6 September 2017
Adam Searle’s questions to the Treasury Panel:
- The Hon. DOMINIC PERROTTET, Treasurer.
- MICHAEL PRATT , Secretary, Treasury.
- CARALEE McLIESH , Deputy Secretary, Fiscal and Economic Group, Treasury.
- PHIL GARDNER , Deputy Secretary, Commercial, Treasury.
- SIMONE CONSTANT , Deputy Secretary, Financial Risk Management and Transformation, Treasury.
- VIVEK BHATIA , Chief Executive Officer, icare.
The Hon. ADAM SEARLE: Treasurer, you said in March this year that the Fire and Emergency Services Levy reform was “one of the most significant pieces of tax reform in New South Wales for generations”. You also said, “A significant amount of work has gone into making sure we have the best tax system possible.” Do you remember saying those words?
Mr DOMINIC PERROTTET: They sound familiar.
The Hon. ADAM SEARLE: Hauntingly familiar.
Mr DOMINIC PERROTTET: No, just familiar.
The Hon. ADAM SEARLE: Do you still think that is best the description of those reforms?
Mr DOMINIC PERROTTET: I think we would agree on the principle that a levy on insurance premiums paid only by those who take out insurance policies to pay for the important work undertaken by our emergencies services personnel is not the most efficient nor the fairest system. It is an accident of history. I think the Labor Party, and even The Greens, may agree on that principle. As you know, the fire and emergency levy reforms were deferred.
The Hon. ADAM SEARLE: No, they were scrapped.
Mr DOMINIC PERROTTET: It is a deferral of the Fire and Emergency Services Levy.
The Hon. ADAM SEARLE: The Parliament repealed the legislation. That is not a deferral.
Mr DOMINIC PERROTTET: We remain committed, as I am sure you are—in fact, we are on a unity ticket—
The Hon. ADAM SEARLE: Do not bring me into your mess; this is all yours.
Mr DOMINIC PERROTTET: No.
The Hon. ADAM SEARLE: You are right; you must share it with the Premier.
The Hon. TREVOR KHAN: Are you going let the Treasurer answer the question or are you going to have a chat?
The Hon. ADAM SEARLE: I think the Treasurer can look after himself.
The CHAIR: Let the Treasurer answer the question.
Mr DOMINIC PERROTTET: As you are aware, we deferred the levy, and as part of that we returned to collecting the levy on insurance premiums. We still take the view that collecting the levy on insurance premiums is not the most efficient process, nor is it fair. As the data came through as part of this process, the lived experience did not match the policy intent. I am very proud to be a member of a government that has embarked upon a number of reforms. The reality is that an active government constantly making decisions in the best interests of the people of New South Wales will not always get it right. I have said that we did not get it right on this occasion. However, we will continue to embark on reform and to make decisions in the best interests of the people of New South Wales.
The Hon. ADAM SEARLE: You described the reform as in some ways very simple, and you certainly did not rush into it. Your Government put out its first discussion paper in 2012, and three years later the then Treasurer announced the levy. In the following June you appointed the monitor, and in April you legislated. Suddenly in May you announced that it would be scrapped.
Mr DOMINIC PERROTTET: Deferred.
The Hon. ADAM SEARLE: The Parliament then repealed the legislation. In fact, in June this year you had to introduce legislation to bring back the former scheme. That is not a deferral; it is a complete capitulation. There was no “lived experience” because your policy was never implemented. Can you tell the Committee how you got it so wrong? What did you get wrong? What caused you to scrap the policy?
Mr DOMINIC PERROTTET: In relation to its being “simple”, it is a simple concept.
The Hon. ADAM SEARLE: But you got it wrong.
Mr DOMINIC PERROTTET: I have said that. We cannot hide the fact that we could have had a better result. However, we got the big things right, and that is why we are in a strong financial position. It is great to appear as Treasurer at the budget estimates hearings having a $4.5 billion budget surplus and a budget that is the envy of the western world. That is despite the fact that the Labor Party has opposed every government reform measure. Your reference to the “lived experience”—
The Hon. ADAM SEARLE: They were your words just a moment ago.
