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ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS LEGISLATION COMMITTEE

Consideration of Additional Estimates

WEDNESDAY, 17 FEBRUARY 1999

CANBERRA

BY AUTHORITY OF THE SENATE

INTERNET

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CONTENTS WEDNESDAY, 17 FEBRUARY Department of Communications, Information Technology and The Arts— Program 3—Broadcasting, online and information technology— Subprogram 3.6—National Office for the Information Economy ................. 369 Subprogram 3.7—Office for Government Online........................................ 386

Wednesday, 17 February 1999 SENATE—Legislation ECITA 365

ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS

Communications, Information Technology and The Arts

SENATE

ENVIRONMENT, COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS LEGISLATION COMMITTEE

Wednesday, 17 February 1999

Members: Senator Eggleston (Chair), Senators Allison, Bishop, Bolkus, Payne and Tierney Senators in attendance: Senators Abetz, Bishop, Eggleston, Lundy and Payne

Committee met at 8.08 p.m.

DEPARTMENT OF COMMUNICATIONS, INFORMATION TECHNOLOGY AND THE ARTS

Proposed additional expenditure, $20,127,000 (Document A). Proposed additional expenditure, $8,795,000 (Document B). Consideration resumed from 11 February.

In Attendance Senator Alston, Minister for Communications, Information Technology and the Arts Department of Communications, Information Technology and the Arts— Program 1—Arts and Heritage Subprogram 1.1—Arts and Heritage Policy Mr Rob Palfreyman, Acting Executive Director, DCITA Mr Les Neilson, General Manager, Arts, DCITA Mr Craddock Morton, General Manager, Cultural Development, DCITA Mr Peter Young, Acting General Manager, Major Performing Arts Review, DCITA Mr Bill Henderson, General Manager, Old Parliament House, DCITA Mr Brian Stewart, General Manager, Government and Reform, DCITA Ms Dawn Casey, Chief General Manager, DCITA Subprogram 1.4—Australia Council Ms Jennifer Bott, General Manager, Australia Council Ms Sarah Gardner, Director, Strategy and Policy, Australia Council



Mr Gabriel Chan, Manager, Finance, Australia Council Mr Don Baxter, Director, Arts Funding, Australia Council Subprogram 1.6—National Gallery of Australia Dr Brian Kennedy, Director, National Gallery of Australia Mr Alan Froud, Deputy Director, National Gallery of Australia Mr Kieron Roost, Head of Finance, National Gallery of Australia Mr Phil Rees, Head of Facilities, National Gallery of Australia Subprogram 1.7—National Library of Australia Ms Jan Fullerton, Acting Deputy Director, National Library of Australia Mr David Toll, Assistant Director-General, National Library of Australia Subprogram 1.8—National Museum of Australia Dr William Jonas, AM, Director, National Museum of Australia Dr Darryl McIntyre, General Manager, National Museum of Australia Program 2—Film and Intellectual Property Subprogram 2.1—Film and Intellectual Property Policy Dr Rod Badger, Acting Executive Director, ITTB, DCITA Dr Alan Stretton, Chief General Manager, DCITA Ms Megan Morris, General Manager, Film and Online Content, DCITA Subprogram 2.2 Mr Rod Bishop, Director, Australian Film Television and Radio School (AFTRS) Ms Pat Mackintosh, Manager, Corporate Services, Australian Film Television and Radio

School (AFTRS) Subprogram 2.3 Mr Ron Brent, Director, National Film and Sound Archive Mr Sean Rooney, Manager, Financial Services, National Film and Sound Archive Subprogram 2.4—Australian Film Finance Corporation Ms Catriona Hughes, Chief Executive Officer, Australian Film Finance Corporation (FFC) Mr Michael Ward, Policy Manager, Australian Film Finance Corporation (FFC) Mr Michael Malouf, Financial Controller, Australian Film Finance Corporation (FFC) Subprogram 2.5 Ms Sharon Connolly, Chief Executive Officer, Film Australia Ms Deborah Coombe, Director, Corporate Services, Film Australia Subprogram 2.6 Ms Cathy Robinson, Chief Executive Officer, Australian Film Commission (AFC) Ms Kim Ireland, Policy Advisor, Australian Film Commission (AFC) Mr Ron Neale, Director, Finance Systems, Australian Film Commission (AFC) Porgram 3—Broadcasting, Online and Information Technology



Subprogram 3.1—Broadcasting Policy, Information Technology and Regional Telecommunica-tions Dr Rod Badger, Acting Executive Director, ITTB, DCITA Dr Alan Stretton, Chief General Manager, DCITA Mr Colin Lyons, General Manager, Public Broadcasting, DCITA Dr Simon Pelling, Acting General Manager, Digital TV Group, DCITA Mr Michael Sutton, General Manager, ICID, DCITA Dr David Williamson, General Manager, Networking the Nation, DCITA Subprogram 3.2—National Transmission Agency Mr Greg McAdoo, Assistant General Manager, National Transmission Agency Subprogram 3.3—Australian Broadcasting Corporation Mr Brian Johns, Managing Director, ABC Mr Russell Balding, Head, Finance and Business Services, ABC Mr Andy Lloyd-James, Head, National Networks, ABC Ms Sue Howard, Head, Regional Services, ABC Mr Colin Knowles, Head, Technology Strategy and Development, ABC Subprogram 3.4—Special Broadcasting Service Ms Maureen Crowe, Head of Resources, SBS Mr Nigel Milan, Managing Director, SBS Mr Jon Torpy, Manager, Finance, SBS Subprogram 3.5—Australian Broadcasting Authority Mr Gareth Grainger, Acting Chairman, ABA Mr Giles Tanner, General Manager, ABA Ms Andree Wright, Director, Policy and Content Regulation, ABA Ms Jonquil Ritter, Director, Planning and Licensing, ABA Subprogram 3.6—National Office for the Information Economy Ms Mary Burton, NOIE Dr Paul Twomey, Chief Executive Officer, NOIE Ms Fay Holthuyzen, Deputy Chief Executive Officer, NOIE Mr Tim Field, Chief General Manager, Government and Community Strategy, NOIE Subprogram 3.7—Office for Government Online Ms Glenys Roper, Chief Executive, OGO Mr Warren Richter, Chief General Manager, OGO Ms Susan Page, Chief General Manager, OGO Mr Steve Fielding, General Manager, OGO Mr Gary Allan, General Manager, OGO Mr Peter Anderson, General Manager, OGO



Program 4—Communications Subprogram 4.1—Telecommunications and Postal Policy Dr Rod Badger, Acting Executive Director, ITTB, DCITA

Mr John Neil, Acting Chief General Manager, Telecommunications Division, Telecommuni-cations and Postal Policy

Mr James Cameron, Acting General Manager, Telecommunications Competition and Consumer Branch, Telecommunications Division, Telecommunications and Postal Policy

Ms Patricia Barnes, Acting General Manager, Enterprise and Radiocommunications Branch, Telecommunications Division, Telecommunications and Postal Policy

Mr Richard Thwaites, General Manager, International Branch, Telecommunications Division, Telecommunications and Postal Policy

Mr David Luck, General Manager, Research, Statistics and Technology, Telecommunications and Postal Policy

Subprogram 4.2—Australian Postal Corporation Mr Gerry Ryan, Corporate Secretary, Australian Postal Corporation Mr Michael Talbot, Group Manager, Retail, Australian Postal Corporation Mr John Slight, Group Manager, Network Renewal, Australian Postal Corporation Subprogram 4.3—Telstra Corporation Limited Mr Graeme Ward, Group Director, Regulatory and External Affairs, Telstra Corporation

Limited Mr John Stanhope, Director, Finance, Telstra Corporation Limited Mr Lawrence Paratz, Executive General Manager, Network and IT Infrastructure, Telstra

Corporation Limited Mr Andrew Day, Managing Director, Sales, Telstra Corporation Limited Ms Deena Shiff, Director, Regulatory, Telstra Corporation Limited Mr Peter Frueh, Managing Director, Business Development, Telstra Corporation Limited Subprogram 4.4—Australian Communications Authority Dr Bob Horton, Deputy Chairman, Australian Communications Authority Mr Geoff Luther, Acting Senior Executive Manager, Radiocommunications Group, Australian

Communications Authority Mr Peter Stackpole, Executive Manager, Customer Affairs Group, Australian Communications

Authority Ms Roslyn Kelleher, Executive Manager, Consumer Affairs Group, Australian Communica-

tions Authority Mr Barry Matson, Executive Manager, Radiofrequency Planning Group, Australian

Communications Authority Mr Norm O'Doherty, Acting Executive Manager, Telecommunications Licensing Group,

Australian Communications Authority Mr Jeremy Chandler, Acting Executive Manager, Corporate Management Group, Australian

Communications Authority



Program 5 Dr Kay Daniels, General Manager, Intellectual Property Branch, DCITA Mr Arthur Blewitt, Chief General Manager, Corporate and Coordination, DCITA Mr Lennard Marsden, General Manager, Corporate Services, DCITA Mr Neville Stevens, Secretary, DCITA Department of Finance and Administration Observers Ms Judy Daniel, Director, Recreation, Culture and Communications, Outcomes Advice Unit Mr Terry Walford, Assistant Director, Recreation, Culture and Communications, Outcomes

Advice Unit Mr Mark Munro, Finance Officer, Industry Sector, Output Purchasing Unit Ms Louise Seeber, Director, Industry Sector, Output Purchasing Unit CHAIR—I hereby declare open the public hearing of the Senate Environment, Communica-tions, Information Technology and the Arts Legislation Committee continuing consideration of additional estimates in respect of the year ending 30 June 1999. The committee will continue its consideration of the Communications, Information Technology and the Arts portfolio with subprogram 3.6, National Office for the Information Economy, and subprogram 3.7, Office for Government Online. I welcome the minister, the Hon. Richard Alston, and officers from the Communications, IT and the Arts portfolio. I remind the committee that departmental officers should not be asked to comment on the reasons for policy decisions or the advice they may have tendered in the formulation of policy, or to express a personal opinion on matters of policy. Senator Alston—Could I just clarify one small matter before we start. On the last occasion under subprogram 1.4, I was asked why I and Minister McGauran did not attend the Third National Performing Arts Conference in Sydney, and my answer—on advice—was that we did not receive invitations. You will be pleased to know that some people pore over every word of the estimates. The conference administrator promptly wrote in— Senator PAYNE—As they should, minister. Senator Alston—I am sure you all do, but I thought you would like to know if the public do as well. Senator MARK BISHOP—You did receive an invitation. Is that what you are saying? Senator Alston—Apparently I did, yes. Senator MARK BISHOP—And you misled us? Senator Alston—I did, yes. You were seriously misled, but it was entirely unintentional. The facts are that they were advised on 8 December that I would be overseas on 16 January, which was when the conference was, and they did then invite Mr McGauran. The conference administrator says that he was unable to accept the invitation at short notice, but my information is that he was asked to speak on Australian content, which he said was not an issue of responsibility for him, and therefore he declined, so even now there is perhaps some slight difference as to why he was not there. Anyway, I can confirm that neither of us were there, but we both received invitations, and that is the reason. Mea culpa! CHAIR—Thank you, Minister. We will now deal with program 3.6.



[8.13 p.m.]

Program 3—Broadcasting, online and information technology Subprogram 3.6—National Office for the Information Economy

Senator LUNDY—Dr Twomey, it is a pleasure to have you present at estimates this time around. I just want to turn to NOIE's role initially, before I get into specific areas. I am attempting like crazy to familiarise myself with NOIE's place within DOCITA, but perhaps, Dr Twomey, you could just take half a minute and describe the relationship between NOIE and the department and the formal linkages that exist between NOIE—whatever it is now—and the department itself.

