these partial indicators would tend to indicate if there had been poor tender performance, particularly when examined over time.

Treasury Fixed Coupon Bonds

Treasury Fixed Coupon Bonds were the main funding instrument employed by the Commonwealth in 1998-99. Seven tenders were held in 1998-99, raising $3.9 billion, which was down from the 1997-98 program of $4.5 billion. Issuance was concentrated in the Commonwealth

’s longer-dated stocks, in the interests of building liquidity in that part of the curve. This action ensured that the Commonwealth yield curve remained liquid across its length of around twelve to thirteen years.

The average margin between tender and prevailing secondary market yields (around one basis point) was similar to last year, as was the average range of accepted tender bids at around one and a half basis points. These indicators are consistent with the programme

’s being implemented in a cost-effective manner.

Treasury Indexed Bonds (TIBs)

Ongoing consultation with market participants suggested that adherence to the six-to-eight-week tender schedule (introduced in 1997-98) would continue to assist the development of this market. Accordingly, Treasury maintained a six-to-eight-week tender window through 1998-99.

In 1998-99, there were six tenders held, with total issuance of around $550 million. Issuance was split between the 2015 line and the 2020 line with the majority being into the latter. The average spread to secondary market yields was a little under one basis point, marginally higher than in 1997-98, and the average range of accepted bids at tender increased slightly to around 4 basis points from around 4 basis points in 1997-98.

Treasury Notes

Treasury Note issuance in 1998-99, as in prior years, was designed principally to provide short-term financing to cover within-year timing mismatches between the payment of Commonwealth Government outlays and the receipt of Commonwealth Government revenues. The Treasury Note tender program was managed such that, over the course of the full year, cumulative average cash balances were well inside the Ministerially-prescribed target. This reflects improved accuracy in forecasting Commonwealth cash flows and matching T-Note issuance to these flows.

In 1998-99, around $45 billion of Treasury Notes were issued to the public, through 37 tenders. The RBA took up a further $1.3 billion over the year at the weighted average yield recorded at the applicable tenders. The average range of accepted bids at tender was 4 basis points, and the spread to secondary market yields was 2 basis points. Both of these measures were in line with the results achieved in 1997-98.

Legislative and Administrative Requirements

The debt issue, repurchase and redemption programs were administered in accordance with the provisions of the Commonwealth Inscribed Stock Act 1911, the Loans Redemption and Conversion Act 1921, the Financial Agreement Act 1994 and related legislation. Estimates of Commonwealth PDI obligations on the Commonwealth debt portfolio were prepared regularly as an input into Budget figuring.

All legislative and administrative requirements for debt redemption were met, including those related to the redemption, through the Debt Retirement Reserve Trust Account, of Commonwealth Government debt on issue for the States and Territories.

Debt assistance payments to the States and Territories, in the form of Commonwealth sinking fund payments to the Debt Retirement Reserve Trust Account (to assist them in their redemption of Commonwealth Government securities on issue on their behalf) and untied grants (to compensate them for the costs of cessation of Commonwealth borrowing on their behalf), were made in accordance with the provisions of the Financial Agreement Act 1994. All relevant accountability requirements were met and enquiries from State and Territory Treasuries concerning debt redemption matters were handled promptly.

Further details on these issues, including the Commonwealth’s portfolio benchmark and portfolio management philosophy, the marketable debt portfolio and swap transactions, are contained in the 1998-99 Commonwealth Debt Management Report.

Subprogram 1.7 Investment

Objectives

To encourage foreign investment consistent with national interest considerations by
following procedures that minimise the impact on commercial decision-making. To represent Australia in international fora with respect to bilateral and multilateral foreign investment agreements and issues.

Description

The Government’s approach to foreign investment policy is to encourage foreign investment consistent with the interests of the community. Overall the general stance of policy is welcoming, in recognition of the contribution that foreign investment has made and continues to make to the development of Australia, providing scope for higher rates of economic activity and employment than could be achieved on the basis of domestic savings. Foreign direct investment also provides access to new technology, management skills and overseas markets.