Mr DOMINIC PERROTTET: Okay, in relation to your reference to my use of the words “lived experience” and the reform not being implemented, that certainly came to light because one of the key tenets of this Government is being open and transparent. It is something that we pride ourselves on. As part of this reform process we advertised and ran a campaign to inform the public of this change. As part of the campaign we set up an online calculator that gave business owners, people in the industry and home owners the opportunity to inform themselves of what the change would be. It became clear to me as Treasurer and to the Government that the outcome based on the data that was coming through fell outside the intention of the Government’s objectives with this policy.
The Hon. ADAM SEARLE: That raises the question I asked a moment ago. You did not rush into this reform; your Government took five years to design and craft it. You had all the firepower of the New South Wales Treasury to assist you.
Mr DOMINIC PERROTTET: A world-class Treasury.
The Hon. ADAM SEARLE: I acknowledge that you say that. Yet it was completely wrong. You say that the modelling was completely wrong compared with the lived experience.
Mr DOMINIC PERROTTET: No.
The Hon. ADAM SEARLE: How did it get so wrong?
Mr DOMINIC PERROTTET: Throughout this process it was a challenge to get 100 per cent of the data. We were transitioning from a system where the levy is based on insurance policies to a system where it is based on land value. In circumstances where we were unable to get a clear 100 per cent sample—and I take the point that it is the case in any reform that you make assumptions based on the data that you receive—the outline position in fluctuations for the industrial and commercial side was outside the scope of what we had believed it would be.
Sure, as you say, this is not a policy we rushed into. This policy took some time to prepare. The model is a model, but the data that came out of it as we approached the implementation date of 1 July this year was outside of what the Government and I were comfortable with. As a result of that, we decided to hit the pause button. I believe that was the right decision to make. Sometimes in government you do not get everything right and you have to make the right decision based on the situation in front of you. Based on the data that I received, the Government formed the view that we should defer the implementation of the Fire and Emergency Services Levy.
The Hon. ADAM SEARLE: You inherited this project from the former Treasurer. Would you have embraced this model yourself if you had brought it forward?
Mr DOMINIC PERROTTET: The Government remains completely behind the principle of—
The Hon. ADAM SEARLE: I meant the legislation.
Mr DOMINIC PERROTTET: I introduced the enabling legislation as Treasurer sometime around March or April.
The Hon. ADAM SEARLE: April.
Mr DOMINIC PERROTTET: I introduced the legislation. It is my legislation as Treasurer of New South Wales. Following the introduction of the legislation and as data came through it became clear to the Government and to me that the outcome was not what we had intended at the outset.
The Hon. ADAM SEARLE: You say that the outcome was not what you had intended and the lived experience was falling outside of expectations. Was that because people were contacting the Government because they were going to have to pay too much or a lot more than they had paid previously?
Mr DOMINIC PERROTTET: We received a range of correspondence during that time, particularly at the time that the Fire and Emergency Services Levy calculator went online. I think the calculator was a positive step and it was the right move for the Government to implement it. If we had not done that, we would not—I think that was the mechanism which provided the information that led to the Government’s decision to defer the legislation. My office received a range of correspondence. Members of Parliament raised concerns with me based on their constituents. It always gives me faith in the political system that constituents can raise issues with their local member and their local member can take those concerns to the Minister. I heard those concerns, considered the situation for some time to work through those issues, and reached the conclusion that the Government should defer the levy at this time.
The Hon. ADAM SEARLE: We are debating about whether you have scrapped it or whether you have deferred it, and you keep using the word “deferral”. When is it deferred until, exactly?
Mr DOMINIC PERROTTET: The Fire and Emergency Services Levy is—to use the words of the great former Prime Minister Tony Abbott—”dead, buried and cremated.”
The Hon. ADAM SEARLE: So not deferred?
Mr DOMINIC PERROTTET: The principle, which I believe we are on a unity ticket on—and, as I said, I think The Greens are on it as well—
The Hon. TREVOR KHAN: That is a worry.