Dr Twomey—Senator, as you know, prior to the election the National Office for the Information Economy was established as a separate entity with a separate board. With the government changing administrative arrangements after the election, the national office has retained its separate identity but it has moved and integrated much more with the department. Basically, it has been tasked with looking at the strategic implications of the convergence between telecommunications, IT and to a degree broadcasting and looking at the issues that fall out of that.

The office, therefore, has a strategic policy role. It also coordinates a lot of the international aspects for DOCITA, and has a big role also in terms of public awareness, as it had previously. There is a further integration with different parts of the department—for instance, it is fully interlinked with the executive of the department, and with the Office for Government Online, but it still retains its separate nature because it is targeting a specific audience, if you like.

Senator LUNDY—And since the machinery of government changes post-election you have had a certain number of staff appointed to NOIE. Has that changed within this new framework, or is it still the same group of people working together?

Dr Twomey—The same group of people are still working, and there have been additional people who have joined the national office. Ms Holthuyzen actually has the numbers spe-cifically.

Senator LUNDY—Perhaps if you could just provide that on notice rather than go through the intricacies now.

Ms Holthuyzen—I can just do that briefly. NOIE had on board at the end of last year about 30 people, which was its original idea of how many people NOIE would have. About 12 or so people have come into the organisation from the industry department—they did some e-com-merce matters—and about 16 or 17 people have come from the trade and development branch that used to sit inside the telecommunications division, which now has its broader international role. All up, NOIE has got about 65 people now. There have been three or four new positions created.

Senator LUNDY—In terms of your relationships with other departments, particularly in the area of IT industry development, what is the extent of your liaison, for example, with sections like the Office of Asset Sales and Information Technology Outsourcing? We are aware, Mr Stevens, of the two officers that are seconded from Mr Sutton's area across to OASITO, but I am just exploring if there is any relationship with NOIE itself.



Mr Stevens—Not directly. The relationship is through the area we talked about last week. That is where the IT industry development function has been centralised.

Senator LUNDY—What about in a policy sense? Mr Stevens—I guess in a policy sense it does touch on a whole range of different areas. For example, Dr Twomey's role as investment facilitator is very important for the IT industry. So in a policy sense, when we are looking at, say, the IT industry development, we would tend to involve people from NOIE, people from the old industry department, and people indeed from the Office for Government Online. In other words, we try to draw together all the strands.

Senator LUNDY—So what is the framework within the department for drawing together those strands of common interests in industry development? Mr Stevens—We do it a number of ways. In many cases, it is done on a reasonably ad hoc basis in the sense that we might get a small task group together to talk about an issue, but more formally we have an executive management group which comprises Dr Twomey, Ms Roper, me, Ms Holthuyzen, Dr Badger and Mr Blewitt. We meet formally every three or four weeks and look at some of these more strategic issues. Senator LUNDY—What do you call that group? Mr Stevens—An executive management group. Senator LUNDY—Is that specifically for industry development? Mr Stevens—No, sorry. It reaches across a portfolio. It covers Y2K, it covers industry development, it covers many other issues as well. Senator LUNDY—Do they meet every month or so? Mr Stevens—I think every three weeks, yes. It is early stages yet. Senator LUNDY—Do you see that process as developing over time as the IT role within DOCITA is developed? Mr Stevens—Yes, very much so. I think we see it as very important. We can actually use all the areas of the portfolio when we are looking at the IT industry because they all impinge upon its performance. Senator LUNDY—Minister, given that procurement or purchasing of IT&T commodity services in the Australian marketplace is constituted up to the level of 40 per cent by government purchasing, how important do you see the IT outsourcing program to industry development? Senator Alston—Clearly it is an important factor by sheer weight of demand. It obviously generates opportunities for a lot of players who would not be there if government was not a major purchaser. Senator LUNDY—Minister, you would be aware that, leading up to this point, there has been a lot of public discussion about the IT outsourcing program and the perception that it excludes the involvement of Australian companies at the primary contractor level because of the way it is structured. I am interested in not only how that view has either been expressed in your capacity now as IT minister but also what opportunities exist for Australian IT industry representatives to pursue their cause within the framework of your department. Senator Alston—I do not think there is a great capacity to do that because there is a clear line of demarcation. That is not my area of responsibility so I do not follow the day-to-day



complaints that people might have or the refinements that might be made to the system. I might read the odd newspaper article but beyond that it is not really a matter for me to focus on precisely how it is going or what impact it might have. I assume that people who might have suggestions or complaints do not generally come to our department at all—except insofar as industry development is concerned, but I assume you are not talking about that. Senator LUNDY—I am talking about that, yes. Senator Alston—You are? Senator LUNDY—Yes. Senator Alston—It is not exactly an onerous— Mr Stevens—We do have people who are obviously interested in talking about the issues with us and we are always talking to people, yes. Senator LUNDY—Let us focus on the advisory council that you have established that brought together the previous NOIE board. Was is it called—the Information and Industries Advisory— Senator Alston—The Australian Information Economy Advisory Council, AIEAC. Senator LUNDY—I would presume that body is a forum in which industry development issues are raised on a reasonably regular basis. Senator Alston—There has only been one formal meeting of the full council. Dr Twomey—One of the areas which has been raised by the council is the issue of entrepreneurship and barriers to entrepreneurship in the industry. That is certainly one of the areas they are looking at. Senator LUNDY—Has it been expressed that they see the IT outsourcing program and the way it is currently structured as one of those barriers? Mr Stevens—I think in many cases their concerns go to some of the concerns about skills in the IT industry. That has been an issue which has— Senator LUNDY—No, I do not really want to get into the other issues. Mr Stevens—But this is what the council spent time on at the last meeting, in regard to their concerns about industry development. Senator Alston—It was not on our agenda, and I do not recall it being raised. Mr Stevens—So outsourcing was not discussed. Senator Alston—We have only got a small component, being the industry development, and that was apparently not a concern. Senator LUNDY—In terms of the IT outsourcing program, Minister, do you think there is a role for your department or NOIE in having a say about the industry development components of the IT outsourcing program? Senator Alston—Yes, we have been given that responsibility since the election. Senator LUNDY—The industry development— Senator Alston—The industry development component of IT outsourcing, but, apart from that, everything else is the responsibility of the minister for finance— Senator LUNDY—I presume you are talking about the two officers that have been seconded, or is there another linkage? Minister, I am making it really easy for you.



Senator Alston—I am being reminded that I was not here when you discussed it last week so it is a bit hard for me. I confess I did not read the Hansard. I do not quite know what you are asking me to add to. Senator LUNDY—Can you tell me what the linkages are with the department, be it NOIE or elsewhere, and the IT outsourcing program industry development aspects? Senator Alston—Industry development is our direct responsibility. Senator LUNDY—How is that expressed in terms of the officers? Senator Alston—Whose functional responsibility is it? Who brought people over from the industry development—

Mr Stevens—We explained this last week, Senator. There is a group within the department. A number of officers are in fact located within the office of asset sales. Senator LUNDY—Do they have any role in the expression of policy in their capacity in OASITO? Mr Stevens—Yes, they do. In regard to the development of our policy on the IT industry, yes, we do draw on their expertise. Senator LUNDY—In evidence we have heard from OASITO a description of those two positions as the equivalent to executive levels 1 and 2 now. Is that the former SOGB and C? Mr Stevens—Yes, I think that is probably right. Senator LUNDY—You should know, Mr Stevens. Mr Stevens—No, it is many years distant since I was there. Senator LUNDY—How are the views of your department expressed through those positions? I am asking you that quite explicitly because evidence heard earlier this evening from OASITO leads me to believe that in fact there is little opportunity for expression of view other than that it is a structured program of evaluating ID components of those bids and it is quite isolated in that defined and specific role. My interpretation of the evidence heard is that there would not be the opportunity for an expression of policy or direction outside of a very narrow brief. Mr Stevens—It is not just those officers concerned. Dr Badger sits on a more senior steering committee which looks at the industry development aspects of the outsourcing. Senator LUNDY—Yes, the options committee it is called. Mr Stevens—Thank you. It is not just those two more junior officers who are involved. There is a more senior officer involved. I have not seen the evidence to know. I am very happy to have a look at it to try and give you some written advice as to how we see ourselves interacting with OASITO on this issue. Senator LUNDY—Thank you, Mr Stevens. That would be useful. Does NOIE have any formal consultative mechanisms with the IT industry, particularly looking at the Australian businesses in IT? Dr Twomey—There have been to date three specific forms of consultations I would draw attention to. The first would be in the lead-up to October, or actually up to November. I, some of my staff and the then board of the national office held consultations in every capital city in Australia with members of information economy—it is broader than IT—related businesses. In that process we spoke to, I would say, at least several hundred businesses. The second form of



the consultation has been around feedback to the national strategic framework for information economy. The third one, and probably the most significant, is the government's established Information Economy Council which has a significant number of IT executives on it. Senator LUNDY—Yes, I noticed. The round of consultations that occurred last October-November, can you provide the committee with the date of each of those consultations and just a general description of the forum? Dr Twomey—I can take that on notice and we will provide that. Senator LUNDY—Of those, how many were held before the election as opposed to after the election? Dr Twomey—The program was to reach each capital city, the state's capital cities, and I think with the exception of Hobart it had been completed before the election. So Hobart was held after the election. Senator LUNDY—Would there have been any relationship with the timing of that program and the federal election? Senator Alston—I think it was set well before the election ever was announced. Senator LUNDY—I thought you would say that, Minister. Senator Alston—The board set the time. I doubt that they were privy to the Prime Minister's inner thoughts about the likely date for an election, so they probably had as much knowledge as you and I did. Senator LUNDY—What consultants are currently engaged by NOIE or by the department in relation to IT? Mr Stevens—Can I take that on notice, Senator? Senator LUNDY—Are there any significant ones that you could take a swing at? Mr Stevens—No, we would have to take that on notice. The IT people are not here tonight, they were here last week, so many of them would in fact be from that area, if there are any. Senator LUNDY—I see, from Mr Sutton's area. Mr Stevens—Yes, that is the group that probably would admit any consultancies. Senator LUNDY—So NOIE would not take on consultancies? Mr Stevens—No. Senator LUNDY—Could you provide details as to the brief for each of those consultancies, the value of their contracts and duration? Mr Stevens—Certainly. A number of them we probably would have inherited from the previous industry department in fact, but we will certainly provide those details as well. Senator LUNDY—Yes, that would be useful. To what degree has NOIE been involved, or indeed the department, in the development of the `new silk road' publication? Dr Twomey—We have been involved in some minor way as being one of a number of places around Canberra which was asked to make some comments on drafts, but that is the full summation of our involvement in that direction. Senator LUNDY—You have just commented on drafts progressively. Dr Twomey—Yes.



Senator LUNDY—I would like to move now into a couple of specific areas that NOIE, I presume, have been involved with. One in particular is e-commerce and the progress of that particular issue. I refer back to the joint statements of last year on the bilateral agreement between Australia and the US on e-commerce, and note with interest the fact that it did state it was a bilateral agreement between the two countries. A couple of pages on e-commerce were circulated at the time that had `Agreement between Australia and US' written on it. Is that the agreement or is there a more substantive document that constitutes the arrangements that were entered into at the time? Dr Twomey—The complete nature of the arrangement now is a seven-page document which was released at the time by the Prime Minister and the President. Senator LUNDY—So I am presuming that the government circulated it at the time. Dr Twomey—That is right. Senator LUNDY—Minister, at around that time I sought information from you specifically relating to details of that particular agreement and they were not forthcoming. Senator Alston—You sought information from us? Senator LUNDY—From you in question time. Senator Alston—Oh, in question time. Senator LUNDY—And it was not forthcoming. I would just like to pursue some specifics in relation to this bilateral agreement. First of all, does that agreement in any way call up or make specific reference to more substantive documentation produced by either the US government or an international organisation such as the OECD? Senator Alston—It certainly talks about WTO and developments in international fora: Recognising that bilateral cooperation can complement often the essential multilateral frameworks, Australia and the United States will:

. . . . . . . . . B. Cooperate closely in relevant international fora to support the growth of and access to global e-commerce; these may include, for example, the WTO, WIPO, OECD, UNCITRAL, UNCTAD, and APEC. Senator LUNDY—So it said it may include elements of those. Senator Alston—Yes. Senator LUNDY—Can you tell the committee exactly what the government has committed Australia to with respect to an e-commerce framework as a result of that bilateral agreement? Senator Alston—These things are of their nature not quite like binding legal agreements. They are more an indication of a joint approach or a willingness to usually share information but to cooperate in various areas where there is usually a commonality of view to start with. So I do not think you will find anything there that you could sue on for breach. We state: . . . agree on the following approaches to key areas of electronic commerce and information economy . . .