Table 8: Financial and Staffing Resources Summary
Subprogram 1.7 Investment

Strategies

Strategies to achieve the foreign investment objectives of the subprogram include:

Performance Indicators

Performance indicators for this subprogram include:

Performance Outcome for 1998-99

Consistent with the need for Ministerial decisions on major national interest issues, the more significant foreign investment cases were submitted to the Treasurer, or Assistant Treasurer, for consideration. However, the great bulk of cases requiring examination, approximately 94 per cent, were handled by officers under delegation.

The number of cases received in 1998-99 was 5,091, compared with 4,767 in 1997-98, continuing an upward trend in recent years

. The information requirements for processing proposals have been designed to keep to a minimum the time taken (and hence the cost involved) in obtaining foreign investment approval. In 1998-99, 65 per cent of applications were decided within 10 days of receipt of a completed application; over 90 per cent of cases were decided within 30 days.

Under the Foreign Acquisitions and Takeovers Act 1975 (the Act), the statutory time limit for reaching a decision is 30 days, with up to a further 10 days to notify the parties. There is, however, scope for an interim order extending the period of examination for up to a further 90 days. In 1998-99, there were 50 interim orders and 158 final orders issued. Interim Orders are frequently sought where applicants have failed to provide adequate information to assess their proposal against the national interest test within the 30 day statutory deadline. Final orders are issued where a proposal is inconsistent with Australia’s foreign investment policy. Most final orders issued in 1998-99 related to cases in the real estate sector.

Decisions under ministerial authorisation, including the application of national interest considerations, were overseen by the FIRB and senior management on a weekly basis for consistency with policy and processes. The Executive Member met formally with the Board approximately every four weeks, and the Executive provided reports to the Board on major proposals on a weekly basis. Following examination of a report, the Board’s views and recommendations were submitted by the Executive Member to the Treasurer or Assistant Treasurer.

During the year, the Division focussed on increasing business community awareness of the policy rationale and obtaining feedback on their concerns. As a result the foreign investment policy statements were revised and circulated to law and real estate associations with an offer for Division staff to give follow-up presentations. Two presentations were given on foreign investment policy, see Appendix J. The revised policy statements are also available from Treasury’s website.

The Division considered over 246 representations from the public on the policy or specific cases and handled over 40,000 telephone enquiries.

Monitoring of compliance with foreign investment policy continues to be a significant activity, particularly in respect of the real estate sector. Attention has been focussed on fulfilment of development conditions attached to approval of proposals, schemes designed to avoid the application of the policy and policy evasion. During the year this compliance work led to a number of proponents moving to meet conditions and 5 divestments.

The MAI and Australia New Zealand Bilateral Economic Relations Task Force

During 1998-99, negotiations in the OECD for a Multilateral Agreement on Investment (MAI) ceased.

The MAI was being negotiated by members of OECD, including Australia, and eight non-OECD participants with the aim of providing a transparent, effective and comprehensive framework for international investment.

In October 1998 the French Government withdrew from the MAI Negotiating Group. This led to the cessation of negotiations. The Assistant Treasurer noted that the Australian Government had indicated for some time that it had a number of serious concerns with the draft text of the proposed treaty as it stood. He also reiterated the Government’s commitment not to sign any treaty unless it were demonstrably in the national interest. On 21 December 1998 Treasury officials appeared for a third time before the Joint Standing Committee on Treaties (JSCOT). JSCOT released its final report on the MAI in March 1999.

The review of foreign investment policy (which is one of a set of legislative reviews announced in 1996 to examine costs imposed upon businesses) continued during 1998-99. This work was drawn on in developing Australia’s negotiating position for the Joint Prime Ministerial Task Force on Australia New Zealand Bilateral Economic Relations. A Treasury officer was seconded to the secretariat of the Task Force during March 1999. The Prime Ministers subsequently announced the changes to foreign investment policy in Australia and New Zealand.