Mr DOMINIC PERROTTET: —which concerns me—is what is deferred is moving away from a system where the levy is calculated based on insurance premiums. The Government and I do not believe it is fair that the only people who pay for the important work that our emergency services personnel do are those who take out insurance. I would like to see a system where everybody makes a contribution and the tax burden across New South Wales is reduced. That is what this Government has a strong reputation in doing.
The Hon. ADAM SEARLE: To be clear, are you still working on a model of changing the fire and emergency service arrangements?
Mr DOMINIC PERROTTET: What I am working on at the moment is ensuring that the implementation and continuation of the Emergency Services Levy [ESL] paid on premiums is continued and that we have a smooth transition as we continue at that point of collection.
The Hon. ADAM SEARLE: Do you mean back to the future? The system that was in place beforehand?
Mr DOMINIC PERROTTET: We will continue the current arrangement.
The Hon. ADAM SEARLE: Yes. There is not much to do there. That arrangement is back in place.
Mr DOMINIC PERROTTET: I have been working with the insurance companies and meeting with them because they are a key stakeholder in this reform. I have been focused on ensuring that there is a smooth continuation of the current system.
The Hon. ADAM SEARLE: So after six years we are back where we started from? Is that what you are saying?
Mr DOMINIC PERROTTET: You mean that we are collecting the levy based on insurance premiums?
The Hon. ADAM SEARLE: Yes.
Mr DOMINIC PERROTTET: Yes, we are.
The Hon. ADAM SEARLE: I am glad we have that cleared up. You mentioned the insurance industry. They have said that this venture of yours has cost them tens of millions of dollars.
Mr DOMINIC PERROTTET: The reform process?
The Hon. ADAM SEARLE: The reform process, the new legislation and then scrapping it and going back to the old scheme. They say the chopping and changing has cost them tens of millions of dollars. Have they indicated to you how they are going to recoup those losses? Will they recoup them from their customers, who will then be paying more?
Mr DOMINIC PERROTTET: I have had constructive discussions with the insurance companies and the Insurance Council. Some of those were tough conversations, as you could imagine in circumstances where you have been working on a reform process and they have been working towards that as well.
The Hon. ADAM SEARLE: I can imagine.
Mr DOMINIC PERROTTET: I want to thank them because I think they have worked closely with the Government in what would have been a difficult situation for them in relation to continuing the collection of the ESL. I have met with the Insurance Council of Australia a number of times and I will continue to meet with the insurance companies. It is not for me to direct the insurance companies to do one thing or another. They are in the private sector. They are in a competitive environment and they will continue to collect the Emergency Services Levy [ESL]. We have said that no person should be worse off as a result of the continuation of the ESL. That is our position.
The Hon. ADAM SEARLE: You are using some pretty tricky language there, Treasurer. You created this big change. You caused the insurance industry to incur costs by switching twice to a new scheme and then back, and you are saying that no-one should have to pay more as a result of this. But these are commercial players. They have incurred costs as a result of your Government’s actions. How can you guarantee that they will not pass those costs on to households and business customers who will then be paying more as a result of your Government’s bungling?
Mr DOMINIC PERROTTET: As a result of the deferral of the Fire and Emergency Services Levy—
The Hon. ADAM SEARLE: You mean the scrapping of the levy. I think you would agree that that legislation is dead and buried, correct?
Mr DOMINIC PERROTTET: Yes.
The Hon. ADAM SEARLE: The FESL has been scrapped. It has not been deferred.
Mr DOMINIC PERROTTET: The FESL in its known form is now dead, buried and cremated.
The Hon. ADAM SEARLE: So we have moved from the known knowns to the unknown knowns. Is that what you are saying?
Mr DOMINIC PERROTTET: I have been completely consistent in my position that we are completely committed to the principle of moving away from a levy on insurance. Therefore the costs incurred by the insurance companies is not in vain.
The Hon. ADAM SEARLE: That is a ridiculous proposition, Treasurer.
Mr DOMINIC PERROTTET: How?
The Hon. ADAM SEARLE: The scheme you got them to expend money switching to has been scrapped. Whatever you might do in the future could look entirely different and would require more work on the—
Mr DOMINIC PERROTTET: That is a hypothetical.
