Report - Budget estimates 2008-09

The Senate

Foreign Affairs, Defence and

Trade Committee

Budget estimates 2008–09

June 2008

ISBN

978–0–642–71923–2

This document is produced by the Senate Standing Committee on Foreign Affairs, Defence

and Trade Secretariat, and printed by the Senate Printing Unit, Parliament House, Canberra.

iii

Senate Standing Committee on Foreign Affairs,

Defence and Trade

Membership

Senator Mark Bishop (ALP, WA) (Chair)

Senator Russell Trood (LP, Qld) (Deputy Chair)

Senator Mathias Cormann (LP, WA)

Senator Michael Forshaw (ALP, NSW)

Senator John Hogg (ALP, Qld)

Senator Hon Sandy Macdonald (NATS, NSW)

Senator Anne McEwen (ALP, SA)

Other senators who participated

Senator E Abetz, (LP, Tas)

Senator J Adams (LP, WA)

Senator L Allison (AD, SA)

Senator Hon R Boswell (NATS, Qld)

Senator Hon G Brandis (LP, Qld)

Senator B Brown (GR, Tas)

Senator J Collins (ALP, Vic)

Senator Hon C Ellison (LP, WA)

Senator C Fierravanti–Wells (LP, NSW)

Senator M Fifield (LP, Vic)

Senator B Heffernan (NATS, NSW)

Senator S Hutchins (ALP, NSW)

Senator Hon D Johnston (LP, WA)

Senator Hon I Macdonald (LP, Qld)

Senator C Milne (GR, WA)

Senator Hon N Minchin (LP, SA)

Senator Hon K Patterson, (LP, Vic)

Senator K Nettle (AG, NSW)

Senator M Payne (LP, NSW)

Senator Hon M Ronaldson (LP, Vic)

Committee secretariat

Dr Kathleen Dermody, Secretary

Ms Pamela Corrigan, Research Officer

Ms Jenene James, Research Officer

Ms Erja Stephenson, Senior Research Officer

Parliament House, Canberra ACT 2600

Phone: (02) 6277 3535, fax: (02) 6277 5818

e–mail: [email protected]; Internet: http://www.aph.gov.au/senate_fadt

Table of contents

Page

Membership ................................................................................................................. iii

Report to the Senate ............................................................................................................1

Introduction .......................................................................................................................1

Questions on notice ...........................................................................................................1

Foreign Affairs and Trade portfolio................................................................................1

Department of Foreign Affairs and Trade.....................................................................1

Budget Portfolio Statement........................................................................................2

Portfolio overview .....................................................................................................3

Output 1.1 ..................................................................................................................3

1.1.1—North Asia................................................................................................3

1.1.2—South East Asia........................................................................................4

1.1.3—Americas ..................................................................................................4

1.1.4—Europe......................................................................................................4

1.1.5—South and West Asia, the Middle East and Africa...................................4

1.1.6—Pacific ......................................................................................................5

1.1.7—Bilateral, regional and multi–lateral trade negotiations...........................5

1.1.9—International organisations, legal and environment.................................5

1.1.10—Security, nuclear disarmament and non–proliferation...........................5

1.2—Secure government communications and security of overseas missions..........6

1.3—Services to other agencies in Australia and overseas........................................6

1.4—Services to diplomatic and consular representatives in Australia.....................6

2.1—Consular and passport services .........................................................................6

3.1—Public information services and public diplomacy...........................................6

AusAID...........................................................................................................................6

Austrade .........................................................................................................................8

Defence portfolio ..............................................................................................................8

Department of Defence ..................................................................................................8

Portfolio Budget Statement........................................................................................9

Changes to outcome and output structure..................................................................9

Chief of the Defence Force opening statement........................................................10

Secretary's opening statement..................................................................................11

Portfolio overview and budget summary.................................................................12

Output group 1.1 Office of the Secretary and Chief of the Defence Force .............12

Output group 1.12 Chief Financial Officer..............................................................13

Output group 1.14 Superannuation and housing support services for current

and retired Defence personnel and other administered items ..................................13

Output group 2.1 Operations contributing to the security of the immediate

neighbourhood and Output group 2.2 Operations supporting wider interests .........13

Output group 3.1 Defence contribution to support tasks in Australia .....................13

Capability development: Output group 1.11 Capability development ....................13

Defence Materiel Organisation ...................................................................................14

Capital facilities and Defence support .....................................................................14

Output group 1.6 Defence support...........................................................................14

People: Output group 1.13 People strategies and policy .........................................15

Remaining Defence outputs.....................................................................................15

Output group 1.2 Navy capabilities ...................................................................15

Output group 1.4 Air Force capabilities ............................................................15

Output group 1.7 Defence science and technology ...........................................15

Department of Veterans' Affairs ..................................................................................15

Portfolio overview/Corporate and general matters ..................................................15

Outcome 1—Income support and compensation.....................................................16

Outcome 2—Health .................................................................................................16

Outcome 3—Commemorations ...............................................................................16

Outcome 4—Advice and information......................................................................16

Outcome 5—Joint DVA/Defence support services .................................................16

Output group 6 .........................................................................................................17

Australian War Memorial............................................................................................17

Acknowledgements .........................................................................................................17

Additional comments from Coalition Senators...............................................................19

Index to proof transcripts .................................................................................................21

Foreign Affairs and Trade portfolio ...............................................................................23

Department of Foreign Affairs and Trade ...................................................................23

Australian Agency for International Development (AusAID).....................................24

Australian Trade Commission (Austrade) ...................................................................24

Defence portfolio ............................................................................................................25

Department of Defence................................................................................................25

Department of Veterans' Affairs ..................................................................................26

Appendix 1—Defence organisation outcome structure......................................................27

Senate Standing Committee on Foreign Affairs,

Defence and Trade

Report to the Senate

Introduction

1. On 13 May 2008, the Senate referred to the committee for examination and

report the following documents:

• Particulars of certain proposed budget expenditure in respect of the year ending 30 June

2009 relating to the Defence portfolio and the Foreign Affairs and Trade portfolio, and

• Particulars of proposed budget expenditure in respect of the year ending 30 June 2009.

