Part 2: Report on performance (continued)

Date

Program 1.1: Department of the Treasury (continued)

Markets Group

Overview

Markets Group contributes to Australia’s continuing economic development and the wellbeing of its people by fostering a well functioning market economy and secure financial system. Improving the operation of markets is intended to underpin stronger, sustainable economic growth and enhanced living standards.

The efficient operation of Australia’s product and services markets is supported by a combination of laws, institutions, policies and administrative practices. The Treasury provides advice to the Government on developing and implementing policies to maintain and improve markets, so that investors and consumers can have confidence and certainty in making decisions that are wellinformed and free from market distortions and impediments. The Treasury also provides advice to promote sound corporate practices, remove impediments to competition in product and services markets, and safeguard the public interest in matters such as consumer protection and foreign investment.

The Treasury also supports the operations of the Australian Government Actuary, the Takeovers Panel and the Financial Reporting Panel.

A key focus for the Treasury in 2009-10 was providing policy analysis and advice to improve Australia’s productivity and international competitiveness, and deepen the supply potential of the economy, in the wake of the global financial crisis. These policies focused on promoting economic growth and supporting employment, ensuring the financial system remained robust and dynamic, and ensuring that regulatory frameworks promoted macroeconomic stability and market confidence.

The Treasury also continued to monitor and provide advice on the general prudential framework applying to the banking sector, insurers and superannuation funds. The Treasury participated actively in international forums, such as the G-20 and Financial Stability Board, to enhance the regional and global financial architecture.

During 2009-10, the Treasury continued to pursue sound regulatory and structural reforms to foster well functioning markets in key infrastructure, housing, financial and labour markets. This included work to further the COAG reform agenda to reduce the regulatory burden on business, including a national approach to consumer policy and consumer credit; housing supply and affordability; and Standard Business Reporting (SBR).

The multiagency SBR program was delivered on time and within budget on 1 July 2010. Participating agencies include the ABS, the Australian Prudential Regulatory Authority (APRA), the Australian Securities and Investments Commission (ASIC), the ATO, and all State and Territory government revenue offices.

In addition, the Treasury provided advice on foreign investment and trade policy, and continued to participate in negotiating free trade agreements.

Group deliverables

Markets Group’s key deliverables are to provide advice on:

  • measures to promote competition and financial system stability;
  • availability of finance to key financial institutions, including banks and credit unions, and to key sectors of the economy to support growth and jobs;
  • implementation of the Government’s principles for assisting borrowers facing financial hardship in servicing housing and personal debt;
  • the efficient operations of the guarantees on deposits and wholesale funding of banks and other Australian deposit taking institutions;
  • the impact of the Government’s investment in residential mortgagebacked securities;
  • how best to implement G-20 decisions to strengthen the financial regulatory system while ensuring settings are appropriate for Australia’s domestic circumstances;
  • further reforms to executive remuneration arrangements through the recommendations of the Productivity Commission’s inquiry into director and executive remuneration and the work of APRA on its prudential standards for sound remuneration;
  • initiatives arising from the Australian Financial Centre Forum to strengthen Australia as a regional centre;
  • financial services and corporate reform addressing emerging issues in investor protection, corporate governance and reporting, and market integrity;
  • the introduction and implementation of criminal sanctions for serious cartel conduct;
  • key planks in the COAG reform agenda designed to reduce the regulatory burden facing business including a national law for consumer policy, national consumer credit law and as the lead agency in the multiagency SBR initiative;
  • international cooperation in financial system regulation, corporate governance, financial reporting, auditing and corporate insolvency;
  • reform of the national access regime, and building the nation’s infrastructure, including a national broadband network;
  • managing incoming foreign investment to ensure that the national interest is protected and encourage free flows of investment;
  • representation of Australia’s interests on investment and financial service issues in negotiating free trade agreements and the Doha Round and, in relation to investment, in multilateral forums such as the OECD and APEC; and
  • actuarial matters through the Australian Government Actuary which provides actuarial services to government, the Treasury and other agencies.

Group outcomes

Markets Group’s key outcomes were:

  • supporting the review into the governance, efficiency, structure and operation of Australia’s superannuation system. The review reported to the Government on 30 June 2010 and the Government released the report publically on 5 July 2010;
  • developing legislation to introduce reforms to improve the efficiency, timeliness and effectiveness of regulatory decisionmaking under the National Access Regime. The legislation was passed by Parliament on 24 June 2010;
  • developing a Housing Supply and Affordability Reform Agenda to examine a range of factors and government policies that influence housing supply and demand in Australia. COAG has agreed to the reform agenda;
  • leading key reforms of the COAG Business Regulation and Competition Working Group to progress reforms in some of the 27 areas where duplicate and inconsistent regulation across jurisdictions imposes an unnecessary burden on business;
  • developing legislative amendments to implement the Government’s commitments to reform the unconscionable conduct and mergers and acquisitions provisions of the Trade Practices Act 1974 , which were introduced as part of the Competition and Consumer Legislation Amendment Bill 2010 on 27 May 2010;
  • developing legislation to implement the Australian Consumer Law, which will replace provisions in 17 Commonwealth, State and Territory laws with a single national consumer law commencing on 1 January 2011. The Australian Consumer Law was enacted in two Bills that were passed by both Houses of Parliament during 2009-10;
  • developing the National Consumer Credit Protection Laws which came into force on 1 July 2010, and give effect to the October 2008 COAG agreement to transfer responsibility for consumer credit regulation to the Australian Government;
  • developing the Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Act 2010 to improve the efficiency and operation of a range of financial legislation;
  • developing the Corporations Amendment (Corporate Reporting Reform) Act 2010 and associated Regulations to reduce the regulatory burden on companies and improve Australia’s corporate reporting framework;
  • developing the Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 and associated Regulations to strengthen the regulatory framework for the payment of termination benefits to company directors
    and executives;
  • developing the Corporations Amendment (Financial Market Supervision) Act 2010 and the Corporations (Fees) Amendment Act 2010 to give effect to the Government’s decision to transfer the responsibility for supervision of Australia’s domestic licensed financial markets from market operators to ASIC;
  • progressing the Government’s initiative to position Australia as a leading financial services centre in the Asia-Pacific region, including work to establish a Centre for International Finance and Regulation;
  • providing advice, in consultation with the Foreign Investment Review Board, on significant and high profile foreign investment cases of national interest and trade policy matters; dealing with global investment, trade flows and trends, foreign government investment and trade policy responses; and the implications for Australia;
  • amending the Foreign Acquisitions and Takeovers Act 1975 to ensure it applies equally to foreign investment proposals irrespective of the ways they are financially structured;
  • implementing the changes to the foreign investment policy on residential real estate, announced by the Government on 24 April 2010;
  • leading the negotiations for an Investment Protocol to the Closer Economic Relations Trade Agreement with New Zealand. Contributing to free trade agreement negotiations with Japan, China, Korea, Malaysia and the Gulf Cooperation Council, and participating in the first two rounds of the Trans-Pacific Partnership Agreement negotiations held in March 2010 and June 2010;
  • achieving substantive progress towards a single economic market between Australia and New Zealand. In August 2009, the Australian and New Zealand Prime Ministers agreed on a framework of principles for developing crossborder economic initiatives and a range of shared practical outcomes as the next step towards commitment to a single economic market;
  • delivering SBR which provides a quicker and easier way for businesses to fulfil their government reporting requirements; and
  • continuing to provide advice relating to the currency system and maintaining successful operations of the Australian Government Actuary and the Financial Reporting Panel.