A: Rules for the taxation of the Internet and electronic commerce should be neutral, efficient, simple to understand and should promote certainty.

They are at one level pretty trite but nonetheless there may be others who do not wish to commit themselves to even those basic principles. We go on to say: . . . will cooperate closely to ensure effective and fair administration of their tax systems in relation to electronic com-merce, including prevention of tax evasion and avoidance.



I would not have thought there was anything controversial about that. There would be if we did not, I suppose. We continue: In support of this the Australian and US national tax authorities should continue to consult and cooperate on the taxation issues associated with electronic commerce in international fora, such as the OECD and other bodies . . .

So there is really nothing there that specifically identifies a preferred taxation mechanism or canvasses some of the things that are discussed, both bilaterally and multilaterally, about collecting sales tax at the point of sale or point of purchase. I think you will find that the rest of it is in the same fairly broad terms. There may be some other instances, which I obviously cannot pluck out of nowhere without looking at the document, that are a bit more specific but that is the general flavour of most of these in the joint statement. The introductory statement is that we both: . . . believe that the growth of the information economy is a significant and positive development . . . These benefits should accelerate economic growth . . . This joint statement is being made in order to accelerate the development of e-commerce by:

.providing certainty and building confidence . . .

.facilitating progress in key areas . . .

.promoting a dialogue . . .

So it is more an indication of a willingness to work together to address a number of these issues. The reality is that most countries are still grappling with the way ahead because this is all greenfield stuff. The significance of an arrangement such as this is that at least you have two countries which are prepared to make the running to the extent that these matters are not being progressed in multilateral fora and, where they are, to give a lead to a certain extent. It is not in any shape or form pre-empting a particular policy prescription or locking Australia into any specific approach that we would have to put into legislation, for example. It is meant to be an indicator of goodwill to address these issues as quickly as we can. Senator LUNDY—Minister, the term `bilateral agreement' gives a strong indication of a degree of formality— Senator Alston—Well, it is headed `Joint statement'. Senator LUNDY—between the arrangements of two countries. Can somebody at the table, if not yourself, provide the committee with a definition of what constitutes a bilateral agreement? Senator Alston—But where do you get that term from? This document is headed `Joint statement' and I read the recitals and the purpose statement. It is not a bilateral agreement in the normal use of that language. It might be an agreement to cooperate. Senator LUNDY—Minister, can I suggest you investigate not only the Hansard for yourself but also the joint press release that was released at the time. Senator Alston—I am not saying it is not a bilateral agreement but this document, on its face, does not describe itself as that. Senator LUNDY—But publicly you described it as a bilateral agreement. Senator Alston—I suppose that is shorthand for— Senator LUNDY—It is misleading, Minister. You are misleading the Australian public because `bilateral agreement' implies a degree of formality way beyond what you have just described, which is little more than, like you say, an expression of common interest.



Senator Alston—It is an agreement. We both have certain shared beliefs. Senator LUNDY—But what has been agreed? Senator Alston—We agree to accelerate the development of e-commerce in both countries by providing certainty, et cetera. Senator LUNDY—Minister, you have stated that in your own strategic framework. You have stated your intent clearly. What is the purpose of calling the arrangement with the US that you have described a bilateral agreement? Was a document specifically signed between the Australian government and the US government in relation to this matter? Senator Alston—There are no signatures. Senator LUNDY—Nothing was signed? So it is not a bilateral agreement. Senator Alston—It depends how you use the term `agreement'. Senator LUNDY—It certainly does. Senator Alston—You can use it as something under seal or a deed between parties with signatures being cross-verified. You can have an informal oral agreement to go down the street together. There are whole levels of formality, if that is the term you use. It is not a misuse of the term `agreement'. It is simply a low level agreement on the scale of what might be legally binding. This is not anything other than a political agreement as opposed to a legal agreement. Senator LUNDY—So it has no legal status? Senator Alston—No. Senator LUNDY—No legal status? Senator Alston—No. Senator LUNDY—But you were prepared to allow the Prime Minister to make a public statement that a bilateral agreement had been entered. Senator Alston—That may well be a convenient shorthand term but I have not had anyone saying to me, `Where is the legality in all this? Will you sue for breach?' The concept does not arise. If you have two heads of state prepared to agree on something, no-one says that is enforceable at law. Senator LUNDY—Minister, it is looking like the public statements associated with the release of this joint expression or view were designed to create the perception that the government had a far greater grip on e-commerce than in fact you actually do, and that you have misled the Australian public by claiming that this mutual expression of view is in fact a bilateral agreement therefore falsely giving the impression of confidence particularly to the Australian business community about your relations with the US on this matter. CHAIR—What is the question? Senator LUNDY—I am just interpreting proceedings as we go along, Mr Chairman. CHAIR—We are here to ask questions. Senator LUNDY—Just going back to the basis upon which that public statement was made, what documentation from the US government and indeed President Clinton, who was cited in this statement, do you have? Dr Twomey—Senator, my understanding was that the document itself was released by both parties at the same time. It was an Australian document but named by both parties as a joint



statement with agreed phraseology. It was referred to by the President in a speech he was giving that day and there was a press release released by— Senator LUNDY—Is this the speech he gave on 30 November 1998? Dr Twomey—That is right. Senator LUNDY—Dr Twomey, perhaps for the committee's benefit you can describe the context in which Australia rated a mention in that speech? Dr Twomey—I am informed the press release was only from our side. There was no press release from the United States. Senator LUNDY—Did you draft the joint statement press release? Senator Alston—No, the press release was a joint statement. Senator LUNDY—Sorry, did you draft the joint statement?

Senator Alston—There was no joint press release, but you are saying this joint statement? Senator LUNDY—Yes, who drafted the joint statement? Dr Twomey—The drafting of the joint statement was a process backwards and forwards between various parts of the Australian government and various parts of the US government over a period of time to an agreed set of words. It is quite a common practice. Senator LUNDY—Can you tell me who within the US administration you dealt with? Dr Twomey—I would probably have to take that on notice to give you a full set of names. The major figure who coordinated it at the United States level was Ira Magaziner, the then Chief Policy Adviser to the US President. The coordinating agency in Australia was the National Office for the Information Economy. Senator LUNDY—Did you handle that process, Dr Twomey? Dr Twomey—I oversaw it. It was actually handled by my colleague, Mr Tom Dale, who is here as a witness as well. Senator LUNDY—Are you able to, for the committee's benefit, describe the context that Australia was mentioned within the speech by President Clinton on 30 November? Dr Twomey—I would only be going from memory, Senator. I have not read the speech for some time. If my memory serves me correctly, the President referred to it in the context of the success which he thought his administration was achieving in being engaged in international dialogue on this sort of issue. Senator LUNDY—Can I refresh your memory? It was in fact the 16th paragraph of the President's speech and it goes like this: This year 132 nations followed the U.S. lead by signing a declaration to refrain from imposing customs duties on electronic commerce. We reached agreement supporting our market-driven approach with the European Union, Japan, and other nations. Today, the Australian Prime Minister and I will issue a joint statement along these same lines. Working with Congress, industry, state and local officials, we passed a law to put a three-year moratorium on new and discriminatory taxes on electronic commerce. And again, I thank Secretary Rubin and Deputy Secretary Summers for their work on that.

That is what you based a bilateral agreement public statement on, Minister? Senator Alston—Is that what I based a statement on? Presumably his speech was made on the basis of the joint statement already agreed upon.



Senator LUNDY—The context in which your government presented the announcement of this bilateral agreement on e-commerce was that it was something relatively unique and important for Australian business and the community in general. Yet we find, when we actually source the context of the President's comments relating to it, that it is along with 132 other nations—certainly the European Union, Japan and other nations—with respect to this joint statement. He does not describe it as a `bilateral agreement'. He describes it, as you correctly did, in being little more than a joint statement, a commonality of intent. Senator Alston—The way you read it there—and I have not read it—he is only drawing out the part that relates to the taxation regime and the agreements that have been reached. That is the prerogative of political leaders around the world, to draw on a particular aspect of the document that they regard as important at the time. It may carry a lot less weight with a US administration that has been at the forefront of many of these issues for a long period of time. They have previously signed a bilateral arrangement with— Dr Twomey—Three or four others. Senator Alston—I remember when Magaziner was here there had only been one, hadn't there? So these things were evolving. To us it may carry more weight than it does to him be-cause he is dealing with a multitude of regimes and they are attempting to set the pace. The political facts of life are that a lot of what occurs in relation to the Internet and online activities emanates from the US. It is understandable that they might not see this as being the biggest event in the political calendar, whereas for us it might assume much greater prominence. We are not misleading. It is something a reflection of the—

Senator LUNDY—Does it constitute a bilateral agreement in the standard definition? Senator Alston—We can sign an MOU with Indonesia tomorrow. Senator LUNDY—But does it? Senator Alston—They may think it is a huge deal, a real coup to get Australia on board. They might make a big statement on it. It might be front page in the newspapers. Back here our media might think, `Ho-hum, another MOU,' and it gets no run at all.

Senator LUNDY—It is not a question of media interpretation. It is a question of the formality.

Senator Alston—But that is no reflection. You would not say the Indonesians are being misleading or overstating the case. It is simply an indication of the relative political significance that each party attaches to the document. They will present it in a context and if there are other major issues around it they might swamp it. If it is a quiet news day it might get a big run. It does not detract from the fact that the administration and the Australian government entered into a joint statement. We regard that as a significant step forward. I think they would feel it was another notch in their belt. You do what you to do with it politically.

Senator LUNDY—Does it qualify under a definition of a bilateral agreement? Senator Alston—I have just told you. CHAIR—Senator Alston has covered that point. I think he has made the point and we should move on.

Senator Alston—If you are asking me if it is a binding legal agreement, the answer is no. It never purported to be.

Senator LUNDY—Except in your public statement.



Senator Alston—If you think that the masses out there immediately jumped up in front of their radios and televisions and said, `By God, this mob has just signed a binding legal agreement with the US,' then I do not think you would have too many mates. They would see it as another political statement about some arrangement entered into between two governments.

Senator LUNDY—The point has been adequately traversed, Minister. The actual substance of the joint statement refers to `several international fora in which e-commerce was traversed in a very wide ranging way'. A number of the issues were certainly within the majority of those fora but I would like to refer specifically to the OECD e-commerce ministerial forum held in Ottawa.

That forum provided a whole series of documentation relating to taxation frameworks for e-commerce. My question previously to you without notice during question time related to: to what degree Australia had committed itself to the OECD path of managing a taxation framework and the conditions thereof with respect to e-commerce.