Subprogram 1.8 Financial and Currency

Objective

To develop policies and a framework of legislation that assist in increasing the financial safety, efficiency, competitiveness and stability of Australia’s financial system; to provide advice and implement policies on the taxation and non-taxation issues relating to the age pension and to private savings, including superannuation, and to life and general insurance; and to maintain policies for a currency system that represents an efficient medium of exchange.

Description

Financial Institutions Division is responsible for advising on matters relating to the structure and functioning of the Australian financial system, including currency matters, and prudential issues relating to deposit-taking institutions, superannuation funds, and life and general insurance companies. The Division also has administrative responsibility for the Royal Australian Mint (the Mint) and participates on the Mint Advisory Board. (Detailed performance reporting on the Mint’s program is provided in the Mint’s Annual Report.) The Retirement and Personal Income Division, including the Retirement and Income Modelling Unit, is responsible for advising on taxation and non-taxation issues relating to retirement incomes, and private savings, including superannuation and age pensions.

Table 9: Financial and Staffing Resources Summary
Subprogram 1.8 Financial and Currency

Strategies

Strategies to achieve the objectives of the subprogram, which are reflected in the Operational Plans of the Financial Institutions Division and the Retirement and Personal Income Division, include:

Performance Indicators

Performance indicators for this subprogram include:

Performance Outcome for 1998-99

The main output of this subprogram involves the provision of advice to the Treasury portfolio Ministers on policy and administrative matters relating to retirement and personal income policy and the financial sector.

Retirement Income Policy

The Department continued to assist in the development and implementation of superannuation, savings and retirement and personal income policy initiatives during the year.

• Substantial progress was made in the implementation of measures relating to superannuation set out in the 1998-99 Budget.
• A Bill was introduced into Parliament in March 1999 providing for the transfer of the regulation of self-managed superannuation funds from the Australian Prudential Regulation Authority to the Australian Taxation Office.
• An exposure draft Bill containing measures designed to maintain the integrity of the rules applying to the investment of superannuation funds was released in April 1999 for comment.
• Analysis by the Retirement and Income Modelling Unit was used extensively to research and cost a broad range of policy proposals.

Financial Sector Policy Advice

Implementation of the Government’s response to the Final Report of the Financial System Inquiry (FSI) continued throughout 1998-99.

• Negotiations were completed and agreement reached with the States and Territories to give effect to the second stage of the implementation of the Government’s response to the FSI, namely the transfer of responsibility for financial institutions subject to regulation under the Financial Institutions Code, to Commonwealth jurisdiction. Legislation to achieve this goal took effect on 1 July 1999.
• Measures contained in the Financial Sector Reform (Amendments and Transitional Provisions) Bill (No. 2) 1999 and associated Bills, introduced into Parliament on 30 June 1999, continue the financial sector reform process and, when passed, will enhance the operation of existing financial sector legislation.
• Details of the Government’s strategy to promote Australia as a centre for global financial services (CGFS) were announced in May 1999, including the establishment of an Australian Centre for Global Finance (located in Sydney) to develop and implement a coordinated CGFS promotional campaign.
• To assist the work of the Australian Centre for Global Finance, the Government has also established a Regulatory Advisory Committee, chaired by the Treasury, and including representatives from the agencies involved in the regulation of the financial sector.
• FSAC, which brings together a broad range of business views from the financial sector to provide advice to the Government on policies to facilitate the growth of a strong and competitive financial system, continued its work throughout 1998-99, as did the Regional Financial Centre Task Force, which is a specialist body advising the Government, through FSAC, on policies to build on Australia’s existing advantages to ensure our full participation in the increasing global trade in financial services.

The Division also dealt with major operational and administrative matters relating to the financial sector.

• The Treasury Ministers were provided with policy advice and instruments were prepared under the Financial Sector (Shareholdings) Act 1998. Major developments included the AMP takeover offer for GIO, and the NRMA takeover of SGIO.

Currency

Senior Officers of the Financial Institutions Division chaired and served on the Royal Australian Mint Advisory Board during the year. The Division also responded to numerous inquiries from the public for information on a wide range of issues relating to currency.