Analysis of performance

Review into the governance, efficiency, structure and operation of Australia’s superannuation system

On 29 May 2009, the Government announced the details of a review into the governance, efficiency, structure and operation of Australia’s superannuation system.

The review aimed to ensure the superannuation system operates in the most costeffective manner and best interests of all its members. It considered how to maximise retirement income for Australians, including through increasing efficiencies, reducing costs and fees, and lifting longterm rates of return.

The review reported to the Government on 30 June 2010 and the Government released the report publically on 5 July 2010. The review report is available at www.supersystemreview.gov.au.

The Treasury provided secretariat support to the review and will provide advice to the Government in its response to the report.

Infrastructure policy

The Treasury provided advice on the Government’s investment in infrastructure projects announced in the 2010-11 Budget. The Secretary to the Treasury is a member of Infrastructure Australia, the Government’s key advisory body on nationally significant infrastructure. The Treasury is engaged in the activities of the COAG Infrastructure Working Group, including the Private Public Partnership Sub-group.

The Treasury provided advice on the interaction of the Government’s climate change policies and the Australian energy market. The Treasury was actively engaged in the work of the Ministerial Council on Energy Standing Committee of Officials which provides advice on ongoing energy market reforms.

The Treasury worked with the Department of Infrastructure, Transport, Regional Development and Local Government to progress COAG reforms in the transport sector to improve marketbased frameworks and promote greater competition.

The Treasury worked with the Department of Infrastructure, Transport, Regional Development and Local Government to develop the National Aviation White Paper.

The Treasury provided advice on a package of reforms to help improve the efficiency, timeliness and effectiveness of regulatory decisionmaking under the National Access Regime in Part IIIA of the Trade Practices Act. The Treasury assisted in developing legislation to introduce these reforms, which was passed by Parliament on 24 June 2010. The Treasury also developed regulations, which commenced on 8 June 2010, to support the competitive tendering provisions of Part IIIA.

The Treasury is working with the Department of Broadband, Communications and the Digital Economy, the Australian Competition and Consumer Commission and other central agencies on implementing the Government’s National Broadband Network policy, and providing advice on telecommunications regulatory issues.

The Treasury also is working with the Department of Broadband, Communications and the Digital Economy and other relevant agencies on measures to facilitate the switchover to digital television around Australia.

The Treasury was instrumental in COAG agreeing to a Housing Supply and Affordability Reform Agenda that is examining a range of factors and government policies that influence housing supply and demand in Australia. The Treasury leads key activities of the COAG Housing Supply and Affordability Working Party, which is responsible for reporting to COAG through the Ministerial Council for Federal Financial Relations on issues such as planning and zoning, infrastructure charges and an audit of under-utilised land. Consistent with the Housing Supply and Affordability Reform Agenda, the Treasury is also working on a review of Commonwealth policies that affect the housing market.

The Treasury was an exofficio member of the National Housing Supply Council and contributed to its 2nd State of Supply Report .

The Treasury advised the Government on funding for housing measures in, and announced after, the 2010-11 Budget.

Competition policy

The Treasury contributed to key outputs in the Government’s competition policy legislative reform program.

The Treasury provided advice to Government on possible reforms to the mergers and acquisitions provisions of the Trade Practices Act to address creeping acquisitions. The Treasury developed legislative amendments to implement the Government’s reforms to the Trade Practices Act, introduced as part of the Competition and Consumer Legislation Amendment Bill 2010 on 27 May 2010.

The Treasury informed public debate on competition policy-related matters by making public submissions and appearing before Senate Inquiries held into the Grocerychoice website, the Trade Practices Amendment (Guaranteed Lowest Prices — Blacktown Amendment) Bill 2009, the Trade Practices Amendment (Material Lessening of Competition — Richmond Amendment) Bill 2010, and the Competition and Consumer Legislation Amendment Bill 2010.

The Treasury leads key reforms of the COAG Business Regulation and Competition Working Group. These include progressing reforms in some of the 27 areas where duplicate and inconsistent regulation across jurisdictions unnecessarily burdens business, eight competition reform areas and other reforms such as examining the effects of State and Territory planning and zoning laws on grocery retailing.