Senator Alston—Dr Twomey was there and I was not. Dr Twomey—I was not there either. Mr Dale was there. Senator Alston—We had other major distractions at the time. In broad terms you would say that we are wanting to play a role in the OECD. We would generally be happy with the path down which they would be going on a range of issues but, as often happens, there can be divergences between the US and Europe. That can mean that you will not always be satisfied with an OECD compromise. It depends on the precise issue you are talking about. Senator LUNDY—I will come to the specifics, Minister. Basically a lot of the documentation relating to taxation framework conditions emanating from that conference relates specifically to the impact on consumption taxes in an e-commerce environment. I have several questions specifically in this area about how the government intends to address the issue of the electronic commerce environment with respect to consumption or VAT or GST type taxes. Have you considered these issues, Minister? Senator Alston—Have I considered what happened in Ottawa about consumption tax? Senator LUNDY—No, have you considered the impact on the GST as we move into an electronic commerce environment? Senator Alston—Other than reading the occasional article on the subject, I have not. Senator LUNDY—Minister, the OECD documentation on this area specifies a series of guidelines about how they advocate consumption taxes should be dealt with in an e-commerce environment. Are you familiar with those? Senator Alston—No. Senator LUNDY—Can I take it from that that despite the joint statement and references to different fora like the OECD, in fact the government has not come to any degree of determination of specificity in relation to e-commerce and the taxation framework conditions? Senator Alston—Yes, I think that goes for every country in the world. It is still very much an evolving issue. To the extent to which downloading of electronic material bypasses the normal revenue collecting arrangements, everyone is going to be reserving their position even though they might say they are not in favour of using it for revenue raising purposes and they do not believe in bit or transactions taxes. There will always be a degree of hesitation because you cannot afford to have substantial leakages through revenue.



Senator LUNDY—Minister, the OECD has gone quite a way down the track about defining how they would see an international approach, a common approach to the handling of consumption taxes. They have of course provided for an ongoing agenda to address outstanding matters but I would like to know whether one issue is currently being considered—that is, the OECD recommends that for the purposes of consumption tax certain categories of goods be exempt. In terms of your broad statement and commitment to following the path of the various international fora, are you aware of the implications of that particular OECD recommendation on the government's proposed tax plans and GST? Senator Alston—It is really not my area of responsibility to be examining those matters in terms of the design of tax changes. I have every reason to think that Treasury and Taxation cer-tainly are crawling all over them. There were representatives from the tax office at the Ottawa summit, for example. I think we have generally kept ourselves pretty much up to date with international development but it does not mean that my department needs to be separately inventing the same wheel. Senator LUNDY—However, Minister, in terms of your willingness to make joint statements with various international partners, you seem to be acknowledging your willingness to proceed down a certain policy path. Senator Alston—I think I read this out earlier but in terms of taxes they are essentially a series of motherhood statements: Rules for taxation on the Internet and electronic commerce should be neutral, efficient, simple to understand and should promote certainty. Governments will cooperate closely to ensure effective and fair administration of their tax systems . . . including prevention of tax evasion and avoidance. In support of this the Australian and US national tax authorities should continue to consult and cooperate on the taxation issues associated with electronic commerce in international fora . . .

That does not commit anyone to anything. Senator LUNDY—No, but are you aware of the position taken by the US Department of Commerce, for example, on that issue? Senator Alston—Congress itself resolved on a three-year moratorium. Senator LUNDY—No, specifically on the issue of exempting certain products from a consumption tax in the USA? Senator Alston—No, I have not followed that debate. It is not directly germane to my responsibilities. Senator LUNDY—Are you aware if that clause you just read out reflects very closely the expression of view contained in the OECD documentation, arising out of— Senator Alston—I do not think anyone has reached anything like a concluded view on anything. This is an evolving area. It has huge implications. No-one quite knows precisely where e-commerce is going to go and how it will go. To the extent anyone has a concluded view, it will probably turn out to be wrong in six months time, so they are all treading fairly warily. Whilst it is not actually costing them revenue then I do not think they feel there is a dramatic urgency. Clearly you have to be ready to respond but I do not think anyone is advocating fundamental change be introduced now. I have heard Ira Magaziner talking about the approach I referred to earlier, where you impose the burden on the purchasers jurisdiction, but I am not even sure where they are on that now. I know he was going to be discussing it in OECD.



Dr Twomey—Senator, in that speech you referred to earlier, which was a report by the President to the nation on a 12-month work program that the whole administration had actually achieved, he set a series of targets for the United States government. One of the four things they had tasked the US administration to do this year was to run a very major exercise trying to examine taxation policies. So our understanding is that the US is far from coming to any conclusions whatsoever on its own position on the tax. The OECD documentation referred to is simply proposing general principles for governments to consider, but I think there was a clear understanding at Ottawa, before and after, that there were no conclusions made by anybody about what the so-called answer was. It was just principles to consider. Senator LUNDY—Perhaps Dr Twomey can advise me whether, for the purposes of a consumption tax, the US has decided to exempt digital or intangible products from the definition of `a good'. Dr Twomey—I could take that on notice, which is probably the best way to put it in giving you an answer. CHAIR—It is best to take it on notice, Dr Twomey, if you do not have the right answer. Senator LUNDY—The draft Electronic Transactions Bill has been released for comment. Does that bill in any way address taxation framework conditions for electronic commerce? Senator Alston—No. Senator LUNDY—Why not, given that it is the focus of the joint statement between yourself and the US government? Senator Alston—For the reason I indicated earlier, because no-one is yet at a point where there is any need for legislative changes to be made to the current regime. We are still in the exploratory stage. We are still all considering the way in which technology is changing, the way in which goods are delivered. Goods are being ordered electronically but in most instances delivered physically, and to that extent you can still attach sales taxes at the point of sale. It is only when you start to get people downloading music, CDs, that you might start to get serious problems. When that arises then I am sure it will hasten the political will to do something about it. But we are not about to unilaterally establish a new tax regime, for the simple reason that we do not have confidence about what the appropriate approach should be. Senator LUNDY—Given that you are, in fact, trying to establish a new tax regime for Australia with the GST proposal, what level of investigation has been conducted by NOIE about how that is likely to be affected as e-commerce increases? Have there been any studies or research analysis by the department? Senator Alston—I do not know that it would be necessary for us to be doing that, but I think Treasury would be looking at all contingencies. Senator LUNDY—But surely, given your role in establishing joint statements, expressing a view on matters relating to tax as a result of those statements, and several expressions of view within your strategic framework, you should ensure as we move towards an information economy and facilitate electronic commerce that all is fair and equal. Senator Alston—We will, but we have had 60 years to realise that the current tax system is outmoded and ramshackle. It is only now we are getting around to doing something about it. We have not yet got the legislation through the parliament. We have not had a chance to see how it will work, let alone impact on electronic commerce which may have moved on quite considerably by the time the GST is in operation. We will be monitoring it closely. If we think



there is a need for us to start making recommendations to Treasury or changing the rules of the game then we will be ready to do that, but it is premature at this stage. Senator LUNDY—So you are not doing any study at the moment. Senator Alston—There is nothing to study—the possible impact of a GST that has not even got through the Senate yet? If you give us a bit of certainty that that might occur we might be prepared to do some work right now. Senator LUNDY—Have there been any other joint statements, bilateral agreements or MOUs with any other country in relation to electronic commerce? Senator Alston—No, not with e-commerce. We do not think there is anything already in existence or in the pipeline in relation to e-commerce, but there are two MOUs in relation to IT with Singapore and Hong Kong coming up shortly. Senator LUNDY—So they have not yet been signed. Do they get signed? Senator Alston—Hong Kong has been signed. Singapore will be signed next Monday. Senator LUNDY—What did those MOUs traverse? Ms Roper—The MOU with Hong Kong and Australia was between the Chief Executive of the then Office of Government Information and Technology in Australia and the Broadcasting Bureau of the Government of Hong Kong Special Administrative Region of the People's Republic of China. It was on cooperation in information technology. Essentially it dealt with areas and forms of cooperation in IT between the parties that might take the following forms: exchange of information on IT, with encouragement of liaison with other government agencies; encouragement of liaison with industrial, academic and professional organisations; facilitation of trade and technology activities. I have summarised that a little. I have not read out all the words but this can certainly be tabled. Senator LUNDY—Yes, please, if you could provide that to the committee. With respect to Singapore, what is the nature of that MOU? Ms Roper—It is somewhat similar. I have not got a copy of it with me at the moment. It has a similar thrust. CHAIR—Are we drifting from subprogram 3.6 to subprogram 3.7 here? Senator LUNDY—I did not anticipate that the Office for Government Online was directly involved with international agreements. So, yes, I guess we are going into that area, unbeknownst to me. CHAIR—I suppose it would be easier to try to conclude one program. Senator Alston—I do not think there is any problem in us giving you copies of those MOUs. Senator LUNDY—That would be most useful, Minister. Thank you. There are no other joint statements requiring signature or, indeed, not requiring signature that you have entered into? Senator Alston—Not even any binding legal agreements. Senator LUNDY—No bilateral agreements, Minister? Senator Alston—Not that I am aware of. Senator LUNDY—Are there any in the pipeline?



Senator Alston—Probably not, but that is because the US is far and away the world leader. From our point of view we would place more store on an arrangement with the US than we would on running around trying to do MOUs for the fun of it with a whole range of other people who in most instances would not be as far advanced as we are. Senator LUNDY—Minister, the European Commission has proposed a legal framework for electronic commerce. There is an EU directive that described initially the proposed framework for that. Is it the government's intention to enter into a bilateral agreement or joint expression of view with the European Union on matters relating to electronic commerce? Senator Alston—No-one has suggested it to me. No, I do not think so. Senator LUNDY—Are there any discussions occurring between the government and the EU in relation to electronic commerce? Senator Alston—I imagine there are, but not in which we are involved. Senator LUNDY—But NOIE is involved? Dr Twomey—I am involved in discussions at an official level but they are on substantive specific issues around domain name administration. There is the ongoing multilateral dialogue that takes place at the WTO between diplomats. That is not standard ongoing procedure. Senator LUNDY—Are you familiar with the nature of the proposed EU electronic commerce framework? Dr Twomey—From what I have seen of the proposed framework communicated from the European Commission's mission here in Canberra, most of what it covers relates to the operation of the internal market for Europe. They are the sorts of things we are already addressing in things like the electronic transactions bill. Senator LUNDY—How do the issues raised within the EU legal framework relate to the provisions in the current exposure draft of the electronic transactions bill? Dr Twomey—At first glance they parallel the sorts of issues we face within our federation, but in terms of issues of common recognition, I think there are very few, if any, issues about common recognition. It is really an internally focused issue about how their internal market works. Senator LUNDY—It is proposed that there be a forum on electronic commerce to be held between the US and the EU in May this year. Are you aware of that? Dr Twomey—I am not aware of the specific forum. I know there is ongoing discussion in a number of arenas between the two. Senator LUNDY—Do you have a watching brief on how the relationship and issues on e-commerce are developing between the EU and the US? Dr Twomey—Through a number of methods the Australian government does keep a very close view on those proceedings. Senator LUNDY—Are you at a stage to be able to say that you are either participating in that conference or will have official representation at that conference? Dr Twomey—Senator, the national office has close and high-level personal contacts with people on both sides of that process, as does the Australian Diplomatic Service in both Washington and Brussels.