Subprogram 1.9 Business Law

Objective

To formulate policy initiatives and advice to portfolio Ministers to facilitate the efficient operation of corporations and the securities and futures markets.

Description

Since the Treasury restructure, Subprogram 1.9 Business Law consists of two divisions: Corporate Governance and Accounting Policy Division which is responsible for advising on policy initiatives to facilitate the efficient operation of corporations, and Financial Markets Division which has similar responsibilities for the securities and futures markets. Both divisions work closely together and share responsibility for the operation of the Corporations Law and other business laws.

Table 10: Financial and Staffing Resources Summary
Subprogram 1.9 Business Law

Strategies

Strategies to achieve the objectives of the subprogram include:

Performance Indicators

Performance indicators for this subprogram include:

Performance Outcome for 1998-99

Corporate Law Economic Reform Program (CLERP)

The Corporate Law Economic Reform Program, which commenced in March 1997, made further progress in 1998-99. The Program aims to deliver a corporate regulatory regime which takes full account of the Government’s economic objectives, fostering investment, employment and wealth creation by facilitating investment and capital formation, protecting investors and maintaining confidence in the business environment.

Corporate Law Economic Reform Program Bill 1998

The Corporate Law Economic Reform Program Bill 1998 (‘the CLERP Bill’) was introduced into Parliament on 3 December 1998 and covers arrangements for fundraising, takeovers, the setting of Australian accounting standards, and directors’ duties and corporate governance.

CLERP 6

Financial Markets Division released a consultation paper entitled Financial Products, Service Providers and Markets An Integrated Framework in March 1999. The consultation paper provides further detail on the implementation of ‘CLERP 6’. Since the release of the paper the Division has undertaken extensive consultation through public seminars and meetings of industry representatives with the Minister and Treasury officials. The Division has considered the many submissions received from the public on the CLERP 6 consultation paper and is developing options to address the various issues raised. It is proposed to release draft legislation for public consultation later in 1999.

CLERP 7

A new phase of the Corporate Law Economic Reform Program was announced by the Treasurer on 17 September 1998. ‘CLERP 7’ will focus on reducing the paper compliance burden of Australian companies and enabling the Australian Securities and Investments Commission to make greater use of communications technology. Reforms to be introduced under CLERP 7 include a ‘no change, no lodgement’ policy under which companies and registered schemes will not need to lodge an annual return when there has been no change in the information held by the Commission, and a review of fees set under the Corporations Law with the objective of reducing fees paid by small business and reducing the complexity of fee arrangements. A consultation document on the proposed changes is planned for release in the second half of 1999 so that detailed proposals can be developed in full consultation with the business and investor community.

Financial System Reform

Corporate Governance and Accounting Policy Division played an important role in implementation of the second stage of the Government

’s package of financial sector reforms, arising out of the Financial System Inq
uiry. The Division’s role related principally to development of legislation and administrative mechanisms to convert building societies, credit unions and friendly societies into companies regulated by the Australian Securities and Investments Commission under the Corporations Law. On this significant task the Division worked closely with the Financial Institutions Division in liaison with industry groups, regulators and State and Territory governments. The relevant entities were successfully transferred from the State and Territory-based Financial Institutions Code and Friendly Societies Code to the Corporations Law regulatory framework on 1 July 1999.

Company Law Review Act 1998

The Company Law Review Act 1998 and associated regulations, and the Corporations Legislation Amendment Act 1998 commenced operation in July 1998. The Company Law Review Act simplifies the procedures for setting up a company and improves the law concerning meetings, share capital, financial reporting, annual returns and deregistering defunct companies.

MINCO

The subprogram continued to provide advice on business law matters to the Ministerial Council for Corporations (MINCO). The Financial Markets Division provides secretarial support to MINCO.

Cheques and Payment Orders Act 1986

In consultation with interested parties, the Financial Markets Division prepared the Cheques and Payment Orders Amendment Act 1998, to amend the Cheques and Payment Orders Act 1986 to:

Review of the Bills of Exchange Act 1909

Following the commencement of the review of the Bills of Exchange Act 1909 as part of the Commonwealth Legislative Review Program, submissions have been obtained from interested parties. On the basis of these submissions a discussion paper is to be released in the second half of 1999. The discussion paper will propose reforms to facilitate the electronic transfer of negotiable instruments under the Act and be followed by release of draft legislation for public comment.