The Treasury coordinates and advises the Government on preparing terms of reference for Productivity Commission research and inquiries. In 2009-10, this involved four public inquiries and six commissioned research references.

The Treasury assisted in developing the Government’s regulatory reform agenda, including the revi
sion of the Best Practice Regulation Handbook .

The Treasury represents Australia at international forums on competition policy. The Treasury is a member of the OECD Competition Committee, and a member of the APEC Economic Committee.

Consumer policy

In 2009-10, the Treasury provided advice to the Government on the consumer policy framework.

The Treasury is leading a number of projects being progressed under COAG’s consumer policy agenda, including the development of the Australian Consumer Law.

The Treasury developed legislation to implement the Australian Consumer Law. The Australian Consumer Law will replace provisions in 17 Commonwealth, State and Territory laws with a single national consumer law and will commence on 1 January 2011. The Australian Consumer Law was enacted in two Bills that were passed by both Houses of Parliament during 2009-10.

The Trade Practices Amendment (Australian Consumer Law) Act (No. 1) 2010 (first Australian Consumer Law Act) established the Australian Consumer Law as a schedule to the Trade Practices Act. The first Australian Consumer Law Act includes the national unfair contract terms law and new civil penalties, enforcement powers and consumer redress options. This Act passed both houses of Parliament on 17 March 2010 and received Royal Assent on 14 April 2010. The enforcementrelated provisions commenced on 15 April 2010 and the national unfair contract terms provisions commenced on 1 July 2010.

The Trade Practices Amendment (Australian Consumer Law) Act (No. 2) 2010 (second Australian Consumer Law Act) completed the text of the Australian Consumer Law. The second Australian Consumer Law Act includes a single set of provisions about unfair practices and fair trading, new consumer guarantees provisions, new provisions dealing with unsolicited consumer agreements, simple national laws for layby agreements, a new national product safety regime and new provisions on information standards that will apply to services as well as goods. The second Australian Consumer Law Act also changes the name of the Trade Practices Act to the Competition and Consumer Act 2010 . The reforms in the second Act will commence on 1 January 2011.

The Treasury, in collaboration with the Department of Innovation, Industry, Science and Research, supported the work of an Expert Panel in preparing a report entitled Strengthening Unconscionable Conduct and the Franchising Code of Conduct , which was published in March 2010. The recommendations of the report formed the basis of the unconscionable conduct provisions of the Competition and Consumer Legislation Amendment Bill 2010, which was introduced into Parliament in May 2010.

The Treasury commenced work during 2009-10 to review legislation that may be inconsistent with or alter the effect of the Australian Consumer Law. The Treasury also worked with national, State and Territory regulators during 2009-10 to implement a new policy and enforcement framework for the Australian Consumer Law.

The Treasury represents Australia in international forums on consumer policy. The Treasury is a member of the OECD Committee on Consumer Policy. The Treasury contributed to the development of the OECD’s Consumer Policy Toolkit, which was published in July 2010, and the establishment of the OECD’s Working Group on Consumer Product Safety.

The Treasury continued to provide secretariat support to the Ministerial Council on Consumer Affairs and to the Commonwealth Consumer Affairs Advisory Council.

National regulation of credit

The Treasury continued work throughout 2009-10 on developing the National Consumer Credit Protection laws, which came into force on 1 July 2010. The legislation gives effect to the COAG agreement of October 2008 to transfer responsibility for consumer credit regulation to the Australian Government.

The National Consumer Credit Protection laws:

  • replace the State and Territory administered Uniform Consumer Credit Code with a nationally consistent consumer credit framework;
  • introduce a national credit licensing system with both entry standards and ongoing conduct requirements for all persons engaging in credit activities; and
  • require lenders, and those intermediaries who provide credit assistance, to meet responsible lending obligations, so that borrowers are not provided with products that are unsuitable.

Financial system reform

Financial sector crisis management

A key focus of activities during 2009-10 was providing policy analysis and advice to improve Australia’s productivity and international competitiveness, and deepen the supply potential of the economy in the wake of the global financial crisis. These policies focused on promoting economic growth and supporting employment, ensuring the financial system remained robust and dynamic, and the regulatory framework promoted macroeconomic stability and market confidence.

The Treasury continued to participate in the work of the G-20, contributing to the development of key global reforms to financial regulation, including strengthened standards for capital and liquidity and providing advice to government on implementing these reforms so that they are appropriate for Australian domestic circumstances. The Treasury also contributed to the work of other international bodies to foster international cooperation in financial system regulation, corporate governance, financial reporting, auditing and corporate insolvency.

Regulation of particular market sectors addressed in those forums included hedge funds, credit rating agencies and overthecounter derivatives.

In the case of financial reporting, the Treasury worked with the Financial Reporting Council on regional and international initiatives to promote convergence to International Financial Reporting Standards.

Domestically, the Treasury progressed further initiatives to address regulatory concerns emerging from the global financial crisis.

In March 2009, the Government announced reforms to strengthen the regulatory framework for the payment of termination benefits to company directors and executives. The Treasury developed and implemented these reforms through the Corporations Amendment (Improving Accountability on Termination Payments) Act 2009 and the associated Regulations, which commenced in November 2009.

In November 2009, the Corporations Amendment Regulations 2009 (No. 8) were made regarding the disclosure of covered short sales. The new rules are intended to promote market transparency, reduce the scope for market manipulation and restore confidence in Australia’s financial markets.

The Treasury also provided advice on Australia’s financial sector crisis management arrangements, including the operation of the Guarantee of Large Deposits and Wholesale Funding (Guarantee Scheme), and the Financial Claims Scheme.