Senator LUNDY—How will Australia's interests be represented at that forum, given that it is really the coming together of the two most advanced—in one instance a country and in the other instance the EU—on matters relating to e-commerce legal and taxation frameworks? Dr Twomey—Senator, it is an interesting issue of semantics to describe the European Union as being any more advanced than Australia on these issues. I think on average it is more behind. Senator LUNDY—I think in terms of economic clout they have a certain level of significance. Dr Twomey—That is certainly true. There are two arenas. One is to ensure that the issues that arise and that we become aware of are addressed in other fora where they relate, which is for instance the multilateral fora where reviews are being undertaken on the impact of e-commerce on the Trade in Goods Agreement and the Trade in Services Agreement at the WTO. The second one, importantly, is that the Australian-US joint statement actually provides for a US-Australian dialogue both at a judicial level and a business level. That is a priority for the National Office of the Information Economy this year. We are very confident that representatives of the US government and also the EU understand clearly our positions in many of these areas. CHAIR—Does that cover subprogram 3.6? Do you want to move to subprogram 3.7? Senator LUNDY—Yes, it might be an appropriate time to bring in officers. CHAIR—Can we dismiss subprogram 3.6 then? Senator LUNDY—There might be issues that traverse those that— CHAIR—They will all be sitting in the background. Senator LUNDY—I have just one more issue. I am sure Mr Stevens is going to stick around. Senator Alston—He would not miss it for quids. Senator LUNDY—I know that. I know how much he enjoys it. CHAIR—Mr Stevens is a very dedicated attender of estimates. Senator Alston—He does read the Hansard every time. CHAIR—Yes, Senator Lundy? Senator LUNDY—My question relates to the electronic commerce bill. Has the department had any representations or legal advice that indicate that the Commonwealth has constitutional problems in legislating in relation to electronic commerce? Dr Twomey—Senator, first of all the carriage of the bill was actually that of the Attorney-General's Department, not this department, but my understanding is that there is an agreement by the Standing Committee of Attorneys-General of the process to be undertaken. This is first of all for the Commonwealth to pass its legislation and for the states then to pass similar legislation, as is common in a lot of areas that overlap in the commerce area where there are powers in both levels. Senator LUNDY—Is it an issue of concern? Dr Twomey—I would not describe it as an issue of concern. It is an issue of fairly well-established procedure.



Senator LUNDY—It is an issue that needs to be addressed in terms of jurisdictional application. Senator Alston—It is an issue that has been addressed, but A-G's would not be putting it forward if they had some serious doubts about it. Senator LUNDY—With respect to the exposure draft, I just want to clarify that point, Dr Twomey. For that bill to be passed does the state legislation have to be passed prior to it or subsequent to it? Dr Twomey—The bill relates to activities that are required under Commonwealth jurisdiction and action and Commonwealth administration and legislation. Where activities come clearly under state administration or legislation it is up to the states then to pass their copycat legislation to cover that. Senator LUNDY—It is an issue in terms of the constitutional coverage about the trade in commerce with other countries and among the states, so for electronic commerce within states and providing the framework for that—is that the demarcation with state legislation? Dr Twomey—Similar to things operating in other commercial legal areas, there is this issue where states and federal actually have separable constitutional powers and as a consequence have to pass complementary legislation. Senator LUNDY—Is your plan in that respect to manage the timing of the federal bill to coordinate with all the states? CHAIR—The officers have said it is actually an Attorney-General's Department issue. Senator LUNDY—This is e-commerce. I expect them to know this information. Senator Alston—I think what Dr Twomey has already said is that we are proceeding on the basis that the Commonwealth will pass its legislation and the states will then come in with mirror legislation. Senator LUNDY—Will the federal bill be operational prior to the state legislation coming in? Senator Alston—Yes. It will take effect from the date that it is set to take effect. Senator LUNDY—But for practical application, is its workability contingent on the states passing their legislation? Senator Alston—I do not know that you can actually— Senator LUNDY—Bear with me, Minister. I am just trying to get it clear in my mind about how this bill will weight. Senator Alston—I do not think there is an academic yes or no answer to a question like that. You would have to look at the terms and see to what extent it was dependent upon states passing complementary legislation. Senator LUNDY—Is this something that has not been resolved as yet? Senator Alston—We do not have direct knowledge but we are saying we do not imagine that there could be any problems, otherwise it would not be being brought forward. Senator LUNDY—I am sorry, I felt it was a reasonable assumption that NOIE would be fully briefed as to the application in operational effectiveness of the federal bill in relation to what is being proposed in the states. I think it is a reasonable assumption.



Senator Alston—I think it is a reasonable proposition to say that, once it is passed and proclaimed, it will have full force and effect, but you will need to look at the particular clauses to see to what extent they are contingent upon complementary state legislation. I cannot give you an answer in the broad because I am sure it will vary. Senator LUNDY—Can you take on notice to provide the committee with any legal advice on this matter which has been provided to the department? Senator Alston—We will see what A-Gs can do to assist. Senator LUNDY—Yes, if you do not mind, that would be useful, particularly if it starts impacting upon the government's claims about the effectiveness of this bill and its application, particularly timing issues. People may, in fact, be making business decisions based on your projected time frames and application of this bill. I think it is important information to be made public. CHAIR—Does that conclude 3.6, Senator Lundy? Senator LUNDY—Yes, reluctantly. CHAIR—If you have other questions, you can put them on notice. We will now deal with subprogram 3.7. Senator LUNDY—Some of these issues may overlap. We originally discussed having them in conjunction. [9.20 p.m.]

Subprogram 3.7—Office for Government Online Senator LUNDY—Can you provide a description of the timetable for privacy legislation in relation to electronic material held in private hands?

Ms Roper—Senator, this is probably a question for NOIE to take up. Senator LUNDY—Sorry—no. Ms Holthuyzen—The privacy legislation is aimed I think to be introduced in the spring sittings of parliament.

Senator LUNDY—There have been several public reports about the requirements of the European Union with respect to privacy of personal data. At this stage is it the intention of the government to address specifically those concerns in the EU environment about privacy within our proposed bill?

Ms Holthuyzen—The government has announced a policy position in relation to privacy in terms of the self-regulatory approach plus the default style legislation that was being introduced in Victoria. That is the approach being adopted, and now it is just a matter of working through the development of the legislation and putting it into place.

Senator LUNDY—Does that model you have described satisfy the European Union decision, as I understand it, to only allow trade in that field between countries and European Union member states who have, in fact, passed comparative or comparable laws?

Senator Alston—I think the short answer is that the EU will ultimately decide for itself whether it regards other jurisdictions as having satisfactory privacy regimes in place. There has been a fair bit of noise, as we know, and people saying, `Well, unless you have a very tight black-letter law regime you won't get past the EU.' The Americans have made it plain from the outset that they are not going to go down any such path and these are still matters for political



negotiation. The EU's basis for assessment is fairly unpredictable and will obviously depend ultimately on the extent to which they want to raise the high jump bar. It is hard to believe that they are going to prohibit trade with other nations that have a privacy regime that might not be quite the same as theirs but nonetheless is a pretty fair attempt, given domestic circumstances. We would, I think, be very surprised if the EU took a negative view of our proposed approach.

Senator LUNDY—The purpose of the question was to establish whether or not you were taking their permission into account in the drafting of the bill.

Senator Alston—We are conscious of their formal position. At the end of the day it is up to us what regime we put in place and how they respond to it. We are not going to be out there being provocative. To the extent that they have ongoing concerns, we hope to be able to talk those through, but I am not aware of any EU response to our draft legislation.

Senator LUNDY—Have you circulated draft privacy legislation? Senator Alston—No. We have announced the framework and there would be a capacity for them to—

Senator LUNDY—Have you sought an EU response, view or opinion? Mr Stevens—This is an exercise in which the main characters would be the Attorney-General's Department rather than this department, so there could well be discussions in the Attorney-General's offices and the European Commission which would be—

Senator LUNDY—Just on that point, Mr Stevens, how does DOCITA liaise with A-G's? You are quite right, there are several pieces of legislation that are directly involved in terms of policy development in your department that A-G's have carriage of. How do you manage that?

Mr Stevens—Very closely. We work very closely with them. In some cases we actually have prime carriage of some of the areas where they have a close policy interest as well. So there is a joint shared interest and we work very closely with them. Senator LUNDY—Like the copyright. Mr Stevens—Yes. Senator LUNDY—Just on another privacy matter, there has been some discussion in the media regarding another perspective on privacy relating to encryption policy by the govern-ment. The Australian government apparently signed or re-signed to the Wassenaar arrangement on 14 December. Are you familiar with that arrangement? Dr Twomey, I saw you shaking your head. Can you advise me, in fact, of Australia's relationship to the Wassenaar arrangement? Dr Twomey—Senator, my understanding is, contrary to reports in the press, we actually did not sign the agreement then; the agreement has been signed for quite some time. Under the agreement reinterpretation takes place by the members of the provisions of the agreement. Senator LUNDY—So on 14 December there was a publicly announced reinterpretation? Dr Twomey—Yes, the effect of which was actually to loosen limitations, not to increase them. Senator LUNDY—Given the changing in the arrangements or the changing in the nature of the Wassenaar arrangement—I understand it went from a proscribing encryption beyond 40— Senator Alston—It went from 56 to 64. Senator LUNDY—From 56 to 64, not from 40 to 56? Senator Alston—That is not what I read.



Senator LUNDY—Are there any officers here who are familiar with this machine? Dr Twomey—We would have to take that on notice, I think. Senator LUNDY—Do your best and I will just keep asking questions. With respect to the Wassenaar arrangement, my understanding is that at some point in time the appropriate department within the Department of Defence will interpret those changes to the Wassenaar arrangement and make a determination in relation to Australia's policy or approach to the export of encryption. Can you tell the committee what point that process is at? Senator Alston—Well, it is not our responsibility— Senator LUNDY—No, I appreciate that. Senator Alston—and I do not think we would normally be privy to what they might have in mind. There has always been a general discretion vested in DSD, so I do not know whether they have previously consulted us about it. Mr Stevens—There have been various consultations, but I do not think we could answer the question quite as you have asked it, Senator. Senator LUNDY—In terms of establishing time frames? Mr Stevens—Yes. They are not our time frames, that's all, so it is inappropriate for us to try to put time frames on someone else. Senator LUNDY—Sure. Can you pass the question along and take it on notice and get back to us? Mr Stevens—Whatever we can. Senator LUNDY—Just on that, Minister, the issue of encryption is one that can be approached from a range of policy perspectives, one being the issue of national security, hence the traditional involvement of DSD in managing that policy and providing for permits for exports of encryption software. To what degree has the department or yourself considered the operation of those policies or that approach on the encryption software industry that exists here in Australia?

Senator Alston—Again, it is a moving feast. Some of the articles I have read suggested that one of the reasons that they had actually allowed the bit rate to move up was that people had been putting together a hundred thousand PCs and were able to crack a 56-bit code in a much shorter period than they previously thought, whereas 128, which seems to be the preferred level, is still six months hard work by anyone, even using supercomputers. So I think we would be following international developments. The American industry, as you know, has been very vocal on all this, and I have read suggestions that we are likely to get to a point where national security and law enforcement agencies will basically throw in the towel in terms of bit levels but will simply use other means, presumably direct surveillance. But I do not know that you can say it is inevitably going to go down that path, because it is a pretty sensitive political issue if you suddenly find a gang of international terrorists were only able to operate because they had totally secure lines or software. There would obviously be political pressure to allow code cracking or key lodgment, so I think we are still monitoring progress.

Senator LUNDY—Minister, do you see this as an area of policy that would be more likely to be addressed in the future by NOIE, by the department, given the industry implications about it and the wider considerations.

Senator Alston—We are following the debate now and we will certainly have a view on it.



Senator LUNDY—To what degree are you following the debate? Do you have an active interest?

Senator Alston—Yes. Dr Twomey—Yes, we do have an active interest and ongoing dialogue with the intelligence and crime community on the issue. I would point out, Senator, some clear distinctions which are much more towards industry development vis-a-vis—the United States and Canada. There are absolutely no limitations in Australia on what you can use inside Australia. When it comes to exports, unlike the position in North America, it is a case by case situation here in which ap-proaches are made for a determination. I think some example of how that is proceeding in terms of Australian industry development is RSO's recent investment in Brisbane, where the major American encryption company is investing in Brisbane with experts in Brisbane to export from Australia, where they feel they cannot do so in the United States. So I think the regime here is always having to make that balance, but it is clearly a bit more towards the industry development side than people are experiencing in North America.