Corporate Governance

The Corporate Governance and Accounting Policy Division contributed to the development of the OECD’s ‘Principles of Corporate Governance’, a set of non-binding concepts providing guidance for stock exchanges, investors, corporations and others involved in the process of developing good corporate governance. The Division has also actively contributed to corporate governance work within APEC.

Business Law Dialogue with New Zealand

Australian and New Zealand Business Law officials continued to consolidate the bilateral business law relationship. Officials met during the reporting period for the purpose of exchanging views on business law developments, to identify issues of a trans-Tasman nature and to consider whether harmonisation may provide benefits.

Accounting Standard Setting Arrangements

During the year arrangements were finalised for the establishment, on an informal basis pending enactment of the CLERP Bill, of the Financial Reporting Council (FRC) that will oversee the revised accounting standard setting arrangements. The appointments to the FRC will be formalised when the CLERP Bill is enacted.

Audit Review Working Party

MINCO has accepted the broad thrust of the recommendations contained in the report of the Working Party established to review the requirements for the registration and regulation of company auditors.

International lnsolvency

The Corporate Governance and Accounting Policy Division assisted the Prime Minister’s Task Force on International Financial Reform in making recommendations to the Prime Minister on how Australia could best contribute to the reform and strengthening of the international financial system, in particular through a paper outlining the possible development of an international model law on insolvency. The Prime Minister’s Task Force has recommended that Australia seek to have the United Nations Commission on International Trade Law (UNCITRAL) consider the development of model legislative provisions on corporate insolvency to foster and encourage the adoption of effective national corporate insolvency regimes. Following strong support by Australia, a working group of UNCITRAL has been established to examine the proposal and the methodology that may be used in any future work.

Transparency Report

The subprogram contributed to the consideration of transparency issues relating to the private sector and financial sector supervision in respect of Australia’s transparency report Making Transparency Transparent: An Australian Assessment, published in March 1999. Treasury prepared the Report following a recommendation of the Task Force on International Financial Reform in response to a recommendation of the G22 in the context of issues relating to the stability of the international financial system (see page

* and *).

Subprogram 1.10 Consumer Affairs

Objective

To support and advance consumer and business interests in a well-functioning marketplace.

Description

The Consumer Affairs Division is responsible for advising the Minister for Financial Services & Regulation, the Hon Joe Hockey, MP on consumer policy and initiatives to promote safe, fair and well-functioning markets, including the operation of the consumer protection, unconscionable conduct and fair trading codes provisions of the Trade Practices Act 1974.

Table 11: Financial and Staffing Resources Summary
Subprogram 1.10 Consumer Affairs

Note: The 1998-99 Budget and Actual Staff Years figures refer to the period from Consumer Affairs Division’s transfer to Treasury in October 1998 to the end of the 1998-99 financial year, consistent with the financial figures.

Strategies

Strategies to achieve the stated objective of the subprogram include:

Performance Indicators

Performance indicators for the subprogram include:

Performance Outcome for 1998-99

A Safer Market

Advice and briefing were provided to the Minister on the administration of the Trade Practices Act in relation to consumer products and a range of product safety issues. In particular, the Division advised on the safety evaluation and subsequent recall of Pyrokor fire doors, as ordered by the Minister on 9 June 1999.

Self-Regulation and Electronic Commerce (A Fairer Market)

In line with the Government’s commitment to industry self-regulation, the Division has been involved in the development or review of industry codes of conduct in relation to direct marketing, the mortgage industry, the private health sector and the financial sector. In June 1999, the Division commenced work on a Model Code of Conduct for electronic commerce, in consultation with industry, consumer groups and relevant government agencies. The Division has also provided general advice on best practice industry self-regulation on request.