The Hon. ADAM SEARLE: You are right. Will you introduce a new scheme before March 2019 or is the embracing of this principle of yours on the never-never?
Mr DOMINIC PERROTTET: Mr Searle, I am trying to answer the questions as well as I can here.
The Hon. ADAM SEARLE: You are struggling, Treasurer.
The Hon. SCOTT FARLOW: That is when he can decipher a question from what you are saying.
Mr DOMINIC PERROTTET: We remain completely committed to moving away from a levy on insurance companies. We have said that we will not pursue the current system in place, or the proposal in place that came through as part of that.
The Hon. ADAM SEARLE: But you will not guarantee that the insurance companies will not pass on the costs that they have incurred to their customers, the households and businesses.
Mr DOMINIC PERROTTET: I have had some very constructive discussions with the insurance companies. The experience to date, based on preliminary figures that I have seen from the insurance companies, is that the lived experience of what premium holders were paying before is in line with what they are paying now. So feel free to ask the insurance companies specific questions. As part of this, I would say that the Government’s commitment is that no policyholder should be worse off. I have continued the role of the insurance monitor, Allan Fels, through this process. I do not have the date for the period of time.
Ms McLIESH: That is mid-2020.
Mr DOMINIC PERROTTET: I believe that that is a reasonable period of time to make sure that the monitor will continue to play an important role. He is doing good work in ensuring that policyholders are not worse off as a result of the Government’s deferral of this reform.
The Hon. ADAM SEARLE: It is very courageous of you to keep using the word “deferral” in the face of the evidence. In relation to Professor Fels, the main purpose of the monitor was to oversee the transition to the new Fire and Emergency Services Levy.
Mr DOMINIC PERROTTET: That is correct.
The Hon. ADAM SEARLE: You have agreed that that legislation and that model has been scrapped; it is dead and buried?
Mr DOMINIC PERROTTET: Yes.
The Hon. ADAM SEARLE: So why are you continuing to engage Professor Fels and David Cousins in their monitoring roles? What exactly are they monitoring? Are they just monitoring to make sure that no-one pays more as a result of your Government’s disastrous policy? Is their job to sweep up after you?
Mr DOMINIC PERROTTET: I reject the proposition of “disastrous policy”. The principle behind the reform remains completely valid. As I said, the Government is committed to that. The insurance monitor has done some significant work for the Government over a period of time in relation to the protection of consumers in a range of areas. My experience with Professor Fels has generally been very positive. I certainly made the decision—particularly in the early stages, when we went down this path of deferring—that it made sense to continue his engagement for the protection of consumers. Obviously ours is a government that wants to make sure that consumers across New South Wales are given as much protection as possible. I decided to continue his engagement with the New South Wales Government at this time.
The Hon. ADAM SEARLE: How was it that other organisations were able to work out the flaws in your Government’s model for the FESL and it took your Treasury and Government much longer to catch up?
Mr DOMINIC PERROTTET: Obviously in the time leading into the implementation date of 1 July the Valuer General conducted the valuations of land values on the unimproved land across New South Wales. We then set out an information campaign in relation to the introduction of the Fire and Emergency Services Levy, which I believed at the time was quite important given the nature of the change, by setting up the calculator that allowed people to put in their information in respect of their current circumstances. As a result of that approach, that is where the feedback from the State came from. Once that feedback came through, the Government made the decision to defer the levy. You have a model.
The Hon. ADAM SEARLE: Scrapped, I think we agreed you scrapped it.
Mr DOMINIC PERROTTET: The model is the model. The data is based on the information that goes into that model. When there was not a perfect set of data we made assumptions of what we believed would result. As I have said numerous times, the lived experience that came through that process was not in line with what we expected to achieve. That is the reason—and to Mr Mookhey’s point—that is the sole reason we deferred the emergency services levy.
The Hon. ADAM SEARLE: Has local government asked your Government to pay them money to compensate for the costs they have incurred for your botched scheme?
Ms McLIESH: Local government have been compensated for all of the implementation costs associated with the reform.
The Hon. ADAM SEARLE: How much?