Senator LUNDY—Dr Twomey, are you aware of any other permits that have been extended to companies providing encryption products beyond 56 bits at this stage?

Dr Twomey—Again, because it is not our area specifically, no, I am not. That really is the Department of Defence's business.

Senator LUNDY—In terms of your involvement in that process, are you part of the decision making process within DSD?

Dr Twomey—No. The decision making is actually within the Commonwealth Department of Defence. They own that issue. Senator LUNDY—The way the current system works it seems to me there is a high degree of discretion within DSD on who is successful in terms of permit and who is not. Senator Alston—There is an absolute discretion. Senator LUNDY—I suppose I am trying to find out how that impacts upon NOIE in terms of your advocacy of industry growth and the identification of opportunities for growth for the Australian industry sector. Would you like to have control of that policy area? Senator Alston—That is probably not a fair question to ask. Senator LUNDY—I will ask you, Minister. Do you think it would be an appropriate area of policy for your department to have control over, given the industry development implications. Senator Alston—No. We are interested in the right balance in terms of outcomes, and there are clearly competing considerations. If you are saying, `Give it to us because we are more likely to favour the industry,' then you will inevitably pick a fight with someone else who says, `This is a scandalously irresponsible approach you're taking,' and that debate is occurring in the US and other places; it is occurring here. Senator LUNDY—Are you aware of the Walsh report? Senator Alston—The Walsh report. I have read about it. Senator LUNDY—The Walsh report of the review of encryption policy? Senator Alston—I remember it. It is 12 months ago, or more. Senator LUNDY—One of the assertions contained within that report acknowledged I suppose that governments per se were relatively incapable of halting the circulation of



high-level encryption products, and my interpretation is that that undermines the initial justification for export restrictions in the first instance. How does that issue relate back to what you just said about relevancy of policy areas being with certain departments and not with others? Senator Alston—I do not know it affects which department should make the ultimate decision. I do not have a particular problem with responsibility lying where it is, but because there are degrees of difficulty does not mean you throw in the towel. It may mean that you make it a lot more difficult for anyone other than very wealthy individuals who are prepared to pay a fortune. They may be drug runners to whom money is no object, and they may be nonetheless prepared to act illegally and bypass the system, but that is not a good reason why you should generally vacate the field in terms of law enforcement or national security. Senator LUNDY—I would like now to turn to issues in relation to the management of the year 2000 millennium bug problem in the Office for Government Online. On the management of the year 2000 problems and liabilities that the Commonwealth holds, can you provide an explanation as to the current personal liability of Commonwealth officers with respect to year 2000 issues? Ms Page—The liability of Commonwealth officers, Senator Lundy, is not particularly different to the liability that other people in the community face in relation to Y2K issues. They particularly relate to negligent misstatements, the capacity to mislead, the scope for defamation and, for officers working within government business enterprises, some of the possible scopes for liability under the Trade Practices Act. The Office for Government Online has received legal advice on this and we could probably provide that to you on a confidential basis. It is legal advice that was provided for Commonwealth agencies and for its officers. Senator LUNDY—Would that advice have been made available to Commonwealth officers? Ms Page—It was made available to Commonwealth officers on the restricted web site we have, Senator. Senator LUNDY—That would be useful. On the question of liabilities, I heard evidence earlier this evening, in relation to the IT outsourcing program, that certainly one contract that has been let under that program and several other contracts that have been let, transfer responsibility of Y2K remediation to a contract or to a vendor, and that negotiations are currently under way for the request for tender and evaluation process in train on the transfer of liabilities. What involvement does the Office for Government Online have with respect to getting information about the remediation program from contractors or vendors, as opposed to departments themselves? Ms Page—It is really negotiated on a contract by contract basis, Senator Lundy. We provide advice in connection with the negotiation of contracts and assist in the drafting of clauses. There is no single model contract and as the time between now and 1 January 2000 approaches, obviously there are changed emphases in the nature of the types of undertakings that people are prepared to take on. Senator LUNDY—On that basis is it getting harder to insert these clauses transferring liability from the department to the vendor? Ms Page—It is harder to get a vendor to accept a full warranty, yes.



Senator LUNDY—In terms of the contracts currently being negotiated, has your advice been specifically sought by the evaluation teams, the steering committees, on how that should be managed in that evaluation process of tenders? Ms Page—We worked jointly with OASITO during the process to provide advice on particular contracts. Senator LUNDY—What is the nature of that advice? Is it about your requirements and reporting back requirements program, et cetera? Ms Page—It is really about establishing compliance requirements and the definitions of what those requirements could be. It is really a matter for the agency and OASITO and ultimately the outsourcer to work out precisely what the negotiation is on the terms of the warranty that is going to be accepted. We help on some of the definitional aspects. Senator LUNDY—I would like to use the tax office as an example. Currently their tenders are in the process of being evaluated. We heard from the Office of Asset Sales and Information Technology Outsourcing that the timetable is aiming for a May implementation transition phase. Given that that is patently and obviously before 1 January 2000, if that contractor does not include specific responsibilities to be taken up by the successful vendor for Y2K what has the Office for Government Online done in terms of looking at the options of the department's capability to actually continue with the remediation program? Ms Page—That issue, to my knowledge, has not arisen yet. That contract is under negotiation and it will be a matter for the tax office, OASITO and the successful contract winner to negotiate the extent of the transfer of warranty. Senator LUNDY—The recent ANAO report entitled Getting over the line reports back on selected Commonwealth bodies and their management of the year 2000 problem, and several of the audit conclusions relate to progress to date and various weaknesses in the remediation program to date. Specifically reports in this publication indicate that the ATO is midstream in its preparations and remediation program for year 2000 compliance, and the RFT for the IT outsourcing for Tax did in fact include a transfer of responsibility—and, I presume, liability—to the successful vendor. At what point will OGO take an active interest in the outcome or progression of those negotiations in terms of your capability to manage the whole remediation program on behalf of the government?

Ms Page—We would only take an interest to the extent that the Taxation Office's compliance progress fell behind.

Senator LUNDY—I suppose that takes me to questions of what your actual role is with the Y2K remediation process. My understanding is that your involvement is more than just I suppose an overseeing and collation of progress reports to date, that you actually actively advise various departments and agencies on management of the process.

Ms Page—We provide advice on best practice approaches to Y2K remediation. Senator LUNDY—The Office for Government Online manages, from my understanding, several elements of the Y2K process. One of them is the a year 2000 Commonwealth quarterly forum.

Ms Page—Yes, the Office for Government Online runs regular forums for Commonwealth agencies as a means of providing advice on aspects of remediation, aspects of best practice such as—



Senator LUNDY—Is that like an advisory thing? Ms Page—Yes. Senator LUNDY—And the Year 2000 National Strategy Steering Committee? Ms Page—That is a separate exercise. That is a function which previously operated under the industry portfolio. The government provided money last year for the establishment of a national steering committee which would oversee an industry program aimed at raising the awareness of—

Senator LUNDY—So that is a private sector group? Ms Page—It is a committee which comprises Commonwealth, state, territory and industry representatives. It is a broad group chaired by Maurice Newman. It aims to do a number of things, and one is—

Senator LUNDY—Is Graham Inchley involved in that as well? Ms Page—Yes. He is the chief executive officer of the industry program. It acts to raise awareness, principally within business, but in doing that it also aims to coordinate the messages and its activities with the separate ones that are being undertaken by states and industry.

Senator LUNDY—In terms of, I think, the $120 million made available to Commonwealth agencies to help Commonwealth agencies, what proportion of that was allocated to the Year 2000 National Strategy Steering Committee?

Ms Page—None of those funds were allocated. There has been separate funding allocated for the purposes of a national steering committee.

Senator LUNDY—Okay, and how much was that? Ms Page—Just under $10 million. Senator LUNDY—How much of that has been expended to date? Ms Page—I would have to take that on notice, Senator, but I think a little over half, probably. Senator LUNDY—Yes, if you could do that. And I presume there is some sort of an awareness campaign involving that committee? Ms Page—There have been a number of initiatives of the national steering committee. They have run advertising campaigns, they have organised a hotline which the states pay for which enables principally business to get information on where to go for further information on Y2K remediation. They have established a joint register of Y2K products with Standards Australia. They are undertaking surveys of business in conjunction with the Australia Bureau of Statistics. They have run an information campaign on radio. There are a number of initiatives that they are looking at at the moment really based on the information that they got from the recent ABS survey. Senator LUNDY—Is their charter aimed specifically at business, at the private sector, or is it a more general, community campaign? Ms Page—It is principally aimed at raising the awareness of business, and in particular small to medium sized enterprises. Senator LUNDY—With respect to raising community awareness about the issue, what specific initiatives does the Office for Government Online have?



Ms Page—At this stage the minister has been asked to develop proposals for a national communications strategy. Commonwealth, state and territory ministers agreed at a meeting late last year to cooperate in the development of a national communications strategy, and the proposals for that strategy are currently being finalised for consideration by ministers. Senator LUNDY—When will that take place—at the next meeting? Ms Page—That is not necessarily an activity that the national steering committee will be involved in. Senator LUNDY—Sorry, I do not understand, because you just said that it was something that they had collectively decided to do, but now you are saying that it— Ms Page—No, Commonwealth, state and territory ministers with responsibility for Y2K. The national steering committee is principally an officials' body. Senator Alston—You do not have to report back to the Commonwealth-state meeting over— Senator LUNDY—So the steering committee is the one you are talking about that has been preparing that initiative? Ms Page—No, the Office for Government Online has been preparing that— Senator LUNDY—Though in close consultation— Ms Page—on behalf of the ministerial council. Senator Alston—Yes. Senator LUNDY—In consultation with the steering committee. Ms Page—Yes. Senator LUNDY—So how will you fund that? Ms Page—That is a matter for consideration by ministers, Senator. Senator LUNDY—It would not be out of the $10 million provided to the private sector group? Ms Page—That is a matter that ministers have to consider. Senator LUNDY—Is that an option, Minister? Senator Alston—Unlikely. Senator LUNDY—Do you know what the question was? Senator Alston—Yes—will it be funded out of the $10 million budget. Senator LUNDY—Thank you. I was just checking. Is it possible for the minutes of that meeting that determined the advertising campaign or the public awareness campaign to be provided to the committee? Ms Page—Sorry, which campaign? Senator LUNDY—The one you were just describing, the public education campaign for which proposals have been developed. Ms Page—The national steering committee has not made decisions in relation to the community campaign. That is something which the Office for Government Online has been developing for ministers' consideration but they have certainly been consulted in relation to draft proposals.



Senator LUNDY—I would just like to refer to correspondence from your office, Minister, to Mr Joel Fitzgibbon. It states: It was decided that the national office would be responsible for those elements of the marketing program relating to television advertising, national magazines and newspapers and national public relations. In some instances the national office would also be responsible for advertising in major metropolitan newspapers. Regional marketing activities—ie activities primarily within states, including rural areas—were deemed to be the responsibility of the state programs.