An Informed Market

1998-99 was the first year of a three-year consumer education program by the Division targeted particularly to disadvantaged consumers. The Division also continued its administrative role in relation to identifying potential consumer representatives and its role of coordinating Australia’s consumer policy position on international issues.

Consumer Protection Legislation

The Division made significant progress in its regulatory reform activities. In the area of product safety, an Internet site to provide information on voluntary recalls was launched in August 1998, and in subsequent months substantial functional enhancements have been made to the site. The web-site (which can be found at http://recalls.consumer.gov.au) was developed to provide consumers with relevant information about recalls and to facilitate information exchange between regulators. The provision of ready access to recall information enabled further negotiation with agencies to improve regulatory efficiency. The site helps ensure the community is adequately protected when unsafe goods are recalled.

The Commonwealth Consumer Affairs Advisory Council

The Council was established by the Minister for Financial Services & Regulation in May 1999, to advise him on current and emerging issues impacting on consumers. This Council replaced the former consumer advisory body (the National Advisory Council on Consumer Affairs) which ceased operations on 31 December 1998. Key 1998-99 outputs for the outgoing Council included a submission to the Productivity Commission’s Inquiry into Australia’s Gambling Industries and a response to the Blair Committee Review Report on Food Regulation in Australia.

The Commonwealth Financial Counselling Program

During 1998-99, many low income and disadvantaged consumers who were experiencing serious financial difficulties, were able to access and receive timely assistance from accredited financial counsellors under the Commonwealth Financial Counselling Program. Under this program, funds are provided to community-based organisations to deliver crisis financial counselling.

Ministerial Council on Consumer Affairs

The Division provided comprehensive secretariat support services to the Ministerial Council on Consumer Affairs and its advisory committees during 1998-99. The Council, which comprises Commonwealth, State/Territory and New Zealand Ministers responsible for consumer and fair trading matters, develops agreed policies and initiatives on consumer affairs and fair trading issues of strategic national significance.

• Report to the Council of Australian Governments on the operation of the Trans-Tasman Mutual Recognition Agreement;
• Approval of the release of promotional materials on Customer Service Guidelines for National Consumer Day 1998;
• Approval of the launch of the nursery furniture booklet Keeping Baby Safe A Guide to Nursery Furniture; and
• Endorsement of ‘information needs of older Australians’ as the theme for the 1999 National Consumers Day.

Customer Service Charter

The Consumer Affairs Division’s Customer Service Charter, first released in December 1997, informs people having contact with the Division of the service they can expect to receive. The Charter specifies general service standards, as well as standards against specific functions, such as the management of product safety recalls.

Subprogram 1.11 Corporate Direction and Support

Objective

To provide strategic direction and support for the Department and to coordinate the provision of policy advice, support and management of Departmental resources.

Description

The Department’s Executive
(Secretary and Executive Directors) and their staff; the Specialist Adviser, Corporate Strategy; the General Manager, Corporate Services; and the Corporate Services Division.

Table 12: Financial and Staffing Resources Summary
Subprogram 1.11 Corporate Direction and Support

Strategies

Strategies to achieve the objectives of the subprogram include:

Performance Indicators

As the Executive are the peak decision makers within the Treasury, the overall perception of Treasury portfolio Ministers of the quality of Treasury advice and administration is a relevant performance indicator. More specifically, indicators include:

Performance Outcome for 1998-99

Executive

The Executive meets fortnightly as the Executive Board to take key decisions on management issues. It also meets to consider significant economic policy issues with members of the three policy Groups. Important management issues during the year included the finalisation and implementation of recommendations arising from reviews of Treasury core policy advising areas and corporate services.

The Executive has been supported by the Specialist Adviser, Corporate Strategy on management issues and in October 1998, the Executive created a new position of General Manager, Corporate S
ervices Division to assist in improvements to the delivery of corporate services. Late in the year, four SES Band 2 General Managers were tasked (in addition to their other duties) with overseeing corporate system development projects in the following areas: information and knowledge management; communications; human resources, training and staff development; and corporate planning and financial management.