2. The committee has considered the proposed budget expenditure for the year

ending 30 June 2009. It has received evidence from the Minister representing the

following ministers: the Minister for Foreign Affairs; the Minister for Trade; the

Minister for Defence; and the Minister for Veterans' Affairs, and officers of the

departments and agencies concerned.

3. The committee met in public session on 2, 3, 4 and 5 June 2008. Further

written explanations provided by departments and agencies will be presented

separately in volumes of additional information. This information will also be placed

on the committee’s internet site (www.aph.gov.au/senate_fadt).

Questions on notice

4. The committee resolved, under Standing Order 26, that written answers and

additional information should be submitted to the committee by close of business on

Thursday, 31 July 2008.

Foreign Affairs and Trade portfolio

Department of Foreign Affairs and Trade

5. The committee acknowledged the attendance at the hearings of Mr Doug

Chester, Deputy Secretary, and officers of the Department of Foreign Affairs and

Trade.

6. The committee again examined the issue of the two percent efficiency

dividend, which was previously raised in additional estimates in February 2008. The

committee asked the department whether it sought an exemption from the efficiency

dividend.

1 Transcript page numbers for each day begin at page 1. Foreign Affairs and Trade portfolio

hearings are in proof Committee Hansard, 2 and 3 June 2008. (See the transcript index at back

of this report.)

2 Report on Budget estimates 2008–2009

7. Mr Chester, Deputy Secretary, replied that…

You may recall from the additional estimates hearings earlier this year that,

as a result of submission made by ministers, there was a rephasing of some

of the savings measures that applied to the department at that time and, in

relation to our budget for next year, as a result of considerations by the

government, an additional amount of money was provided to the

department pending a so–called root and branch review of the department's

operations. So in a sense those two factors were related to the overall

impact of the 1¼ percent efficiency dividend and the two percent efficiency

dividend.

8. The committee also examined the budget papers with regard to the

department's resourcing requirements and 'a change in emphasis' of the department's

activities.

In particular, the committee sought information on 'a large number of new

responsibilities which the government is expecting of the department'.

9. Mr Chester responded:

We are prioritising—applying the resources that we believe should be

applied to particular priorities. We may well be applying less resources to

things of a lesser priority.

…

We have a busy agenda at the moment. But, as I said, there will be work

done to identify the key priorities that we should be focusing on and the

root and branch will, we have no doubt, assist the department to clearly

understand what is expected of us.

Budget Portfolio Statement

10. A committee member acknowledged the content of the Strategic Direction

Section in the Portfolio Budget Statement which he found helpful. It identified a long

list of new initiatives.

11. The committee also questioned the department about the methodology used to

determine staff numbers attributed to outcomes.

12. The Secretary informed the committee that the methodology used to produce

statistics showing the appropriation of staff to outcomes has changed. This updated

methodology for attributing staff to outcomes was based on survey of staff as to the

time they spent on each of the outcome. The new methodology means that the figures

2 Proof Committee Hansard, 2 June 2008, p. 5.

3 Proof Committee Hansard, 2 June 2008, pp. 6–9.

4 Proof Committee Hansard, 2 June 2008, pp. 6–7.

5 Proof Committee Hansard, 2 June 2008, p. 5.

Report on Budget estimates 2008–2009 3

contained in PBS cannot be compared to figures contained in previous PBS but can be

going forward.

13. A committee member asked questions about reductions of approximately

17 percent in outputs 1.2, 1.3 and 1.4 as shown in table 2.1.1. He was seeking an

explanation of model used to arrive at these figures. He expressed concern that the

department could not offer an explanation for these apparent reductions. The

department took the questions on notice

14. Other matters raised during the hearing are listed below.

Portfolio overview

• Joint review of departmental resources (pp. 10–12).

• Savings measures made as a result of efficiencies: staffing in the department and

posts

(pp. 12–15, 16–19; 24; 27–31; 38–39; 41); travel expenses (pp. 15–16).

• Mr Mamdouh Habib (pp. 19–23).

• Secondment of staff to the department (pp. 23–26).

• Concept of creative middle power diplomacy (pp. 26–27).

• Climate refugees (pp. 27 and 78).

• Heads of missions: appointment of replacements in various missions (pp. 31–34).

• Chief of staff for the former Minister for Foreign Affairs (pp. 34–35).

• DFAT employees employed under the 'MOPS' act (p. 35).

• Ministerial submissions in the minister's office (pp. 35–37).

Output 1.1

1.1.1—North Asia

• Australia's relationship with Taiwan (pp. 39–40).

• Prime Minister's travel in North Asia, in particular Japan (pp. 41–43).

• Japanese government and whaling (pp. 43–45).

• Australia–Japan Foundation and its funding (pp. 45–46).

• Japan and comfort women (p. 48).

• Australia–China human rights dialogue (pp. 46–47).

• Australian government's official delegation to the Beijing Olympics (pp. 47; 110).

• Prime Minister's visit to Hong Kong (pp. 58–61).

6 Proof Committee Hansard, 2 June 2008, pp. 30–31.

7 Proof Committee Hansard, 2 June 2008, pp. 97–98.

4 Report on Budget estimates 2008–2009

• Tibet and Australia's dialogue with China (pp. 47–48; 110).

• Korea and the progress of the six party talks in relation to North Korea (pp. 48–

49).

1.1.2—South East Asia

• Burma and the detention of Daw Aung San Suu Kyi (pp. 49, 51).

• Cyclone Nargis and international aid to assist the Burmese people (p. 50).

• Burma's referendum (pp. 50–51).

• ASEAN and Burma (pp. 51–52).

• Australian sanctions against Burma; children of Burmese generals who are

studying in Australia

(pp. 52–54; 64; 03Jun08, p. 44).

• Timor Leste and the attacks on Prime Minister Jose Ramos Horta (p. 54).

• Consular assistance to Angelita Pires in Timor Leste (pp. 54–55).

• Indonesia and the Australian Prime Minister's visit (p. 55).