The Guarantee Scheme enabled Australian authorised deposittaking institutions to continue to raise funds and to provide credit throughout the crisis. The Government closed the Guarantee Scheme on 31 March 2010 following advice from the Council of Financial Regulators that it was no longer required.

The Financial Claims Scheme provides depositors and insurance policyholders with timely access to funds if a financial institution fails. Depositor claims are currently capped at $1 million, a level which reflected the need to reassure depositors and the market at the time it was set. The Government has committed to review these arrangements by October 2011.

The Treasury also provided advice on liquidity support arrangements for the car dealership financing sector.

The Treasury provided advice and developed legislation to improve the efficiency and operation of a range of financial legislation. The Financial Sector Legislation Amendment (Prudential Refinements and Other Measures) Act 2010 , which contained
amendments to 17 Acts and repealed five redundant Acts, received Royal Assent on 29 June 2010. The legislation strengthens the ability of APRA to effectively fulfil its mandate and is consistent with international developments to review and strengthen regulatory frameworks.

The Treasury continued to participate in the work of the Council of Financial Regulators and liaised with other government agencies to monitor developments in the global and domestic financial markets and provide policy advice. It continued to monitor developments in key overseas financial markets to inform policy considerations.

Corporations and financial services reform

Corporate reporting reform

In December 2009, the Government announced it would implement a range of reforms to reduce the regulatory burden on companies and improve Australia’s corporate reporting framework. The Treasury developed and implemented these reforms through the Corporations Amendment (Corporate Reporting Reform) Act 2010 and the associated Regulations, which commenced in June 2010.

Executive remuneration

Following the Government’s announcement in April 2010 that it would introduce a package of reforms to strengthen Australia’s remuneration framework, the Treasury developed draft legislation to progress the reforms. The proposals address many of the recommendations made by the Productivity Commission in its recent inquiry into Australia’s executive remuneration framework.

Unsolicited share offers

In June 2010, the Government introduced the Corporations Amendment Bill (No. 1) 2010. The Bill includes measures to address unsolicited share offers by changing rules regarding the access and use of information held on share registers.

Market supervision

On 24 August 2009, the Government announced it had decided to transfer the responsibility for supervision of Australia’s domestic licensed financial markets from market operators to ASIC. The Treasury developed the Corporations Amendment (Financial Market Supervision) Act 2010 and the Corporations (Fees) Amendment Act 2010 , which give effect to the Government’s decision. The Bills received Royal Assent on 25 March 2010. The Regulations which provide the detail of the new regulatory framework were approved by the Executive Council on 8 July 2010.

Trustee companies

In 2009-10, in consultation with industry and the States and Territories, the Treasury implemented the Government’s decision to establish national regulation of trustee companies. Legislation and supporting Regulations were made during 2009-10 and largely came into effect on 6 May 2010, with detailed regulation of common funds coming into effect from 1 July 2010.

Whistleblower reforms

In October 2009, the Government released an options paper setting out some possible options to improve access to, and the operation of, protections to corporate whistleblowers in the Corporations Act. The paper sought feedback and comments from the community and over 20 written submissions were received. In March 2010 the Treasury held roundtable discussions to gather further information.

Financial sector trends and structures

The Treasury continues to advise the Government on emerging market trends and structures by assessing market developments and new products, monitoring trends affecting competition and efficiency in the financial sector, and considering potential developments which may affect the effectiveness of existing policy settings. In addition, the Treasury has advised Government on developments on banking fees and charges; the affordability and availability of insurance; and the operation, structure and cost of the superannuation system.

Financial services developments

Australian Financial Centre Forum

On 15 January 2010, the Minister for Financial Services, Superannuation and Corporate Law released the report Australia as a Financial Centre: Building on our Strengths (the Johnson Report) which made a series of recommendations to advance the international competitiveness of Australia’s financial services sector. This followed the creation of the Australian Financial Centre Forum to progress the Government’s initiative to position Australia as a leading financial services centre in the Asia-Pacific region.

On 11 May 2010, the Government announced its response to the recommendations in the Johnson Report, providing inprinciple or direct support for nearly all 19 recommendations. The recommendations fell into four areas:

  • taxation of financial services, which included asking the Board of Taxation to undertake reviews into Islamic financial products and collective investment vehicles;
  • regulation of financial services, including development of an Asia Region Funds Passport and an online regulatory gateway for potential investors into Australia;
  • promotion of Australia and regional engagement on financial services issues; and
  • an ongoing role for a dedicated industry taskforce.

Complementing the recommendations of the Johnson Report, in May 2010, the Government announced that it was establishing a Centre for International Finance and Regulation in Australia, with funding of up to $25 million over four years, to address ways to foster financial sector innovation, while ensuring the risk inherent in the financial system is appropriately managed through best practice regulation.

The Government has appointed an ongoing Financial Centre Taskforce to continue the work of the Australian Financial Centre Forum. The taskforce will comprise Mr Mark Johnson as Chair, Mr Paul Binsted, Ms JoAnne Bloch, Mr Alf Capito, Mr Phil Chronican, Mr Jeremy Duffield, Mr Craig Dunn, Mr Shane Finemore and Mr Paul Schroder.

Financial Services Working Group

In 2008, the Minister for Finance and Deregulation and the then Minister for Superannuation and Corporate Law created the Financial Services Working Group, comprising officials from the Treasury, the Department of Finance and Deregulation and ASIC.

Throughout 2009-10 the working group undertook projects to simplify disclosure for margin loans, superannuation funds and simple managed investment schemes. The working group finalised the Product Disclosure Statements for margin loans (four pages), superannuation, and simple managed investment products (both eight pages) by making these documents shorter and simpler to read, while still containing the key information consumers need to know for making an investment decision. The working group has now completed its tasks.

Review of product rationalisation

Through product rationalisation investors in an outdated managed investment product are transferred to a new similar product with equivalent rights and benefits for the investor. The process phases out economically inefficient older financial products, or ‘legacy products’, by transferring investors into newer, more efficient products.