A major focus of the Executive, building on previous efforts to improve consultation and communication flows within Treasury, has been the development and introduction of a new Treasury Management Model and Performance Management System the implementation of the initial twelve month Certified Agreement has also been of fundamental importance. Negotiation of a second, longer term agreement commenced in April and was completed after the end of 1998-99. The Treasury Management Model is discussed below, and the Performance Management System and Certified Agreement are covered in the Appendices.

Treasury Management Model

A review of Treasury’s core business, and in particular of management structure and practices, has led to major changes in the Department’s organisational and leadership structure in 1998-99 with the adoption of the new Treasury Management Model. The review was prompted by the need to ensure that the Department meets the needs of the Treasurer and Treasury portfolio Ministers as efficiently as possible. Its outcome has been greater clarity of purpose and objectives; improved structure more closely related to outputs; improved people systems; and support for management training and development.

The changes are directed toward clear identification of managerial authority and accountability; clear understanding by all staff of their roles and responsibilities; a flatter structure; devolved decision-making; and improved planning processes. Equally important has been the introduction of a new approach to staff management and development, the Performance Management System, to promote higher levels of staff performance through a fair, transparent and streamlined system of staff appraisal. The Treasury Management Model and the Performance Management System have been incorporated as a case study in the Leadership and Development Good Practice Guide developed by the Public Service and Merit Protection Commission (PSMPC).

Extensive staff consultation through focus groups, workshops and the Workplace Relations Committee was a feature of the development and implementation of the Performance Management System. The Treasury People Values are fundamental to the Performance Management System: they are given in the Corporate Statement (page 11) and are consistent with the APS Values and Code of Conduct. The Treasury People Values are intended to reflect Treasury’s commitment to invest in and develop its staff; to provide challenging work which will provide personal satisfaction; to pursue excellence; and so to continue to attract capable and committed staff. They are incorporated in the assessment criteria and appraisal procedures which are fundamental to the Performance Management System and in which staff have been given training.

The first staff appraisal cycle under the Performance Management System, which was conducted in August 1999, was a ‘trial run’ for non-SES staff and its outcomes will not be linked to their remuneration.

Staff Development

In 1998-99 staff training and development was an important element in the successful implementation of the Treasury Management Model and the Performance Management System.

Information sessions and workshops covering the elements of performance management in Treasury were conducted with the Executive, General Managers, Managers and their staff. More generally, a Change Management Program offered assistance to all staff in managing the significant structural and cultural changes arising from these initiatives. A consultant was engaged to advise management and to provide individual counselling to staff. Career Development Workshops offered to staff had a high participation rate.

Other development opportunities provided to staff included Studies Assistance (both paid leave and financial), Post Graduate Studies Awards, a series of Economic Refresher workshops, a Policy Advising Skills workshop, Treasury Seminar Series, Accrual Accounting workshops, Advanced Writing and Advanced Reading workshops, and attendance at various conferences, seminars and workshops. New options this year included Speech Writing Workshops and Interviewer Skills Training, while Senior Executive Service (SES) officers also attended courses offered by the PSMPC.

Graduate Recruitment

The success of Treasury’s Graduate Recruitment Campaign has largely reflected the significant contributions from senior Treasury policy analysts and SES staff in planning, visiting universities to meet students and present seminars, and participating in the selection process. To support the recruitment campaign a graduate booklet was produced in-house and distributed widely to Australian universities: it is also available at Treasury’s web site. While in previous years a major in economics was required, this year the targeted skills base has been broadened to include law, accountancy, finance, public policy, econometrics, mathematics or related studies. Twenty-four graduates were recruited to commence in 1999.

The graduates appointed in 1999, along with three other recently recruited staff, are participating in the 15-month-long Graduate Development Program. This program provides a broad exposure to Treasury’s operations and work with other agencies and Ministers’ offices. The Program equips officers to be effective policy advisors by providing them with administrative and research experience and developing their oral and written communication skills. Managers of graduates have been provided with training and support for their role in encouraging the development of graduates under the new Performance Management System. Of the 20 graduates who commenced in 1998, 18 completed their training period in March 1999.