1.1.3—Americas

• Direct aid programs and funding in South America (p. 56).

1.1.4—Europe

• Australia's political and economic engagement with Europe (pp. 56–57).

1.1.5—South and West Asia, the Middle East and Africa

• Democratic Republic of Congo and the peace treaty signed earlier this year

(p. 60).

• Sudan and the United Nations (p. 60).

• Zimbabwe and the rerun of the presidential elections; refugees and human rights

(pp. 60–61). Existing Australian sanctions against Zimbabwe (pp. 64–65).

• Darfur and peacekeeping operations (pp. 61–62).

• Afghanistan and the suspension from Parliament of Malalai Joya; representations

by Australia on her behalf

(p. 62). Australia's role and objectives in Afghanistan

(pp. 66–67).

• Australia's policy approach to Western Sahara (pp. 62–64).

• Lebanon and the recent peace agreement (p. 65). Blockade of the Gaza Strip

(pp. 65–66).

• Israel and the 60

anniversary of independence (pp. 65–66).

• Sri Lanka (p. 66).

• India and Australia's relationship (pp. 67–70).

• Iraq and the direction of political events (p. 70).

Report on Budget estimates 2008–2009 5

1.1.6—Pacific

• Fiji and threats made against High Commission staff (pp. 71–72); Pacific Islands

Forum and preparation for elections in March 2009

(pp. 72–74).

• Papua New Guinea and a report by the Auditor General of Papua New Guinea

pertaining to missing funds

(DFAT, pp. 74–75; 89–90; AusAID, 3 June 2008, pp. 30–33).

• Pacific guest workers scheme in Australia; labour mobility issues (pp. 75–78; 90).

• Pacific island nations and climate refugees (pp. 27 and 78).

1.1.7—Bilateral, regional and multi–lateral trade negotiations

• Efficiency dividend and the affect on staffing; specifically, the work on free

trade agreements

(03Jun08, pp. 44–45).

• Priority of multilateral agreements and the role of bilateral trade deals (pp. 45–46).

• China bilateral trade agreement (pp. 46–49).

• Japan free trade agreement (pp. 48–49).

• US–South Korea free trade agreement and an Australia–South Korea free trade

agreement

(pp. 49–50).

• Consideration of free trade agreements with Vietnam and Philippines, and a

feasibility study with India

(pp. 53–54). FTA negotiations with Chile (pp. 54–56).

• Dohar negotiations (pp. 51–53; 54).

• Australian Wheat Board and the single desk (pp. 53).

• Mortimer review (pp. 56–58).

• AUSMIN round (p. 59).

1.1.9—International organisations, legal and environment

• Climate change negotiations (p. 78).

• Australia's engagements with multilateral institutions, specifically with the

United Nations

(p. 79).

• Australia and the optional protocol to the convention against torture (pp. 80–81).

1.1.10—Security, nuclear disarmament and non–proliferation

• Draft treaty on cluster munitions (pp. 81–88).

• Regional maritime security capacity (pp. 88; 90–91).

• Domestic nuclear power industry in Australia; global nuclear energy partnership

statement of principles (p. 92). The role of the Australian Safeguards and Non–

proliferation Office and the generation IV International Forum

(pp. 92–93).

8 Output 1.1.7 hearings are in proof Committee Hansard, 3 June 2008. (See the transcript index

at back of this report.)

6 Report on Budget estimates 2008–2009

• Australia's role in nuclear disarmament in the Middle East (pp. 93–94).

• Australia's involvement in missile defence (pp. 94–95).

1.2—Secure government communications and security of overseas missions

• Appropriations: reprofiling of funding and Post security task force (pp. 95).

• Security of Australian staff and diplomatic premises (pp. 96).

1.3—Services to other agencies in Australia and overseas

• Decline in appropriation, with particular interest in the department's relationship

with Parliament

(pp. 96–98).

• Costs borne by diplomatic posts when the Prime Minister or other ministers

travel overseas

(pp. 98–100).

1.4—Services to diplomatic and consular representatives in Australia

• Decline in services to diplomatic and consular representatives (pp. 100–101).

2.1—Consular and passport services

• Department's role in the response process to the Sichuan earthquake and the

cyclone in Burma; Smartraveller campaign

(pp. 101–103). Budgetary attribution to

consular crisis arrangements

(pp. 103–104). Traveller emergency loans (pp. 104–

105).

• Transgender people travelling overseas and passport issues (pp. 105–107).

3.1—Public information services and public diplomacy

• Governments' response to the Senate Standing Committee on Senate Standing

Committee on Foreign Affairs, Defence and Trade's report on public diplomacy

(pp. 107–108).

• Australia's participation in the Shanghai expo (pp. 108–109).

AusAID

15. The committee acknowledged the attendance at the hearings of Mr Scott

Dawson, Deputy Director General, and officers representing AusAID.

16. The committee noted that Mr Davis, Director General of AusAID, was not

present at estimates.

17. Matters raised by the committee included:

• Official development assistance increased funding (ODA) (p. 5).

• Pacific Partnerships for Development; Pacific Islands Forum; Pacific Land

Program

; Pacific Regional Infrastructure Facility (pp. 5–11; 42).

• Investing in Pacific public sector capacity (pp. 10–11).

9 Transcript page numbers for each day begin at page 1. AusAID hearings are in proof

Committee Hansard, 3 June 2008. (See the transcript index at back of this report.)

Report on Budget estimates 2008–2009 7

• Percentage of Australian GDP equivalent in overseas aid (pp. 11–13).

• Logging and biodiversity resources in Papua New Guinea (p. 14).

• Australia official development assistance for health, and specifically, sexual and

reproductive health programs

(p. 15).

• Aid budget and programs for Timor Leste (pp. 15–16).

• Reproductive health in Timor Leste (pp. 15–18).

• Abortions and Australia's overseas aid programs (pp. 18–21).

• Palm oil harvesting in native forests in Papua New Guinea; International Forest

Carbon Initiative

(pp. 21–23).

• Guest worker pilot program (pp. 23–24).

• World Bank approval of a road project in the Philippines (pp. 24–25).