In 2009-10, the Treasury released a proposals paper to consult with stakeholders about a proposed product rationalisation framework for superannuation products, managed investment schemes and life insurance products. The Treasury used the submissions from this paper to revise the proposed product rationalisation framework in consultation with ASIC and APRA.

Advice on, and processing of, individual foreign investment proposals

Proposals for foreign investment that fall within the scope of the Foreign Acquisitions and Takeovers Act 1975 or Australia’s foreign investment policy need to be examined by Treasury ministers to determine whether they might be contrary to the national interest.

The Treasurer is notified when a foreign person enters into an agreement to acquire an interest in Australian urban land or a substantial interest in an Australian corporation valued ab
ove $231 million. The Treasurer is also notified of proposals that involve direct investments by foreign governments and their agencies, regardless of size and including proposals to establish new businesses.

Under the Treasurer’s authorisation, senior Treasury officers make decisions on less complex proposals that are not highly sensitive; this accounts for around 94 per cent of proposals.

During 2009-10, the Treasury began to implement changes to the screening regime for residential real estate purchases announced by the Assistant Treasurer on 24 April 2010. These changes removed the exemption from notification that had been applied to temporary residents since April 2009. They also included measures to strengthen compliance with the screening regime.

The Treasury considered around 4,474 proposals in 2009-10, around 23 per cent fewer proposals than in 2008-09. This decrease reflected fewer real estate proposals as a consequence of the full implementation of the policy changes affecting residential real estate screening announced in December 2008. The number of business cases increased to 617 from around 525 in 2008-09. About 97 per cent of proposals were decided within 30 days. In examining large or otherwise significant proposals, the Treasury consults with Commonwealth and State government departments and authorities, with responsibilities relevant to the proposed activity, to assist in assessing the implications of proposals.

During 2009-10, the Foreign Investment Review Board (an independent body which advises the Treasurer on foreign investment matters) provided advice to the Treasurer on major proposals and oversaw the Treasury’s investment screening function. The General Manager of the Foreign Investment and Trade Policy Division is the Executive Member of the Foreign Investment Review Board.

Additional information on Australia’s foreign investment screening arrangements, including statistics on foreign investment, is provided in the Foreign Investment Review Board’s annual report. The report and other information are available at www.firb.gov.au.

Advice on investment and trade policy

The Treasury provides advice to the Government on general foreign investment and trade policy matters. This has included advice on global investment and trade flows and trends, foreign government investment and trade policy responses, and the implications for Australia. The Treasury also provides advice on Australia’s participation in multilateral and bilateral investment and trade agreements.

Representation in international forums

The Treasury provides policy input on international investment issues in multilateral forums such as the World Trade Organization and the OECD, in regional forums such as APEC, and bilaterally through free trade agreements, Investment Promotion and Protection Agreements and other bilateral partnerships. The Treasury is involved in negotiating investment and financial services related provisions in free trade agreements.

Free trade agreements/closer economic cooperation
Concluded negotiations

The Association of Southeast Asian NationsAustraliaNew Zealand free trade agreement entered into force on 1 January 2010 for eight of the countries that signed the agreement. In March 2010 the agreement entered into force for Thailand. Cambodia, Indonesia and Laos are working towards ratification in late 2010.

The Treasury was also the lead agency in investment protocol negotiations between Australia and New Zealand.

Continuing negotiations

The Treasury continued its involvement in Australia’s ongoing free trade agreement negotiations with Japan, China, Korea, and Malaysia. The Treasury participated in these negotiations together with the Department of Foreign Affairs and Trade and a range of other Australian Government agencies.

In November 2008, Australia announced it would participate in Trans-Pacific Partnership Agreement negotiations with Brunei, Chile, New Zealand, Peru, Singapore and the United States. The Treasury participated in the first two rounds of negotiations held in March 2010 and June 2010. Vietnam is an associate member.

OECD Investment Committee

Australia is represented at OECD Investment Committee meetings by the General Manager of the Foreign Investment and Trade Policy Division. The committee enhances the contribution of international investment to growth and sustainable development worldwide, by advancing investment policy reform and international cooperation.

The committee also oversees the operation of the OECD guidelines, a voluntary code providing recommendations for responsible business conduct in labour relations, human rights, the environment, bribery, tax and consumer welfare. As a member of the OECD, the Government promotes and implements the guidelines. This responsibility rests with the Treasury and is performed by the Australian National Contact Point, who is the General Manager of the Foreign Investment and Trade Policy Division.

In 2009-10, the Australian National Contact Point received a specific instance relating to the industrial relations practices of an Australian company operating in New Zealand. The matter has been handled primarily by the New Zealand National Contact Point in consultation with Australia.

The Australian National Contact Point also continued the promotional program for the guidelines, including participating in business and nongovernment organisation forums. Further information is available at www.ausncp.gov.au. The OECD Ministerial Council launched a review of the guidelines in May 2010, which will involve consultation with stakeholders at the national level through national contact points.

APEC

Australia hosted APEC in 2007, and continues to participate actively in its work. Australia encourages APEC members to enhance the environment for investment in their economies and improve transparency.

The Treasury held the chair of the Investment Experts Group until the end of 2009. The group focused on liberalising investment, improving the transparency of investment regimes and capacitybuilding in the APEC region. The 2009-10 work program included:

  • continuing analysis of barriers to investment climate reform;
  • providing project management for a number of APEC funded projects which are designed to enhance capacitybuilding and benchmark performance improvement in removing barriers to investment; and
  • developing, then getting APEC ministers and leaders to endorse, a number of action plans within the overarching APEC Investment Facilitation Action Plan.

The Treasury also participated in investment climate reform capacitybuilding projects targeting APEC economies undertaken by the Australian APEC Study Centre and Melbourne APEC Finance Centre.