Ms McLIESH: This is part of the overall implementation arrangements for the reform. In terms of the overall payments made to local government—
The Hon. ADAM SEARLE: I am happy for you to take that on notice.
Ms McLIESH: I will take that and come back very shortly.
The Hon. ADAM SEARLE: And to provide us with figures by local council area if you can?
Mr DOMINIC PERROTTET: Yes, we will get that. We will take that on notice.
The Hon. ADAM SEARLE: Treasurer, a Transport for NSW document received by the Opposition dated April this year gave an estimated total cost for the Sydney Gateway project as being between $1 billion to $1.8 billion but in your budget infrastructure statement handed down two months later you gave the estimated total cost at only $800 million. Can you explain the billion-dollar discrepancy please?
Mr DOMINIC PERROTTET: Which document is this?
The Hon. ADAM SEARLE: A Transport for NSW cluster report dated April, which we obtained. You may recall it was reported widely in the media that the Sydney Gateway project had blown out to $1.8 billion.
The Hon. TREVOR KHAN: Is that right? It is not what was reported.
The Hon. ADAM SEARLE: It was. But your budget infrastructure statement says it is only $800 million. Can you explain the difference between them?
Mr DOMINIC PERROTTET: Absolutely. What I found quite frustrating as Treasurer over the last period of time, and obviously taking a keen interest in the media reporting in relation to a number of these documents which seem to be floating around, which I think is quite unfortunate for all—
The Hon. ADAM SEARLE: Mainly for you.
Mr DOMINIC PERROTTET: —is that there seems to be a misconception in respect of what a reservation is, as opposed to a final business case and a final costing of the project.
The Hon. ADAM SEARLE: You accept $1.8 billion is the true figure?
Mr DOMINIC PERROTTET: No, I do not. We have set as part of the WestConnex budget, which is at $16.8 billion, an $800 million reservation because that project is obviously connected to and very related to the WestConnex project—an $800 million reservation. Any strong financial manager who has a significant pipeline of infrastructure projects will set aside a reservation in advance. Another project I read recently that has been raised is the Circular Quay wharf. As the portfolio Minister at the time, my recollection is about $200 million was set aside for the redevelopment of the Circular Quay wharf, which will be a fantastic project when it comes online.
The Hon. ADAM SEARLE: I think that one was estimated to be a total of $455 million. It has now blown out to $1.2 billion.
Mr DOMINIC PERROTTET: This obviously shows the fact that on your side—
The Hon. ADAM SEARLE: That your Government cannot manage.
Mr DOMINIC PERROTTET: I accept that the Labor Party never built any infrastructure in New South Wales.
The Hon. ADAM SEARLE: That is not true, Treasurer. You know that is not true.
Mr DOMINIC PERROTTET: I remember reading in 2011 the review into the Labor Party’s performance at that election, which obviously did not go so well.
The Hon. ADAM SEARLE: Point of order: The Minister has been completely unresponsive to the question. We are not talking about 2011, we are talking about the 2017-18 budget and these projects in particular.
Mr DOMINIC PERROTTET: I accept the point of order, and I will move back as quickly as I can. It is relevant, Mr Chair, to the point that when Labor is talking about the so-called blowouts, they are not blowouts at all because—
The Hon. ADAM SEARLE: Except that they are.
The Hon. TREVOR KHAN: Point of order—
Mr DOMINIC PERROTTET: Because they are reservations that we set aside funding for. You cannot sit there at the outset of a project and say we are going to build these new wharves or a major motorway or a new rail infrastructure and overnight have a determination of what the final cost is. That is not how good infrastructure works. This is not a game of SimCity, where with the press of a button a hospital is built and one wakes up the next morning and there it is. A substantial process of construction of infrastructure is undertaken. There are planning phases, business cases, investment decisions and it comes to the Cabinet Standing Committee on Expenditure Review—ERC. What good government does is set aside provisions to fund those projects into the future. What we have done—specifically to the question, Mr Searle—with Sydney Gateway is make a reservation of $800 million for that project, which I believe is due to be constructed in six years time, in 2023.