• Allocation of funds to address HIV/AIDS and STIs in Papua New Guinea

(pp. 24–25).

• Asia regional trafficking in Persons Project (pp. 25–26).

• Australian NGOs involved in the distribution of aid in Burma (pp. 26–28; 30).

• Australia's overseas aid program and the AusAID NGO Cooperation Program

(ANCP)

(pp. 28–29).

• Papua New Guinea and a report by the Auditor General of Papua New Guinea

pertaining to missing funds

(DFAT, 2 June 2008, pp. 74–75; 89–90; 3 June 2008, pp. 30–

33).

• Official Development Assistance (ODA) and governance and anti–corruption

issues

(pp. 33–34).

• Microfinance (pp. 35–36).

• Australian government financial pledge and the Palestinian territories (pp. 36–37).

• Australia's commitments to Africa and reintegration of Zimbabwe into the

international community

(pp. 37–38).

• Increase in expenditure on HIV/AIDS (pp. 38–39).

• Monash University's APEC Study Centre and its chair, Mr Alan Oxley (pp. 39–

41).

• Fragile States and Peace–building Unit (pp. 41–42).

• Centre for Democratic Institutions (p. 43).

8 Report on Budget estimates 2008–2009

Austrade

18. The committee acknowledged the attendance at the hearings of Mr Peter

Yuile, Deputy Chief Executive Officer, and officers representing Austrade.

19. The committee noted that Mr Peter O'Byrne, Chief Executive Officer of

Austrade, was not in attendance at estimates

20. Matters raised by the committee included:

• Sandalwood oil industry (p. 60).

• Staffing issues and the efficiency dividend (pp. 60–62).

• Invest Australia and Global Opportunities, TradeStart and EMDG—staffing and

funding

(pp. 62–65).

• Export Market Development Grants Scheme (pp. 66–71).

• Consular and passport services provided by Austrade (pp. 72–74).

Defence portfolio

Department of Defence

21. The committee acknowledged the presence at the hearings of Air Chief

Marshal Angus Houston AC, AFC, Chief of the Defence Force (CDF), Mr Nick

Warner PSM, Secretary of the Department of Defence, and officers of the Defence

organisation.

22. The committee thanked officers from Defence, including the Chief Finance

Officer, Mr Phillip Prior, Mr Chris Knott and Mr Steve Warne, for providing the

committee with a very informative briefing on the Portfolio Budget Statements (PBS)

prior to the estimates hearings.

23. It was noted that three chiefs of the Defence Force were attending their last

estimates: Chief of Navy, Vice Admiral Russell Shalders AO, CSC, RAN; Chief of

Army, Lieutenant General Peter Leahy AC; and Chief of Air Force, Air Marshal

Geoff Shepherd, AO. The committee acknowledged their service to the Defence Force

and their invaluable assistance to the committee over many years.

10 Transcript page numbers for each day begin at page 1. Austrade hearings are in proof

Committee Hansard, 3 June 2008. (See the transcript index at back of this report.)

11 Transcript page numbers for Department of Defence refer to proof Committee Hansard,

4 June 2008. (See the transcript index at the back of this report.)

12 Proof Committee Hansard, 4 June 2008, p. 4.

13 Proof Committee Hansard, 4 June 2008, p. 4.

Report on Budget estimates 2008–2009 9

24. The committee noted that Senator Sandy Macdonald will be retiring on

30 June and acknowledged his distinguished service to the committee as a former

chair and parliamentary secretary for Defence.

Portfolio Budget Statement

25. The Chief Financial Officer drew attention to Table 1 in the Portfolio Budget

Statement. He informed the committee that the Department of Finance provides

guidance on the tables. Table 1 is a new table intended to capture all aspects. He

explained that, as now constructed, the table allows for double accounting—there

should not be a final total, because the figures are flow through figures and not

cumulative. In effect this misrepresents the situation.

Changes to outcome and output structure

26. The committee notes that Defence has implemented a new outcome and

output structure in the 2008–09 Budget. Under the new structure, Defence will report

against the following three outcomes:

• Outcome 1: Australia's national interests are protected and advanced through the

provision of military capabilities and the promotion of security and stability

• Outcome 2: Military operations and other tasks directed by the Government to

achieve the desired results

• Outcome 3: Defence's support to the Australian community and civilian

authorities to achieve the desired results

27. According to Defence:

The new structure…better reflects the Government's Defence policy

objectives and describes what Defence delivers to the Government and the

community…

This new framework will align Defence's outcomes and outputs with

organisational resourcing and accountability arrangements. The new

structure will provide greater transparency to the Government.

28. It was previously stated that Defence would report against this new structure

in its Portfolio Additional Estimates Statements (PAES) 2007–08.

Defence explained

that it was asked to defer the changes due to 'timing and system pressures as a result of

the whole–of–government departmental reorganisation following the change in

14 Proof Committee Hansard, 4 June 2008, p. 119.

15 Proof Committee Hansard, 4 June 2008, pp. 54–55.

16 Portfolio Budget Statements 2008–09, Defence Portfolio, pp. 9 and 69.

17 Portfolio Budget Statements 2008–09, Defence Portfolio, p. 9.

18 Portfolio Budget Statements 2007–08, Defence Portfolio, p. 13.

10 Report on Budget estimates 2008–2009

government'.

For a more detailed list of Defence's new outcome and output

structure, including an outline of the previous structure, see Appendix 2.

Chief of the Defence Force opening statement

29. Air Chief Marshal Houston gave the committee a report on his recent visit to

the Middle East area of operations, including southern Iraq and Afghanistan. He

informed the committee that:

The Overwatch Battle Group has ceased operations [in southern Iraq] and

commenced its withdrawal. I visited the battle group to ensure they were

maintaining their operational focus to the end of their mission. I am pleased

to report…that I found our battle group was highly respected throughout the

al-Muthanna and Dhi Qar provinces. I also confirmed that the battle group

was energised to maintain the highest standards through to the end of its

deployment. The battle group was operating freely throughout both

provinces, having won the trust of local Iraqis and the Iraqi security forces

by actively patrolling on foot amongst the population they were tasked to

protect.