Liaison with the Department of Foreign Affairs and Trade

In addition to participating in negotiations, the Treasury provides specialised advice to the Department of Foreign Affairs and Trade on Australia’s involvement in the World Trade Organization Doha round of negotiations on the General Agreement on Trade in Services.

International liaison

International Financial Reporting Standards Regional Policy Forum

The fourth International Financial Reporting Standards Regional Policy Forum, which was held in Singapore in May 2010, was attended by many jurisdictions from the AsiaOceania region. Australia actively participated in the forum through representatives from the Treasury, the accounting standard setters, the auditing standard setters and professional accounting bodies. The forum discussed a number of pertinent issues, including the auditing challenges that have arisen from the global financial crisis, the global convergence of International Financial Reporting Standards, differential reporting for small and medium sized entities, reporting by the notforprofit sector, and the e
xperiences of AsiaOceanic jurisdictions in adopting International Financial Reporting Standards.

Coordination of business law with New Zealand

The Australian and New Zealand Governments are taking a strategic approach to shaping and guiding a single economic market to realise the benefits to business, consumers and investors of harmonising the two economies.

In August 2009, the Australian and New Zealand Prime Ministers agreed on a framework of principles for developing crossborder economic initiatives and a range of shared practical outcomes as the next step towards commitment to a single economic market. In 2009-10 substantive progress was achieved towards:

  • a single crossborder insolvency proceeding;
  • alignment of accounting standards for profit entities;
  • functional equivalence of financial reporting standards bodies;
  • mutual recognition of auditors and financial advisors;
  • a single entry point for the registration of companies which are intending to do business on both sides of the Tasman;
  • crossappointments at the Australian Competition and Consumer Commission and the New Zealand Commerce Commission at associate member level; and
  • a harmonised or coordinated approach to the enforcement of consumer laws.

A TransTasman Outcomes Implementation Group comprising senior officials from the Australian and New Zealand Governments has been tasked with overseeing and, wherever possible, accelerating the progress of the reform agenda. The Treasury currently co-chairs the group.

In June 2010, a revised Memorandum of Understanding on the Coordination of Business Law between Australia and New Zealand was signed by the two governments. The memorandum was amended to include the work program announced by the Prime Ministers in August 2009.

TransTasman Accounting and Auditing Standards Advisory Group

The TransTasman Accounting and Auditing Standards Advisory Group comprises representatives from the accounting and auditing standard setters, the professional accounting bodies, and the policy makers of both Australia and New Zealand. The Treasury chaired the group and provided secretariat support for the two years ending December 2009.

The TransTasman Accounting and Auditing Standards Advisory Group’s focus is to ensure that the financial reporting and auditing frameworks of both countries do not unnecessarily impede TransTasman business activity. During 2009-10, the group progressed a range of reforms designed to ensure greater commonality and alignment between the two frameworks.

TransTasman Council on Banking Supervision

The TransTasman Council on Banking Supervision reports to the Treasurer and the New Zealand Minister of Finance on promoting a joint approach to deliver a seamless regulatory environment for banking services. The Secretaries to the Treasuries of Australia and New Zealand jointly chair the council; its membership also includes senior officials from the financial system regulators.

The Treasury has pursued the council’s work program, focusing on improved cooperation on crisis management.

OECD Insurance and Private Pensions Committee

The Treasury has provided the Australian representative to the OECD Insurance and Private Pensions Committee, which also includes the Working Party on Private Pensions and the Working Party on Government Experts on Insurance. In 2009-10, the committee focused on issues which arose in the financial crisis relevant to insurance sectors and private pension funds across member countries. These included crisis resolution options, corporate structures, consumer protection and accounting standards. It also undertook further work on the OECD guidelines on insurer corporate governance in cooperation with International Association of Insurance Supervisors.

Standard Business Reporting International Forum

The SBR International Forum is jointly chaired by the SBR Program Director and a representative from the Netherlands Government. In October 2009 officials from Singapore, Taiwan, Australia, the Netherlands and New Zealand, along with representatives of the software development community and several major accounting firms, met at an SBR International Forum in Singapore. Australia subsequently hosted an SBR International Forum in Sydney in May 2010 with delegates attending from New Zealand, US and Taiwan. Australia has played a key role in the promotion of SBR internationally since the inception of SBR in 2007.

Takeovers Panel

The Takeovers Panel contributed to well functioning securities markets in Australia by dealing with 25 applications, which are essentially disputes relating to takeovers made under the Takeovers Chapter of the Corporations Act 2001 . The panel, a peer review body with regulatory functions, has 54 members who are specialists in mergers and acquisitions either as investment bankers, lawyers, company directors or other professionals. In resolving disputes, the panel helps to ensure that acquisition of control over voting shares in listed and widely held companies occurs in an efficient, competitive and informed market; security holders and directors are given enough information; and security holders have a reasonable and equal opportunity to participate in any benefits of a proposal. The panel also publishes guidance notes to help foster market confidence and efficiency.

In 2009-10 the panel:

  • considered a number of high profile applications including Multiplex Prime Property Fund 03, Macarthur Coal Limited and Transurban Group; and
  • updated four existing guidance notes and released a consultation paper containing proposals to issue a new guidance note on Recommendations and Undervalue Statements and an update of an existing guidance note.

Financial Reporting Panel

The Financial Reporting Panel is an alternative dispute resolution body in relation to the treatment of accounting standards. This independent third party mechanism could alleviate ASIC from initiating court proceedings when a dispute on the application of accounting standards arises between it and companies. No cases were referred to the Panel during 2009-10.

Standard Business Reporting

SBR is a multiagency initiative to reduce the businesstogovernment reporting burden. Led by the Treasury, participating agencies include the ABS, APRA, ASIC, the ATO and all State and Territory government revenue offices. The government side of SBR was implemented on 1 July 2010, with takeup expected to grow over the next three years.