The Hon. ADAM SEARLE: Treasurer, I think you are talking about different things. Reservations are one thing—and I do understand the reservations process—but when you are undertaking any project it is not a blank cheque; it is not like we will spend any amount of money on this project. Governments usually say the project will cost this amount of dollars. Looking at WestConnex, for example, your Government said the project in total would cost $10 billion. That was not a reservation; that was a total estimated cost. It is now accepted it is about $18 billion. That has blown out.
Mr DOMINIC PERROTTET: Sixteen point eight billion dollars.
The Hon. ADAM SEARLE: Sixteen point eight billion dollars, $17 billion. It will be $17 billion before you are finished.
Mr DOMINIC PERROTTET: I would say there have been substantial changes to the scope of that project. We can have a definition of blowouts. I am going to build a Rozelle metro, for example, and I spend, let us say—I do not say this is the total cost of the project—half a billion dollars, and then not build it. I would probably say that is a blowout.
The Hon. ADAM SEARLE: Treasurer, your Government has privatised more than $50 billion of public assets over the last six years.
The Hon. Dr PETER PHELPS: Government assets.
The Hon. ADAM SEARLE: Government assets. Yesterday I think the finance Minister said the Government held $142 billion in public assets. That means you have privatised something like 26 per cent of total government holdings. Is that about right? If that is not right, what do you say the figure is? I am happy for you to take that on notice.
Mr DOMINIC PERROTTET: I can take the figure on notice but I am not going to accept the proposition or the direction of the question on notice because I note the net worth of the State in the budget papers. There seems to be some issue that is raised in respect of the amount of assets that have been divested, but that is only one side of the story, because as part of asset recycling we are investing in future infrastructure. Obviously I have favourite parts of the budget that may not get taken up. For me, the fact that this will be the first State, over the forward estimates, to have a net worth of a quarter of a trillion dollars is quite significant.
I refer members of the Labor Party—I know the shadow Treasurer will be particularly interested in this—to Budget Paper No. 1 on 7-9. Chart 7.6 shows the annual average growth in general government sector net worth in mainland States in 2016 to 2021. New South Wales is substantially ahead. If you look at that growth you will see that it is well above 8 per cent. To their credit, our Labor counterparts in Victoria are followers; they are at 4 per cent growth. In comparison to other States we are pioneering asset recycling, and the wealth and net worth of this State continues to grow.
The Hon. ADAM SEARLE: Treasurer, are you concerned that recurrent expenditure commitments are very reliant on stamp duty income? As the property market cools, how do you intend to make up for lost revenue?
Mr DOMINIC PERROTTET: That is a very good question; thank you for it. There is no doubt that as Treasurer of the State I strongly monitor our sources of revenue. In particular, we need to make sure that we live within our means. We have enshrined in law the Fiscal Responsibility Act, where we need to maintain a triple-A credit rating, have our expense growth below long-term revenue growth, at 5.6 per cent—it is at 5 per cent in the current budget—and we meet our long-term unfunded superannuation liabilities by 2030. In respect of stamp duty, the residential stamp duty component of total revenues is around 9 per cent, at $7 billion. We would see that the record number of approvals over the last 12 months will now translate into record numbers of buildings constructed. As I said, we expect that we will hit a record of over—
The Hon. ADAM SEARLE: If the stamp duty drops would you consider a switch to land tax? How are you going to make up for any shortfalls if stamp duty dips?
Mr DOMINIC PERROTTET: Firstly, that is a hypothetical. Secondly, we would see stamp duty being a strong component of our revenue base. We will not see it increasing at the same rate. We do not project that. Ms McLiesh may make some further comments, but we would not see it increasing at the rates that we have seen in most recent times. Whilst that is the case, we still see stamp duty making a strong contribution to our revenues. Importantly though, whilst it is not insignificant, it sits at 9 per cent. What would concern me more is the GST component in the sense that we would really want reform there to protect that base going forward. Ms McLiesh may wish to make some wider comments in relation to projections on stamp duty, particularly residential stamp duty.