I wish to publicly thank Lieutenant Colonel Chris Websdane, the

Commanding Officer of Overwatch Battle Group (West), and his team for

their outstanding tour of duty. They have upheld the high standards set by

their predecessors in the al–Muthanna task group, Overwatch Battle Groups

and Australian Army training teams. These people all work to help stabilise

the provinces before them. They have all been excellent ambassadors for

the Australian Defence Force and leave behind some important legacies in

the form of greater security, a well–trained local force and reconstruction

projects involving some key infrastructure.

30. In relation to Afghanistan, Air Chief Marshal Houston updated the committee

on Australia's current contribution through Operation Slipper. He explained that:

Afghanistan remains a complex and demanding environment, but I was

particularly pleased with the progress being made by our combined

reconstruction and special forces groups. I was able to fly out over the

Chora valley in our Australian CH–47 helicopters to observe the

construction of the patrol bases we have established and saw the expanding

area of stabilisation first hand. Our special forces continue to disrupt the

Taliban fighters in their sanctuaries, preventing them from interfering with

the important work of our reconstruction troops. This partnership has been

particularly effective and the assertive actions of our special forces have

pushed the Taliban onto the back foot.

19 Portfolio Additional Estimates Statements 2007–08, Defence Portfolio, p. 9.

20 Proof Committee Hansard, 4 June 2008, pp. 5–6.

21 Proof Committee Hansard, 4 June 2008, p. 6.

Report on Budget estimates 2008–2009 11

31. The CDF also outlined the domestic priorities he conveyed to his senior

leadership group at a recent summit, in relation to recruitment and retention. He

acknowledged that:

One definite area where we must and can do better concerns the retention of

women in the ADF…I am determined to do better to allow the ADF to

access or unlock the talents of almost half the population currently closed to

us. To help us on that journey, I am convening an external women's

reference group to present me with alternative and innovative ideas,

strategies and options to break down barriers to women joining and

continuing to serve in the ADF. I have invited a number of prominent

Australian women from a diverse range of backgrounds to support the

ADF. I will ask this group to consider issues such as cultural, attitudinal

and behavioural aspects of military service, and they will give me advice on

how to close the gaps. I am keenly invested in this issue and have decided

to use the retention of women as a measure of our retention performance

across the board. I look forward to reporting to the committee on our

progress on this issue once the members of the group have been finalised.

32. Air Chief Marshal Houston also updated the committee on the withdrawal of

reinforcements from Timor–Leste

and the establishment of a commission of inquiry

into the circumstances surrounding the sinking of HMAS Sydney II.

Secretary's opening statement

33. Secretary of the Department of Defence, Mr Nick Warner, outlined the impact

of the government's 2008–09 budget on Defence. Mr Warner stated:

Over the next decade Defence will experience a number of pressures on its

funding, particularly from operations and the need to meet the technology,

capability and workforce impacts of the white paper…As a result, Defence

is now looking at smarter, more effective and more efficient ways of doing

business so it can redirect critically needed resources to higher priorities.

That means the savings program to deliver $10 billion over the next

10 years will continue in earnest. So far Defence has identified savings of

$565 million across the forward estimates and…$477.6 million in savings

in 2008–09.

While this is short of the annual $1 billion target, Defence is just at the start

of its savings program and more will be found in 2008–09 and revealed in

the next few months. I am confident Defence will find the $1 billion for the

next financial year. Defence has also established an efficiency and economy

tiger team to look at possible savings measures…everything from

inefficient practices and processes and duplicated activities to travel,

22 Proof Committee Hansard, 4 June 2008, p. 7.

23 Proof Committee Hansard, 4 June 2008, pp. 6–7.

24 Proof Committee Hansard, 4 June 2008, pp. 7–8.

12 Report on Budget estimates 2008–2009

conferences, unnecessarily expensive renovations and promotional items

for internal audiences, such as coffee mugs and—if I can say this—stress

balls.

34. Mr Warner explained that 'everything except operations has been questioned'

and, in addition, Defence is developing a savings plan to identify long–term

efficiencies and economies for the next nine years.

35. Mr Warner also updated the committee on the findings of the Commonwealth

Ombudsman's enquiry into the HMAS Westralia fire.

36. Other topics examined during the hearing included:

Portfolio overview and budget summary

• Iraq: number of Australian personnel remaining (pp. 9–10); strategic overwatch

(pp. 10 and 34);

main challenges in relation to stabilisation and security (p. 11);

withdrawal of training team

(pp. 11–12); training of Iraqis under the defence

cooperation program

(p. 12); type of naval vessels used in the Gulf (pp. 12–13);

whether cluster munitions have been used in Iraq (p. 13); civilian casualty figures

(p. 24).

• Afghanistan: changing trends in tactics used by Taliban fighters (pp. 14–15); use

of special forces in conventional warfare operations

(p. 15); Reconstruction Task

Force

(p. 16); tempo and intensity of Taliban activity this year (p. 18);

implementation of NATO's comprehensive Afghan strategy (pp. 6, 19–20 and 23);

engagement with Pakistan

(pp. 20–21); tactical and strategic progress (pp. 21–22 and

23);

timeframe and benchmarks for withdrawal of foreign troops (pp. 22–23); total

cost of deployment

(p. 24); civilian casualties (pp. 24–27 and 70).

• Post–traumatic stress disorder (PTSD) and related illnesses in Australians who

have served in Iraq

(pp. 14 and 18).

• Capability and Technology Demonstrator program: reduction in funding (p. 14).

• Gap year program (pp. 16–18).

• Entertainment of troops (pp. 27–28 and 45); unauthorised disclosure of entertainer's

name in relation to allegations of inappropriate behaviour; Secretary's statement

that 'Defence did not handle this issue well'

(pp. 28–32 and 34).

Output group 1.1 Office of the Secretary and Chief of the Defence Force

• Cluster munitions (pp. 35–41 and 119).