SBR has been codesigned by Australian and State and Territory government agencies in partnership with business, software developers, accountants, bookkeepers and other business intermediaries across Australia. It aims to simplify financial reporting to government, and make it a natural byproduct of accounting and financial software. Australian business will save around $800 million per year when the initiative is fully operational.

SBR has established ongoing communication and collaboration with the Netherlands, New Zealand, Singapore, Taiwan, the United States, the United Kingdom and the European Union, recognising the need to ensure, where possible, that its businesstogovernment reporting definitions are consistent with other countries.

Governments across Australia have endorsed SBR. It formed part of COAG’s broader agenda for deregulation, under the oversight of the Business Regulation and Competition Working Group chaired by the Minister for Finance and Deregulation and the Minister for Small Business.

During 2009-10 the program built, tested and deployed the main components of the SBR solution: taxonomies (the single language used to enable business software to send reports to government agencies); core services (the system which ensures that a report from business software is delivered to the relevant agency, and receipts and messages are returned); and t
he single secure sign on, AUSkey. AUSkey is positioned to be the single key to access government online services. By 1 July 2010, over 51,000 AUSkeys had been issued to around 36,000 Australian businesses.

SBR was in place and functionally ready to commence on 1 July 2010 with participating agencies able to accept lodgments of reports. Software developers are progressively SBRenabling their financial/accounting and payroll software products for use by businesses and reporting professionals. Maximum takeup, projected to be 60 per cent of targeted Australian businesses, is expected to be achieved by the end of 2013-14.

A number of recommendations have been made regarding the potential expansion of SBR to other business areas. These recommendations appear in the review into AFTS, the report into reform of Australian Government administration, the review into Australia’s superannuation system and Productivity Commission reports on the review of the regulatory burdens of business and the contribution of the notforprofit sector.

Currency

The Treasury provided advice to Treasury portfolio ministers on a range of currencyrelated matters. It chaired the Royal Australian Mint Advisory Board to assist the Mint to develop its policy and administer its initiatives. The Treasury also assisted the Perth Mint in relation to its currency determinations (legislative instruments) which are tabled in Parliament before the release of numismatic (collector) coins.

Statutory and other procedural requirements

Financial sector levies

During 2009-10, the Treasury, in conjunction with APRA, consulted with industry and provided advice to the Government on the determination of financial sector levies which primarily support APRA’s operations.

Review of need for Terrorism Insurance Act 2003

On 1 July 2003, the Australian Government established a terrorism insurance scheme to minimise the wider economic impacts that flowed from the withdrawal of terrorism insurance following the terrorist attacks of September 2001. The Terrorism Insurance Act 2003 requires the Act be reviewed at least once every three years, if it is to continue in operation. The 2009 Review recommended some minor refinements to the scheme. Following the Government’s agreement, the Treasury is working with the Australian Reinsurance Pool Corporation to implement the review’s recommendations.

Appointments

The Treasury advised ministers on appointments to a range of statutory portfolio bodies.

Secretariat services

The Treasury provided secretariat services to the Ministerial Council for Corporations, which met three times during 2009-10. The Treasury also assisted ministers to fulfil the Government’s obligations under the Corporations Agreement 2002. The Ministerial Council’s role was expanded during 2009-10 under new intergovernmental agreements on business names and consumer credit, and in relation to a new national framework for regulation of trustee corporations.

The Treasury provided secretariat support for the Financial Reporting Council, which met five times during 2009-10. This statutory body provides strategic oversight of the accounting and audit standardsetting processes, including the Australian Accounting Standards Board and the Auditing and Assurance Standards Board, and monitors the effectiveness of Australia’s auditor independence requirements. The Australian Accounting Standards Board deals with the setting of accounting standards for the public and private sectors of the Australian economy, while the Auditing and Assurance Standards Board focuses on the development and making of Australian Auditing Standards. Since 1 July 2008, both boards have been agencies for the purposes of the Financial Management and Accountability Act 1997 and are preparing separate annual reports.

The Treasury provided secretariat support to the Financial Sector Advisory Council, which brings together a range of senior financial market participants to provide advice to the Government on policies to facilitate the growth of a strong and competitive financial sector.

Australian Government Actuary

The Australian Government Actuary operates in a competitive and contestable market for actuarial services. Income from consultancy services relative to total costs is, therefore, a primary indicator of performance. The Australian Government Actuary operates a special account to ensure its financial operations are managed properly and transparently. At 30 June 2010, the account was in a sound financial position.

Demand for service was again high during 2009-10.

Consultancy services

Australian Government Actuary consultancy services typically involve analysing uncertain future financial flows using financial modelling techniques, documenting the analysis and presenting the results to clients.

Departments which sought advice included Defence; AttorneyGeneral’s; Education, Employment and Workplace Relations; Families, Housing, Community Services and Indigenous Affairs; Health and Ageing; Finance and Deregulation and Veterans’ Affairs. Centrelink and the ATO also sought advice.

Feedback from these agencies indicates that they were generally satisfied with the advice received, and its value as an input in achieving their objectives.

Services to the Treasury

The Australian Government Actuary contributed its technical expertise on policy issues, including the superannuation system and insurance matters.

The Treasury funded this work which accounted for around 10 per cent of the office’s total revenue for the year.

Operational outcomes

The office operates under the direction of an internal advisory board comprising three senior officers from the Treasury, including the Australian Government Actuary. The board reviews financial performance and oversees the strategic direction of the office.

Treasury support services

To support the Treasury’s policy outcome, Corporate Services Group and the Policy Coordination and Governance Unit provide key services to assist with systems and facilities which provide essential support and organisational back-up to the groups.