Ms McLIESH: Certainly, Treasurer. It is absolutely the case that the property market has been growing at very high levels for a number of years now, and that has been reflected in stamp duty growth. Over the last year residential stamp duties are estimated to grow by 9.6 per cent in the 2017-18 budget. We are expecting stamp duty growth to moderate across the budget and forward estimates period. Residential stamp duties are forecast to grow at 5.4 per cent on average across the budget and forward estimates period. That is reflecting some slowdowns in the real property market but it is still at robust levels. We are expecting to see more of the impact of tightening lending standards and macro prudential policies at the Commonwealth level as well as an expectation of interest rate rises, albeit off very low levels. Nonetheless we are expecting the market to still grow at more moderate levels supported by a very strong supply pipeline from Government and supported by government policies as well as strong population growth and interest rates at relatively low levels.
The Hon. ADAM SEARLE: Treasurer, what further privatisations or sales of public assets do you have planned over the next 19 months?
Mr DOMINIC PERROTTET: The two projects to which I can refer in answer to your question would be the WestConnex transaction. We have made a decision to sell 51 per cent of the Sydney Motorway Corporation [SMC], which will assist in funding stage three of the WestConnex project. The other one of which you would be aware is the Snowy Hydro decision to sell up.
The Hon. ADAM SEARLE: The nationalisation of Snowy Hydro?
Mr DOMINIC PERROTTET: The nationalisation of the Snowy 2.0 pursuit. I understand that the Labor Opposition is supporting that transaction. The Hon. ADAM SEARLE: Snowy Hydro?
Mr DOMINIC PERROTTET: Snowy Hydro, yes. As Treasurer I have been working very closely with the Victorian Government; in fact I met with Tim Pallas last week specifically in relation to that. We have a common interest in making sure that whatever decision is made, if we were to sell—and we have not committed to selling—in negotiations we will not be making a decision in respect of that sale unless it is in the interest of the State. The Victorian Government shares that perspective.
The Hon. ADAM SEARLE: The finance Minister said there was more than a billion dollars in further property sales planned. Do you agree? You do not disagree with that? That is about right? Is that the total list of privatisations you have prepared for the next 19 months?
Mr DOMINIC PERROTTET: Sorry, I am talking more transactions.
The Hon. ADAM SEARLE: That is okay.
Mr DOMINIC PERROTTET: Did you want to expand that definition?
The Hon. ADAM SEARLE: A total figure. I am happy for you to take it on notice to give us a total Government picture.
Mr DOMINIC PERROTTET: Like assets?
The Hon. ADAM SEARLE: Yes, total assets.
Mr DOMINIC PERROTTET: Like, for example, an old fire station would count as an asset sale?
The Hon. ADAM SEARLE: If you were going to sell it, yes. I am happy for you to take that on notice.
Mr DOMINIC PERROTTET: I will take that on notice and I will liaise with the finance Minister. Once again, Mr Searle, I see this as a key and important point about the Government’s asset recycling scheme. I think it is unfair that the Labor Party focuses on the sale but not the investment. We are seeing the net worth. I remember that Michael Daly, who is the former shadow Treasurer, came out to Windsor and made an announcement that we were selling the fire station but did not actually inform the public that we had built a new state-of-the-art fire station just down the road.
The Hon. Dr PETER PHELPS: I am shocked. How could he forget that?
Mr DOMINIC PERROTTET: What I would ask is that we do not politicise this and focus just on the sale. Let us focus on the investment and the infrastructure scheme that we are able to embark on as a result of the Government’s approach. Mr Searle, I draw your attention, the Committee’s attention and the public’s attention back to the net worth of this State, which is growing at a much greater rate than any other State in the nation. In the next four years we will have a net worth of close to a quarter of a trillion dollars, which is something of which we are very proud.
The Hon. ADAM SEARLE: With the sale of the electricity companies, and I think also with SMC, your Government is retaining a so-called golden share or a golden vote over certain issues like dividend payments and capital structures and stuff like that. Is that correct, that you did retain it for the sale of electricity companies and that you are proposing to do so for SMC?