25 Proof Committee Hansard, 4 June 2008, p. 8.

26 Proof Committee Hansard, 4 June 2008, p. 9.

27 Proof Committee Hansard, 4 June 2008, p. 8.

28 Proof Committee Hansard, 4 June 2008, p. 9.

Report on Budget estimates 2008–2009 13

• Development of Defence's White Paper and companion reviews (pp. 41–45).

• Defence cooperation with China (pp. 45–46).

• Ministerial press releases (pp. 46–47).

Output group 1.12 Chief Financial Officer

• Kangaroo cull at Belconnen (pp. 49–50).

• Impact of rising fuel prices on the Defence budget (p. 50).

• Budget reporting (pp. 54–56).

• Operational reserve (pp. 56–58).

• Savings and efficiency measures in the PBS (pp. 58–60 and 63).

• Costing shortfall in relation to funding of the army's new infantry battalion;

Secretary's statement that the 'fault lies with Defence' whose 'costings at that

time…were inadequate'

(pp. 61–62).

Output group 1.14 Superannuation and housing support services for current and retired

Defence personnel and other administered items

• Impact of same–sex superannuation legislation on ADF personnel (p. 67).

Output group 2.1 Operations contributing to the security of the immediate neighbourhood

and Output group 2.2 Operations supporting wider interests

• Operation Paladin (United Nations Supervision Organisation [UNTSO] in the

Middle East)

(p. 69).

• Operation Mazurka (Multinational Force and Observers [MFO] in the Sinai)

(p. 69).

• Role of the 39th Personnel Support Battalion at Randwick in force preparation

for peacekeeping

(p. 70).

• Concurrency pressures and changes to deployment cycle (pp. 70–72).

Output group 3.1 Defence contribution to support tasks in Australia

• Operation Testament (ADF's contribution to World Youth Day 2008): cost;

logistics; military pilgrims program

(pp. 68–69).

• Update on the ADF's contribution to the Northern Territory intervention (pp. 72–

73).

Capability development

Output group 1.11 Capability development

• Capability development in relation to next generation submarines (pp. 73–77 and

78).

• Multi role naval helicopters (pp. 77–78).

14 Report on Budget estimates 2008–2009

• Orion replacement project (p. 93).

Defence Materiel Organisation

• Contracts awarded to CMAX Communications (pp. 48 and 51–54).

• Cancellation of Seasprite helicopter program, including: cancellation

negotiations; cost of cancellation; legal advice on forgoing the right to sue;

lessons learnt

(pp. 79–84).

• Guided Missile Frigate (FFG) upgrade program, including performance of

Electronic Surveillance Measures (ESM) System

(pp. 84–85).

• Air Warfare Destroyer program (pp. 85–89).

• Amphibious ships (pp. 89–90).

• Fuel line problems with Armidale class patrol boats (p. 90).

• Wedgetail airborne early warning and control (AEW&C) aircraft (p. 90).

• Other projects of concern, including: High Frequency Modernisation (HFMOD)

project

; Vigilair; Echidna; Tiger armed reconnaissance helicopter (ARH); Anzac

Ship anti-ship missile defence project; M–113 armoured personnel carriers;

lightweight torpedo replacement

(pp. 91–93).

• Exporting of Bushmasters (p. 92).

• Planned acquisition of Super Hornets (p. 93).

• Arrangement of foreign military sales (FMS) (p. 94).

• Mortimer review of Kinnaird reforms (pp. 94–96).

• Methodology for Australian National Audit Office (ANAO) review of major

Defence projects

(pp. 96–97).

Capital facilities and Defence support

Output group 1.6 Defence support

• Security challenges due to climate change (p. 33).

• Government's pre-election commitment to establish Defence family health

centres; trial sites

(pp. 63–66 and 101–102).

• Transfer of former submarine base HMAS Platypus to the Sydney Harbour

Federation Trust; remediation strategy

(p. 97).

• Mental health issues; lack of detailed information on the prevalence of

conditions within the ADF; suicide rate; counselling and treatment; McLeod

review; mental health review (Dunt review)

(pp. 98–101 and 103–104).

• Audit of Commonwealth land identified as surplus to Defence needs; disposal

schedule; proceeds of land sales

(pp. 104–106).

• Asia–Pacific Centre for Civil-Military Cooperation (pp. 106–108).

Report on Budget estimates 2008–2009 15

People

Output group 1.13 People strategies and policy

• External reference group to advise on increasing the participation rate of women

in the ADF

(p. 108).

• Examination of under-utilised family-friendly policies in the ADF (pp. 108–109).

• Work experience for high school and university students (pp. 109–110).

Remaining Defence outputs

Output group 1.2 Navy capabilities

• Recruitment and retention of submariners (pp. 110–111).

Output group 1.4 Air Force capabilities

• VIP fleet; current contractual arrangements; cost recovery; preparation of flight

manifests; whether a doctor travels with the Prime Minister; whether an Air

Force plane was used to transport a member of the Prime Minister's travelling

party for medical treatment

(pp. 111–116).

Output group 1.7 Defence science and technology

• Reduction in funding for scientific research programs (pp. 60, 63 and 116–117).

• MAGSAFE project (pp. 117–119).

Department of Veterans' Affairs

37. The committee acknowledged the presence at the hearings of Mr Mark

Sullivan AO, Secretary, and officers of the Department of Veterans' Affairs (DVA).

38. It was noted that Mr Sullivan is leaving DVA and this will be his last

appearance at estimates. The committee acknowledged his contribution to the

estimates process, his assistance to the committee and his outstanding contribution to

DVA.

39. Matters raised by the committee included:

Portfolio overview/Corporate and general matters

• Mr Sullivan's resignation from DVA (pp. 5–7).

• Impact of two per cent efficiency dividend on DVA staffing levels and services

(pp. 10–14, 15, 29, 33–34 and 40).

29 Transcript page numbers for Department of Veterans' Affairs refer to proof Committee

Hansard, 5 June 2008.

30 Proof Committee Hansard, 4 June 2008, pp. 3–4 and 5.

16 Report on Budget estimates 2008–2009

Outcome 1—Income support and compensation

• Partner service pensions: proposed raising of the age criteria from 50 to 58½

(pp. 16–18, 23 and 39).