That was in the context of the Y2K industry program and the joint arrangements, I presume, arising out of December’s meeting. Is the meeting at which that approach determined the state and federal ministerial meeting in December? Which meeting was it? Ms Page—That would have been one of the meetings of national steering committee—the officials' body. Senator LUNDY—The officials' body? Ms Page—Yes. Senator LUNDY—Can you provide the minutes of that meeting to the committee? Senator Alston—I am not sure whether that is appropriate. If it is, we will get them for you. Senator LUNDY—If it is talking about management of Y2K public education campaigns and dissemination of information, which your correspondence to Mr Fitzgibbon indicates, I cannot see why not, unless you are going to claim some degree of cabinet confidentiality, Minister. Senator Alston—If you are asking the formal basis for that advice, I will see if I can get it for you. Senator LUNDY—It is not advice; it is minutes of the meeting. Senator Alston—Yes, I know, but it is what the officials determined at that point in time. It may not be the last word on the subject. At the end of the day I suppose the government decides how it wants a program to be marketed and what levels of advertising are to be undertaken. Senator LUNDY—Minister, in terms of the determination at that meeting that regional marketing activities will be deemed to be the responsibilities of the state, is that a general approach the government has in relation to public awareness campaigns? Senator Alston—I do not think I can really talk beyond this one instance. Presumably that was thought to be appropriate in relation to this. It does not necessarily follow— Senator LUNDY—But that is a decision you are aware of? Senator Alston—It depends who you are trying to make aware, I suppose. I do not think you can give a general answer. Senator LUNDY—Were you aware of that decision when it was made, or were you advised of it? Senator Alston—I did not have ministerial responsibility so I would not have had an interest in the matter. Senator LUNDY—I am sorry, I thought this meeting took place— Senator Alston—It was a ministerial meeting which took place on 17 December, but the national steering committee decision in relation to advertising was taken prior to the election. Senator LUNDY—What date?



Ms Page—I would have thought the middle of last year, at some stage. Senator LUNDY—Minister, have you revisited this decision since you have taken over responsibility for the portfolio? I say this on the basis that there was numerous criticism in rural and regional Australia about this approach obviously. I am trying to ascertain to what degree you have reviewed it and, indeed, if you intend to change it and allow the federal government to take responsibility for a cohesive campaign that includes rural and regional areas. Senator Alston—We are as aware as you are, I suppose, of the campaign that was mounted by regional newspapers. We will obviously take into account the validity of their concerns in any ongoing program. The matter is under review in that sense. Senator LUNDY—It is under review but I take it there is still no federal campaign happening in rural and regional areas about Y2K. Senator Alston—Any federally funded? Senator LUNDY—Yes. Senator Alston—I think that is right, yes. Senator LUNDY—Do you think that is a responsible approach? Senator Alston—I have not received any advice that is irresponsible. Presumably we will be monitoring progress to date and will be considering the effectiveness of the advertising program already undertaken, and we will be willing to go further if the need is there. Senator LUNDY—Have there been any changes to the government's estimation of Y2K compliance costs across the Commonwealth sector? Senator Alston—For government? Senator LUNDY—Yes, for government. Ms Page—That is measured on a quarterly basis. At the time the quarterly reports are done we keep track of the estimates that departments provide us. At the time of the last report we were still on track in relation to the initial estimate of $600 million.

Senator LUNDY—In terms of the time frame for the next quarterly report I understand that is due on 31 March. Ms Page—The quarterly report is being finalised at the moment and it will be considered by ministers in the second week of March. Senator LUNDY—Yes, we have been traversing issues about that on another front today. The ANAO report cites the approach by the Commonwealth to seek assurances about the continued supply of telecommunications, electricity, water and sewerage services. How is that going? Ms Page—We contact all utility providers nationally, those who provide utility services to Commonwealth agencies, and we post the responses from those on our restricted web site. We are going out again shortly. Before Christmas we had a response rate of about 40 per cent and I am hoping that will have improved this time. Senator LUNDY—What power does the Commonwealth have to actually extract specific information about compliance progress of those effectively state based utilities? Ms Page—It has no legal power, Senator.



Senator LUNDY—What are you doing to encourage the respective state governments to extract that information? Ms Page—At the ministers' meeting of 17 December last year it was agreed that there would be a national approach to the reporting of government Y2K compliance and also that governments would provide information on the extent of compliance of utilities in aggregated form under particular headings. That work is currently being finalised, and the format for publishing that. Senator LUNDY—Minister, with respect to the Commonwealth's overarching responsibili-ties for Y2K compliance, what degree of commitment do you have from the states to put in place more comprehensive public disclosure and reporting back of compliance progress to date? Senator Alston—I thought the mood generally was quite positive. That is the only meeting that has been held to date. There is another one scheduled for April. I think everyone accepted that there would be an increasing need to make more information available on a more frequent basis. Given that utilities are a major area of concern and they are state based, they were all, I think, going to go away and see what they ought to do to make that information public. We regard ourselves as being the leaders in publicly reporting on an agency basis, even in aggregate form. As we move to portfolio and agency reporting, we would hope that the states would follow suit. I do not know that they have committed themselves to doing that, but we may see at the next meeting a greater willingness to get down to the same level of detail. It is patchy and probably not necessary for me to single out states, but the advice I get is that some states are a lot better than others. Senator LUNDY—In terms of the role of the Commonwealth in providing a substantive public education campaign, what opportunity is there for you to embark on such an exercise? Is it your intention to do so? Senator Alston—I certainly have the capacity to embark on a further awareness campaign and I will be looking at whether that should be done. Senator LUNDY—Are you actively considering it at the moment? Senator Alston—Yes. Senator LUNDY—Have you received representations from organisations and industry bodies to proceed down that path? Senator Alston—Urging us to have another awareness campaign?

Senator LUNDY—No, not another awareness campaign; a public awareness campaign. Senator Alston—It is the sort of thing that various organisations and companies and peak councils and local communities are interested in knowing more about. To that extent, I suppose they are urging us to undertake awareness campaigns, but it is not as if there is a huge almighty push out there. We will make a judgment about what we think is necessary. You have to be looking at what the particular levels of concern might be. It is not just a matter of ignorance. There may be some very fundamental misconceptions about the nature and extent of the problem. It is very easy to whip up hysteria on a subject like this. It may be that, ultimately, most of your efforts are designed to hose things down rather than making people more aware of Y2K simpliciter.



Senator LUNDY—Do you think the government has a responsibility to educate the public about the implications or potential implications of Y2K?

Senator Alston—Yes, but we cannot call them all in for compulsory education programs, and if the media is going to be running semi-hysterical lines—

Senator LUNDY—Do you think they are? Senator Alston—I had someone in today who is in a very senior position in the corporate world telling me that he was increasingly concerned about the number of journalists who seemed much more interested in `Shock! Horror! Who's building underground shelters?' and `How much are people storing away?' and all that sort of thing. I imagine there might be a considerable temptation for the media to dramatise the issue. They do it under the guise of saying, `There are reports around the world suggesting that people are doing X, Y and Z,' but they do not ever say that there is a basis for such concerns. That then feeds into the ether, and you may have to address it in such a way that you put a more realistic picture rather than simply urging people to take action.

Senator LUNDY—Given that experience, surely that reinforces the point that you have the responsibility to engage in a proactive public education campaign rather than a reactive one post those types of stories. If you are not putting out information about the reality, then you are prepared to let it deteriorate into a reactive campaign on behalf of the—

Senator Alston—We are doing research right now to see what the level of public awareness is and in what area its concerns might lie, and in due course we will presumably want to address those.

Senator LUNDY—You have engaged researchers for this task? Ms Roper—Yes, we have, Senator. Senator LUNDY—Who is that? Ms Page—I will have to take that on notice. I do not think a company has actually been chosen yet. There is a tender process under way to choose someone.

Senator LUNDY—To conduct research into— Ms Page—To conduct market research, yes. Senator LUNDY—With a view of a public education campaign? Ms Page—With a view to identifying where public concerns are, the nature of those concerns and what the best means of delivery are for any messages to assist public information. Senator LUNDY—With respect to the complaints raised earlier about the lack of federal involvement in rural and regional Australia, Minister, are you able to make a commitment now that you will include rural and regional Australia in that campaign? Senator Alston—It is premature to do that until you have decided that you are going to have a campaign and what the nature of it might be. But we are conscious of their concerns and we will obviously— Senator LUNDY—Be a bit bold, Minister. Senator Alston—I am not going to give any blank cheques to anyone. I am just saying that we may well take an approach that meets their concerns. Senator LUNDY—In principle, Minister, would you exclude rural and regional Australia from a public campaign?



Senator Alston—I would not take a decision in principle to exclude them but, by the same token, it would be quite silly to say that they have a critical role to play if the research suggests that that is an ineffective way of getting the message across. Senator LUNDY—Did it occur to either you, Minister, or the department, or the Office for Government Online, that this research should have been conducted a long time ago? Senator Alston—We can only talk for our responsibility since the election. We think we have moved reasonably well. Mr Stevens—It is also fair to say that, in a sense, people's perception of Y2K is changing as we get closer to the time. So research conducted two years ago would probably not be as helpful as research conducted at this point because people's awareness has changed. Senator LUNDY—Absolutely. I am not suggesting for a minute that you would have conducted it two years ago and not subsequently continued the analysis. I notice that previously the Office of Government Information Technology, and I presume carried over by the Office for Government Online, put out a request for tender. I will read out the requirements: The Office of Government Information Technology, an independent agency within the Finance and Admin portfolio—

as it was then— is seeking quotations from suppliers for consultancy services to conduct third party audits of Commonwealth departments and agencies on year 2000 compliance for the Year 2000 Project Office.

What degree of relevance does that have now? Ms Page—I think arrangements with bodies which were contracted as a result of that tender process have now lapsed. We are now in the process of going out to engage a further body of people to conduct third party audits. We maintain a body or a group of organisations to conduct third party audits where departments seek an independent review of their Y2K compliance or where the Officer for Government Online considers that there would be benefit in conducting a third party audit. Senator LUNDY—For this one here the closing date for tenders is 2 October 1998. That has lapsed and you have a new series. Ms Page—There is a current one that is being finalised at the moment. Senator LUNDY—Is anyone currently engaged as a consultant to conduct independent audits of government departments or agencies? Ms Page—No, there is not, although we have conducted a number of third party audits under previous arrangements, and we will be conducting further ones when this process is finalised. Senator LUNDY—Do you fund those consultancies out of your budget? Ms Page—Yes, and we share the cost of third party audits with agencies. Senator LUNDY—That answers my question. So how does that impact upon the agencies' obligations to report back to you as a coordinator of their quarterly reports to cabinet? Ms Page—It provides agencies with an additional level of certainty that they have undertaken all the processes necessary to achieve compliance, and it would also provide the Office for Government Online and, through it, ministers with a greater degree of certainty that the work had been carried out with integrity.



Senator LUNDY—Yes, that makes sense. With respect to the ANAO report, Getting over the line, there were six departments and agencies involved in that—is that right?—and the Reserve Bank of Australia. Did you in fact organise that? Ms Page—The Office for Government Online participated in the work of the Audit Office, but I do not think we were involved in the choice of agencies, no. Senator LUNDY—Was that audit report an initiative of the ANAO, as far as you are aware? Ms Page—My understanding is, yes, it was a follow-up of an earlier audit that they conducted, which was a much more general one on the level of awareness and the extent to which work had commenced on Y2K issues. Senator LUNDY—There is a range of recommendations in that report to which the Office for Government Online is respondent to, if you like. Can you just give a general overview as to how progression of those recommendations is going within OGO? Ms Page—I think there are about three broad areas which had reference to the office and its practices. There was a recommendation that OGO identify and encourage the application by Commonwealth bodies of best practice in relation to the effective management of year 2000 risks to the supply of essential goods and services. We have agreed with that. We will continue with our current practices of sharing information, particularly in relation to the supply of essential goods and services. We have held a seminar with bodies that are judged as best practice within the Commonwealth to provide advice to other Commonwealth organisations, and we are in the process of preparing a model to assist organisations in checking supply chains. There is also a recommendation that OGO formulate strategies to raise industry awareness of the Commonwealth's requirements in relation to management of its year 2000 risks. We supported that with qualification, because the purchasing responsibilities for individual agencies lie with agencies. However, to the extent to which the Office for Government Online can influence whole of government purchasing arrangements, we have a role in that and we will continue to do that by influencing the nature of Commonwealth common use contracts and through the shared system project, and through the whole of government telecommunications contractual arrangements. OGO was also asked to continue to make direct approaches to utility suppliers, and we have agreed with that and we are continuing to do that. Senator LUNDY—Just on that point, Ms Page, recommendation No. 2 suggests that, together with relevant lead agencies, you coordinate the preparation of a risk analysis of the potential for the interruption of utility services and assess the potential impacts on key government services. Putting that obviously in context of the earlier discussion that you actually have quite limited power to effect that, how is the preparation of that risk analysis going? What is your time frame for its public release?