Corporate Services Group is responsible for providing corporate services, products and advice including accommodation and facilities management; administrative support management; communications advice and support; financial management; human resource management, training and development; information management and technology services; media management and monitoring; ministerial and parliamentary support; procurement; publishing; security and travel.

The Policy Coordination and Governance Unit was established in 2010 as an outcome of the organisational review. The organisational review considered how the Treasury can sustain its capacity to contribute to policy outcomes while preserving and reinforcing people management values and principles. The review examined the department’s governance arrangements and key organisational systems and behaviours.

As a result, the Policy Coordination and Governance Unit is responsible for facilitating high level policy coordination and wholeofdepartment organisational corporate strategy. The unit provides support to the Secretary, the Executive Board and the Audit Committee. It designs and facilitates wholeofdepartment policy discussions; coordinates organisational strategy initiatives; oversees the risk management, quality assurance and policy evaluation frameworks; seeks to facilitate constructive and effective relationships with the Treasurer and Ministerial offices; and manages Freedom of Information (FOI) requests.

Corporate Services Group

Corporate Services Group’s mission is to provide efficient and effective corporate services, products and advice to the Treasury, Treasury portfolio ministers and other clients
to enable them to meet their objectives.

The four divisions in the group are Financial and Facilities Management, Human Resources, Information Management and Technology Services, and Ministerial and Communications.

The work of the group in 2009-10 was directed towards:

  • improving consultation and managing change;
  • reducing red tape; and
  • promoting environmentally friendly initiatives.

Group deliverables

Corporate Services Group’s key deliverables for 2009-10 were:

  • implementing new payment and financial reporting arrangements under the Federal Financial Relations reforms;
  • negotiating and implementing a competitive and flexible workplace agreement;
  • refreshing the desktop hardware and software;
  • delivering improved document search tools and review recordkeeping policies;
  • progressing priority ICTenabled business projects;
  • reviewing and implementing new timeoff in lieu arrangements;
  • progressing initiatives flowing out of the staff survey and the organisational review;
  • implementing the Manager’s Portal;
  • ensuring delivery of appropriate services to Treasury portfolio ministers; and
  • enhancing advice and assistance on communication activities and media management.

Group outcomes

Corporate Services Group’s key outcomes were:

  • successful implementation of payment and financial reporting arrangements under the Federal Financial Relations reforms;
  • completion and audit of the 2008-09 financial statements with no major issues raised;
  • review and update of the Treasury Environmental Management Plan;
  • coordination of liaison and correspondence for the Treasury and its stakeholders;
  • management of the budget lock-up and media lock-ups;
  • media management, including advice to the Secretary and Executive Board, ministers’ offices and the AFTS review;
  • implementation of the Treasury Workplace Agreement 2009-2011;
  • implementation of new development programs and tools to assist managers;
  • major upgrades and enhancements to the Department’s data network, email system, electronic data storage facilities and active directory environment;
  • preparation for a technology refresh of the Department’s desktop computers, and an upgrade to the standard operating environment, deployed in August 2010;
  • deployment of the Unified Revenue System to automate management of revenue information;
  • deployment of Treasury Search to allow searching across multiple information repositories;
  • improved IT security capability, including spam filtering software and IT security monitoring software and implementation of encrypted USB devices; and
  • design of a collaboration environment for team sites, with embedded recordkeeping capability, to be deployed in 2011.

The Treasury is also participating in a study with the Departments of Finance and Deregulation and the Prime Minister and Cabinet as to the feasibility of jointly operating a shared services arrangement to deliver transactional human resource and finance services. The outcomes of the study will be reported to government in December 2010.

Policy coordination and governance unit

The Policy Coordination and Governance Unit seeks to link policy strategy with organisational strategy to maintain the capacity of the department to deliver on its mission.

The unit is responsible for providing support to the Executive Director — Policy Coordination and Governance; and to the Secretary, the Executive Board and the Audit Committee; managing the relationships with Ministerial offices and Departmental Liaison Officers; coordinating policy issues that traverse the Treasury’s groups; overseeing the risk management framework; managing FOI requests and issues in relation to the Privacy Act; undertaking corporate planning and performance monitoring; and providing policy evaluation guidance and services to the Treasury’s staff.

Key priorities

The key priorities in 2009-10 were to:

  • provide highlevel services to the Secretary and the Executive Board to support and enable key forums within the Treasury’s governance framework;
  • establish, coordinate and support processes within the department to develop and progress an ongoing strategic policy dialogue;
  • ensure the effectiveness, efficiency and conformity to legislative and accountability requirements of the Treasury’s activities, systems and processes;
  • facilitate better relationships with Ministerial offices, providing managerial support to Departmental Liaison Officers; and
  • continue to provide a policy implementation monitoring and advising capability.

Key outcomes

The key outcomes were:

  • coordinating significant briefing products, including for the Secretaries’ Board and the Secretaries’ Committee on service delivery;
  • managing the Treasury’s compliance with FOI and Privacy Act requirements on reporting and other matters;
  • planning the implementation of changes required under the FOI Reform Act and publication regime;
  • organising the ongoing policy dialogue across the department, including arranging policy strategy meetings, senior executive service (SES) meetings and executive level forums;
  • continuing to provide secretariat support for the work of the Executive Board and the Audit Committee;
  • developing products to further improve risk management and corporate planning in the Treasury; and
  • commissioning the Treasury’s internal auditors to review the risk management framework for consistency with the Australian/New Zealand Standard.

1A substantial interest is defined as an interest of 15 per cent or more for an individual foreign person, or an interest of 40 per cent or more for two or more foreign persons, and their associates.

2Under the Australia-United States Free Trade Agreement and the Protocol to the Australia and New Zealand Closer Economic Relations Trade Agreement, a higher threshold of $1,078 million applies for United States and New Zealand investors. The higher threshold does not apply to government investors or investments in prescribed sensitive sectors.