• Partner service pensions: ceasing of payments to married partners who are

separated but not divorced

(pp. 19–23 and 39–40).

Outcome 2—Health

• Management of aged and frail care issues; aged-care beds for veterans (pp. 14–16).

• Whether consideration is being given to extending gold card benefits to members

of the Australian armed forces who have not served overseas

(p. 24).

• Mental health: statistics on forms of mental illness suffered by DVA clients;

trend analysis; suicide statistics

(pp. 25–26).

• Funding for veterans' services: declining population; increasing cost of care

(pp. 26–27).

Outcome 3—Commemorations

• Future dawn services at Villers–Bretonneux in France (pp. 7–8).

• Update on plans for an Australian interpretive centre at Villers–Bretonneux (p. 8).

• Hyde Park memorial in London (p. 8).

• Commemoration of the 'fuzzy wuzzy angels' in Papua New Guinea (pp. 8–9).

• Australia's representation on the Council of the Commonwealth War Graves

Commission

(pp. 23–24).

• Curatorial work on graves of two former Australian Prime Ministers in London

(pp. 27–28).

• Saluting Their Service program (pp. 28–29).

• Funding for ex–prisoners–of–war memorial in Ballarat (pp. 29–32).

• Planning for next Anzac Day services at Gallipoli (p. 32).

• Continuation of the Simpson Prize (pp. 32–33).

• Government consideration of the Flanders Fellowship (p. 33).

Outcome 4—Advice and information

• Impact of cuts to staffing levels on services under Outcome 4 (pp. 33–34).

• Complaints and concerns in relation to the Veterans' Home Care service (pp. 34–

35).

Outcome 5—Joint DVA/Defence support services

• DVA's involvement with the HMAS Sydney II (p. 35).

Senate Standing Committee on Foreign Affairs,

Defence and Trade

Index to proof transcripts

Budget estimates 2008−2009

Foreign Affairs and Trade portfolio

Monday, 2 June 2008

Tuesday, 3 June 2008

Defence portfolio

Wednesday, 4 June 2008

Thursday, 5 June 2008

Report on Budget estimates 2008–2009 23

Monday, 2 June and Tuesday, 3 June 2008

FOREIGN AFFAIRS AND TRADE PORTFOLIO

Department of Foreign Affairs and Trade

Page no

In attendance ............................................................................................................ 1

Portfolio overview..................................................................................................... 5

Output 1.1.1—North Asia........................................................................................................39

Output 1.1.2—South–East Asia............................................................................................... 49

Output 1.1.3—Americas ..........................................................................................................56

Output 1.1.4—Europe..............................................................................................................56

Output 1.1.5—South and West Asia, Middle East and Africa ................................................60

Output 1.1.6—Pacific .............................................................................................................. 71

Output 1.1.7—Bilateral, regional and multi–lateral trade negotiations..................[03Jun08] 44

Output 1.1.9—International organisations, legal and environment......................................... 78

Output 1.1.10—Security, nuclear disarmament and non–proliferation................................... 81

Output 1.2—Secure government communications and security of overseas missions ...........95

Output 1.3—Services to other agencies in Australia and overseas .........................................96

Output 1.4—Services to diplomatic and consular representatives in Australia.....................100

Output 2.1—Consular and passport services.........................................................................104

Output 3.1—Public information services and public diplomacy...........................................108

______________________________________________________________

24 Report on Budget estimates 2008–2009

Tuesday, 3 June 2008

Australian Agency for International Development (AusAID)

Page no

In attendance ............................................................................................................ 3

Outcome 1: Australia’s national interest advanced by assistance to developing countries

to reduce poverty and achieve sustainable development.

1.1: Policy

1.2: Program management

Administered items—Australia’s development cooperation program ...................................... 5

______________________________________________________________

Tuesday, 3 June 2008

Australian Trade Commission (Austrade)

Page no

In attendance ............................................................................................................................. 3

Outcome 1: Australians succeeding in international business with widespread

community support...................................................................................................................60

Outcome 2: Australians informed about and provided access to consular, passport

and immigration services in specific locations overseas ........................................................... 60

______________________________________________________________

25 Report on Budget estimates 2008–2009

Wednesday, 4 and Thursday, 5 June 2008

DEFENCE PORTFOLIO

Department of Defence

Page no

In attendance ............................................................................................................................. 1

Portfolio overview and budget summary...................................................................................5

Outcome 1—Australia's national interests are protected and advanced through the

provision of military capabilities and the promotion of security and stability

Outcome 1, output group 1.1—Office of the Secretary and Chief of the Defence Force .......34

Outcome 1, output group 1.12—Chief Financial Officer........................................................49

Outcome 1, output group 1.14—Superannuation and housing support services for current and

retired Defence personnel and other administered items......................................................... 67

Outcome 2—Military operations and other tasks directed by the Government to achieve

the desired results

Outcome 2, output group 2.1—Operations contributing to the security of the immediate

neighbourhood ......................................................................................................................... 67

Outcome 2, output group 2.2—Operations supporting wider interests ...................................69

Outcome 3—Defence's support to the Australian community and civilian authorities to

achieve the desired results

Outcome 3, output group 3.1—Defence contribution to national support tasks in Australia.. 72

Outcome 1, output group 1.11—Capability development....................................................... 73

Defence Materiel Organisation................................................................................................79

Outcome 1, output group 1.6—Defence support.....................................................................97

Outcome 1, output group 1.13—People strategies and policy...............................................108

Outcome 1, output group 1.2—Navy capabilities .................................................................110

Outcome 1, output group 1.4—Air Force capabilities........................................................... 111

Outcome 1, output group 1.7—Defence science and technology..........................................116

______________________________________________________________

26 Report on Budget estimates 2008–2009

Thursday, 5 June 2008

Department of Veterans' Affairs

Page no

In attendance .............................................................................................................................. 1

Portfolio overview/Corporate and general matters..............................................................5, 10

Outcome 1—Income support and compensation.....................................................................16