Ms Page—The Office for Government Online is not looking solely at risk in relation to the failure of utility supplies. Obviously our focus is to advise ministers much more generally on—

Senator LUNDY—It actually cites that the departments, through you, look at that issue. Ms Page—Yes. Our interest is broader simply than utility suppliers. Our interest is in advising ministers on the extent of risk that agencies will not meet compliance generally, for whatever reason. In order to progress that we are now conducting seminars on contingency planning. We have advised agencies we will be seeking advice on the preparation of



contingency plans. The next quarterly report will require agencies to give an indication of the extent to which contingency plans have been prepared. On that basis we will be able to make some judgments concerning the nature of risk to the Commonwealth of agencies not being able to reach compliance, for whatever reason.

In addition to that, Commonwealth and state ministers at their meeting in December last year agreed on the need for a national approach to a range of issues, and one of them was contingency planning, and that issue is currently being progressed within the Commonwealth and in consultation with the states, largely through Emergency Management Australia at this stage.

Senator LUNDY—Yes, I noticed some contingency guidelines finally went up on the web site in late December.

Ms Page—There were some produced last year. We have had a very good reaction and we have even had a US organisation compliment us on them, which we were quite pleased about.

Senator LUNDY—They reflect the US ones quite closely. Just on that recommendation No. 2, it is quite explicit that, together with the lead agencies, you coordinate the preparation of a risk analysis, et cetera. You just answered the question in broad terms, but are you actually working on what has been specified in that recommendation in the ANAO report?

Ms Page—Again, I would have to answer it in terms of the information that we are seeking from agencies specifically. Agencies have different levels of risk. They use different utilities. They have different distributions across the country.

Senator LUNDY—Yes, but the recommendation actually says `coordinate the preparation of a risk analysis of the potential for the interruption of utility services and assess the potential impacts'. My interpretation of that is that there are two separate tasks identified there for OGO, and I note you have also agreed to this.

Ms Page—I think we agreed, with qualifications. Senator LUNDY—Sorry, you did agree with qualifications. But it is the qualification that you are doing it in the way that you have described rather than what the—

Ms Page—Yes. Senator LUNDY—Okay. And is that a resource issue? Ms Page—No. Senator LUNDY—Why have you qualified it in that way? Ms Page—It relates to the fact that the nature of risk in relation to agencies varies enormously, and it is not only concentrated in relation to utilities. Senator LUNDY—But is what you are required to do, though, an assessment of risk just in relation to government services? Or is it in relation to the community generally? Ms Page—It is in relation to the extent to which Commonwealth agencies and Common-wealth bodies achieve Y2K compliance. Senator LUNDY—So who would be responsible for conducting a general risk assessment with respect to utilities and the impact on the general community? Ms Page—As the Commonwealth is responsible for its agencies, the states and territories are responsible for seeking the compliance of their bodies. Where those bodies lie outside the direct jurisdiction of governments, in many instances regulators are taking on that role.



Senator LUNDY—What, like the Australian Communications Authority? Ms Page—The Australian Communications Authority is not, to my knowledge, undertaking risk management as such, but under the framework that the Commonwealth has the Minister for Communications, Information Technology and the Arts, the Treasurer and the Minister for Transport and Regional Services are required to provide regular reports to ministers concerning the preparedness of the telecommunications, the banking and finance and the aviation sectors respectively. In order to pull together that material on the preparedness of the telecommunica-tions sector, the work at the moment is being done by ACIF, but it is being done in conjunction with oversighted by the ACA. Senator LUNDY—What is ACIF? Ms Page—The Australian Communications Industry Forum. Senator LUNDY—So they are pulling together that report? Ms Page—They are collecting the information, but it is being oversighted by the ACA. Senator LUNDY—Okay. Ms Page—My understanding is that that is a very similar framework to what is currently operating in the United States with telecommunications. Senator LUNDY—Yes, it is the Federal Communications Commission. Ms Page—But the industry body, I think—as in Australia—is collecting the information, and the regulator's role in the United States is to assess the effectiveness of that, and to ensure that the information is useful. Senator LUNDY—So ACIF reports to the minister for communications?



Ms Page—ACIF will provide a report to the minister, yes. Senator LUNDY—And are the contents of that report available for public consumption? Ms Page—At this stage it is a report for the minister to bring to cabinet. However, ministers have agreed that the three ministers who have constitutional responsibility in those areas will at some point make public statements on the preparedness of each of those bodies, and that is the aim of collecting the information. Senator LUNDY—Minister, just with respect to discussions taking place about the public disclosure of Y2K preparedness, is it envisaged that the forums that Ms Page just described would be part of that public disclosure framework proposal along with the agency by agency report-back you are proposing?

Senator Alston—I think they are really advising us on the process. We would make the ultimate decisions about what is then made public. Senator LUNDY—I appreciate that, but I am asking you about the substance of that point: is it your intention to make public the outcomes of— Senator Alston—ACIF recommendations? Senator LUNDY—Well, report publicly as a result of their recommendations, yes, or the nature of their report. Senator Alston—I think you are better to focus on the outcome, and the outcomes are to what extent will we make public the state of preparedness of the telecommunications industry. The answer is: to the maximum possible extent. Whether ACIF has an input into how we go about it, or anyone else for that matter, is not really as relevant as the ultimate outcome. Senator LUNDY—I am sorry, Minister, I am having trouble following what you are trying to say. Does that mean you intend to release publicly the contents of that report when it is made available to you? Senator Alston—I think it is the same old problem in a sense, that you cannot give a blank cheque commitment. It depends on the advice that you get from ACIF. ACIF may, for example, say, `We recommend that you release the following information but, for God's sake, don't tell anyone about these national security problems or commercial-in-confidence material that we obtained from one of the major carriers, on the basis we wouldn't disclose it.' It would be silly for us to then release that, so it will depend on the advice we get and the information. But the bottom line is that we want to do everything we possibly can to make people fully aware of the picture in relation to telecommunications preparedness. That is in our interests, it is in the interests of the industry, it is in the interests of all users, who are basically the entire community. So we are not going to shy away from doing that. Senator LUNDY—You have so far. Senator Alston—No, I think what we have done is progressively increase the level of disclosure. Senator LUNDY—As public pressure mounts. Senator Alston—No, as people move into a more meaningful phase. We have been at this now for many months, but clearly as you get closer to the date it becomes more significant to know where people are at, and it is more relevant to be publishing material now than it might have been six or 12 months ago when people might say, `Well, we've got bags of time to catch up, so what's the relevance of us only being at 10 per cent compliance?' But, if you are right on the verge of it and you still have not got there, it is much more important to disclose that so you know the timetables we have set for tested and fully compliant and assessment and the like. Against those benchmarks we will obviously want to keep the public properly informed. Senator LUNDY—I am glad to hear it. CHAIR—Senator Lundy, we have actually reached our scheduled adjournment time. I do not know whether you have got a lot more. Senator Alston—Originally I thought we were going to come back for an hour and a half, then I was told it was a two-hour session, and we have been going for 2½ hours. CHAIR—It said 2½ hours on the agenda, and we are there. I just wondered if you might think about the possibility of putting other questions on notice, Senator Lundy. Senator LUNDY—I will. Can I just ask one more with respect to Gatekeeper. CHAIR—Very good. Senator LUNDY—Minister, given our previous discussion about the wide availability of 128-bit encryption software, downloadable off the Net, et cetera, what relevance does government public key infrastructure have in that environment? Senator Alston—It is essentially setting the standards for government, isn't it? I will defer to the experts. Mr Richter—The size of the algorithms and the bit size for the encryption within Gatekeeper is determined independently of the export arrangements. Senator LUNDY—What is the proposed level of encryption for Gatekeeper? Mr Richter—Could I take that on notice. I could find it in the documentation but—



Senator LUNDY—Surely it is a critical consideration in terms of its effectiveness. Mr Richter—Yes, it is, but it has been determined previously and it was determined on the basis of recommendations by DSD. Senator LUNDY—Is it 128 bit? Mr Richter—No, it is higher than that, I believe. Senator LUNDY—It is higher than that? Mr Richter—Yes. Ms Roper—It is certainly in accordance with DSD requirements about encryption. Senator LUNDY—DSD, as was heard earlier, have a completely discretionary regime over what is used. Ms Roper—DSD is essentially the adviser to the government on these areas of security and it sets the policy in relation to what might be used in government agencies for encryption. Gatekeeper will use the encryption requirements that are set down by DSD. Senator LUNDY—I would be surprised if it is higher than 128 bit, that is all. I thought it was 56 or 64. Ms Roper—Different agencies will adopt different levels of encryption according to the sort of information they have got to exchange, but there is a basic requirement that Gatekeeper meets DSD requirements. Senator LUNDY—I would be interested in what DSD have specified in relation to it. Mr Richter—If we could take that on notice, I could give you a full account of that. There are the various algorithms as well which have been specified. Senator LUNDY—The different types? Mr Richter—Yes. Senator LUNDY—Are you familiar with the Walsh report? Mr Richter—No. Senator LUNDY—Can you take on notice—this is a bit of a project—to cross-reference, I suppose, the major recommendations of the Gatekeeper report and what initiated the current project with the appropriate clauses relating to encryption contained within the Walsh report, which is essentially a review on encryption policy? I just want to see how the justifications for Gatekeeper stack up against Gerard Walsh's view of the future of public encryption policy in Australia. Ms Roper—I understand your question. You want us to correlate the Gatekeeper implementation strategy components on encryption with those components of the Walsh report? Senator LUNDY—Yes, the relevant sections of the Walsh report, because the Walsh report traverses the effectiveness of issues from key escrow to the management of high-level encryption in a global Internet environment. CHAIR—Senator Lundy, can we get the rest of your questions put on notice? Senator LUNDY—I do not have any more. Ms Roper—Chairman, could I take the opportunity to just read an amendment into the record, please. CHAIR—Yes, go ahead. Ms Roper—In relation to an earlier statement that I made about the two MOUs with Hong Kong and Singapore, I have had the opportunity now to have a look at each of those MOUs, and the thrust of both is in the area of IT&T. Each mentions the area of interest between the two countries in the area of e-commerce, but the thrust of each is in the area of IT&T. Senator LUNDY—With your indulgence, Chair, what is the context of the e-commerce? Ms Roper—In relation to the Hong Kong agreement, it is one of the areas of common interest, but the forms of cooperation were those that I read into the record earlier. Senator LUNDY—So it does not specify a particular international regulatory environment to which both countries are either committing themselves to or working towards? Ms Roper—No, it does not. Senator LUNDY—I know you have taken on notice to supply them to the committee. So thank you for that. CHAIR—Thank you. That completes the examination of the Communications, Information Technology and Arts Portfolio. I thank the minister and officers from the Communications, Information Technology and the Arts Portfolio for their attendance here tonight, and Hansard and Sound and Vision for their services, and I also thank the committee secretariat for their services in conducting these estimates. With that I close this series of estimates.

Committee adjourned at 10.36 p.m.

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