Accrual Based Accounting

Treasury’s accounting framework is now accrual based. In conformity with government policy, devolved banking and cash management have been successfully introduced and Treasury’s 1999-2000 Budget was prepared on an accruals basis. A major staff training program has been undertaken to support the introduction of accrual accounting and of SAP R/3, Treasury’s new financial management system. As in other agencies, the implementation of the SAP system has been far from satisfactory. The transition to accrual budgeting and management will continue to be resource intensive as the Department refines reporting and financial management and e-commerce processes, and acquires the necessary professional skills to support the new accrual framework.

Reviews of Handling of Ministerial Correspondence
within the Department

Following a review earlier in 1998-99 by an external consultant, an internal Treasury taskforce has been conducting wide-ranging examinations of the Department's processes for handling ministerial correspondence. The external review identified the need for some minor improvements to further streamline handling procedures and turnaround times. The internal taskforce was commissioned to examine these options in detail and is expected to report early in 1999-2000 on the adoption of process improvements.

Information Technology Services

Treasury secures access to current technology by leasing its desktop computing equipment and having hardware support services provided under contract. Equally importantly, it regularly reviews how well its Information Technology (IT) services meet users’ needs. Treasury has implemented the findings of an independent review of its IT network conducted in 1997-98 with a rationalisation of equipment, substantial reconfiguration of the network and improvements to backup procedures and documentation. These changes have significantly enhanced service delivery, network reliability and security.

The recent decision to provide desktop access to the Internet, as part of Treasury’s information management strategy of facilitating wider use of external information sources, raised significant security issues. To protect the integrity of the Treasury network, a new IT Security Policy has been developed and endorsed by the Defence Signals Directorate. From July 1999, security on electronic communications classified up to the Protected level will be achieved by measures including intrusion detection management software and a three-tier virus protection facility.

Because Treasury is recognised as a demanding and technically proficient user of software, often testing the limits of its applications, in 1998-99 the Department participated in beta testing for the recently released Microsoft Office 2000 and will move to implementation of that software early in 2000. The beta testing enabled Treasury to rigorously test Office 2000 to ensure it met Treasury’s needs, especially in relation to spreadsheet technology. Treasury was also able to evaluate and influence the development and capability of the software to support information management initiatives including greater use and development of the Treasury web site.

In accordance with government policy, Treasury has accepted an invitation from the Office of Asset Sales and Information Technology Outsourcing to join IT Outsourcing Cluster 11. Treasury participation will depend upon tender results.

Year 2000 compliance of internal IT hardware and software is ensured through a continuing program of testing and evaluation, which has resulted in upgrades to the IT desktop and IT server environment, and the analysis, enhancement and conversion of existing applications software.

Building owners have provided assurance and certification relating to the compliance through verification of on-site testing of electronic-based building systems. The building management system, fire system, security system and the lifts have been confirmed as compliant by respective vendors. A contingency plan has been developed for building-related matters.

Treasury Building Refurbishment and Fitout

The refurbishment and integrated fitout of the Treasury building commenced in June 1999, following the transfer of the Department of Finance and Administration to the John Gorton Building (previously the Administration Building) and the relocation of Treasury staff to the eastern end of the Treasury building.

The current program sees Treasury relocating to the majority of its new accommodation at the western end of the building from December 2000, with the refurbishment of the remainder of the building being completed by October 2001.

The fitout will be to a standard commercial office level and the cost to Treasury will be around $16.5 million.

Awards

In the Australia Day Honours 1999, the Public Service Medal was awarded to Ms Anne Fornasiero, Manager, IT Training and Publications Unit, Corporate Services Division, citing outstanding personal contributions to the work of the Treasury over several years. Ms Fornasiero and the Unit she leads have set high standards in IT training and support for Treasury applications and for the application of on-line technology to the preparation and organisation of major Treasury publications including the budget papers and major reports.

In the Queen’s Birthday Honours 1999, the Secretary to the Treasury, Mr Ted Evans, was awarded the Companion in the General Division in the Order of Australia for service to Australian economic policy development.