Outcome 2—Health. ................................................................................................................24

Outcome 3—Commemorations......................................................................................7, 23, 27

Outcome 4—Advice and information...................................................................................... 33

Outcome 5—Joint DVA/Defence support services ................................................................. 35

Output group 6 ......................................................................................................................... 35

Australian War Memorial ..................................................................................................40

______________________________________________________________

Appendix 1

Department of Defence

New outcome and output structure

Outcome 1: Australia's national interests are protected and advanced through

the provision of military capabilities and the promotion of security and stability

Output group 1.1: Office of the Secretary and CDF

Output group 1.2: Navy capabilities

Output 1.2.1: Navy headquarters

Output 1.2.2: Fleet headquarters

Output 1.2.3: Capability for major surface combatant operations

Output 1.2.4: Capability for naval aviation operations

Output 1.2.5: Capability for patrol boat operations

Output 1.2.6: Capability for submarine operations

Output 1.2.7: Capability for afloat support

Output 1.2.8: Capability for mine warfare

Output 1.2.9: Capability for amphibious lift

Output 1.2.10: Capability for hydrographic, meteorological and oceanographic operations

Output 1.2.11: Navy systems command

Output group 1.3: Army capabilities

Output 1.3.1: Army command and executive

Output 1.3.2: Capability for special operations

Output 1.3.3: Capability for medium combined arms operations

Output 1.3.4: Capability for light combined arms operations

Output 1.3.5: Capability for army aviation operations

Output 1.3.6: Capability for combat support to operations

Output 1.3.7: Capability for operational logistics support to land forces

Output 1.3.8: Capability for reserve protective operations

Output 1.3.9: Training support Army

Output group 1.4: Air Force capabilities

Output 1.4.1: Air Force headquarters executive and agencies

Output 1.4.2: Air command headquarters and executive

Output 1.4.3: Capability for training support

Output 1.4.4: Capability for airlift operations

Output 1.4.5: Capability for combat support of air operations

Output 1.4.6: Capability for strategic surveillance and maritime attack operations

Output 1.4.7: Capability for air combat operations

Output 1.4.8: Capability for aerospace operational support

1 For detailed descriptions of the individual outputs, see Portfolio Budget Statements 2008–09,

Defence Portfolio, pp. 69–109.

28 Report on Budget estimates 2008–2009

Output group 1.5: Intelligence capabilities

Output 1.5.1: Intelligence

Output 1.5.2: Security

Output 1.5.3: International policy

Output group 1.6: Defence support

Output 1.6.1: Defence support executive

Output 1.6.2: Defence health services

Output 1.6.3: Personnel services

Output 1.6.4: Defence legal

Output 1.6.5: Infrastructure

Output 1.6.6: National operations

Output group 1.7: Defence science and technology

Output group 1.8: Chief Information Officer

Output group 1.9: Vice Chief of the Defence Force

Output group 1.10: Joint Operations Command

Output group 1.11: Capability development

Output group 1.12: Chief Finance Officer

Output group 1.13: People strategies and policy

Output group 1.14: Superannuation and housing support services for current and

retired defence personnel and other administered items

Output 1.14.1: Superannuation

Output 1.14.2: Housing support services for current and retired Defence personnel

Output 1.14.3: Other administered items

Outcome 2: Military operations and other tasks directed by the Government to

achieve the desired results

Output group 2.1: Operations contributing to the security of the immediate

neighbourhood

Output 2.1.1: Operation Astute

Output 2.1.2: Operation Anode

Output group 2.2: Operations supporting wider interests

Output 2.2.1: Operation Slipper

Output 2.2.2: Operation Catalyst

Outcome 3: Defence's support to the Australian community and civilian

authorities to achieve the desired results

Output group 3.1: Defence contribution to national support tasks in Australia

Output 3.1.1: Defence force aid to civil authority tasks

Output 3.1.2: Defence force aid to civil community tasks

Output 3.1.3: Operation Resolute

Output 3.1.4: Operation Testament

Report on Budget estimates 2008–2009 29

Defence—Previous outcome and output structure

Outcome 1: Command of operations in defence of Australia and its interests

Output 1.1: Command of operations

Output 1.2: Defence Force military operations and exercises

Output 1.3: Contribution to national support tasks

Outcome 2: Navy capability for the defence of Australia and its interests

Output 2.1: Capability for major surface combatant operations

Output 2.2: Capability for naval aviation operations

Output 2.3: Capability for patrol boat operations

Output 2.4: Capability for submarine operations

Output 2.5: Capability for afloat support

Output 2.6: Capability for mine warfare

Output 2.7: Capability for amphibious lift

Output 2.8: Capability for hydrographic, meteorological and oceanographic operations

Outcome 3: Army capability for the defence of Australia and its interests

Output 3.1: Capability for special operations

Output 3.2: Capability for medium combined arms operations

Output 3.3: Capability for light combined arms operations

Output 3.4: Capability for army aviation operations

Output 3.5: Capability for ground-based air defence

Output 3.6: Capability for combat support operations

Output 3.7: Capability for regional surveillance

Output 3.8: Capability for operational logistics support to land forces

Output 3.9: Capability for motorised combined arms operations

Output 3.10: Capability for protective operations

Outcome 4: Air Force capability for the defence of Australia and its interests

Output 4.1: Capability for air combat operations

Output 4.2: Capability for combat support of air operations

Output 4.3: Capability for surveillance and response operations

Output 4.4: Capability for airlift operations

Outcome 5: Strategic policy for the defence of Australia and its interests

Output 5.1: International policy, activities and engagement

Output 5.2: Strategic policy and military strategy

Outcome 6: Intelligence for the defence of Australia and its interests

Output 6.1: Intelligence

Outcome 7: Superannuation and housing support services for current and retired

Defence personnel

Output 7.1: Superannuation support services for current and retired Defence personnel

Output 7.2: Housing assistance for current Defence personnel

Output 7.3: Other administered revenues and expenses

2 See Portfolio Additional Estimates Statements 2007–08, Defence Portfolio, pp. 71–98.