Mr DOMINIC PERROTTET: I am not going to go into commercial-in-confidence negotiations in relation to the SMC WestConnex transaction. In respect of the electricity distribution networks we leased 100 per cent of Transgrid, but the shareholding in both Ausgrid and Endeavour enables the State to share in the dividends that come from those businesses. In relation to SMC, those matters are commercial-in-confidence, but it would be the case that we would share in the uplift by maintaining a 49 per cent shareholding of the SMC.
The Hon. ADAM SEARLE: Over the last couple of years I have asked questions of the Treasurer about the cost of the challenge to the Australian Energy Regulator [AER] determination, led by Ausgrid, Endeavour and Essential Energy. As at last year it was $2.3 million. Now that those proceedings are finalised, could you provide the total cost of the challenge to the AER determination?
Mr DOMINIC PERROTTET: Are you happy if I take that on notice?
The Hon. ADAM SEARLE: I am happy for you to take that on notice. When you provide a global figure, can you also break that down to barrister or legal firms, consultancies—all the constituent amounts that you have?
Mr DOMINIC PERROTTET: In relation to the AER?
The Hon. ADAM SEARLE: The AER challenge.
Mr DOMINIC PERROTTET: Yes.
The Hon. ADAM SEARLE: I am happy for you to take this on notice as well, but can you also inform the Committee of the total transaction costs for the sale—or, as you would put it, the long-term lease—of Transgrid, Ausgrid and Endeavour—in other words, the total transaction costs?
Mr DOMINIC PERROTTET: Yes. I can give them to you now.
The Hon. ADAM SEARLE: Can you also break that down to strategic and financial advice, legal advice, public relations [PR], advertising, probity services—all the constituent parts that make up the total figure?
Mr DOMINIC PERROTTET: I might pass to the Secretary because I think he would have the breakdown of costs.
The Hon. ADAM SEARLE: Again, if you do not have them to hand, I am happy to take that on notice.
Mr GARDNER: The actual breakdown of costs to the individual adviser level is published on the Crown accounts and that is a final audited number, so I would refer you to those.
The Hon. ADAM SEARLE: I mean no disrespect but sometimes when I have been referred to websites or documents, when you go to the source document the figures are not there. If you are going to refer me to something else, make sure it is there.
Mr DOMINIC PERROTTET: I would not want to do that, Mr Searle.
The Hon. ADAM SEARLE: No, of course you wouldn’t.
Mr DOMINIC PERROTTET: I would want to give you the most accurate information.
The Hon. ADAM SEARLE: No. We have had this discussion in the Committee.
The Hon. TREVOR KHAN: You might have been looking in the wrong spot.
The Hon. SCOTT FARLOW: You must improve your googling.
Mr DOMINIC PERROTTET: Mr Primrose knows all too well, in relation to property assets and transparency in relation to those sales from my time in Finance, that we take that very seriously.
The Hon. PETER PRIMROSE: Yes, I accept that but the problem is, as Mr Searle has indicated, often those figures are not there when you actually go to the site. The Hon. ADAM SEARLE: If not, we will come back to you.
Mr DOMINIC PERROTTET: We might be taking some time to find those.
The Hon. SCOTT FARLOW: Take your time. It is not like we are doing anything else.
The Hon. ADAM SEARLE: I can move on to the next question. I have another question, through you Treasurer—
Mr DOMINIC PERROTTET: That is fine.
The Hon. ADAM SEARLE: —to Mr Bhatia, whom I asked to come along. On of the roles of iCare is to act as the workers compensation insurer. By the end of the year something like six and a half thousand injured persons will be exiting the workers compensation system. Is that understanding correct?
Mr DOMINIC PERROTTET: Are you happy if I answer that?
The Hon. ADAM SEARLE: Of course. When you answer that, if that figure is correct, could you indicate what will happen to those six and a half thousand people; how many are going to the National Disability Insurance Scheme [NDIS]; how many are going to dispute settlement procedure [DSP]; and what will happen to the balance of people?
Mr DOMINIC PERROTTET: Yes. I will provide an overview and then I will pass for specific detail to Mr Bhatia. But obviously as part of the Coalition’s 2012 workers compensation reforms, those who had a whole person impairment of less than 20 per cent would be transitioned out of the workers compensation scheme.
The Hon. ADAM SEARLE: Or, as we would like to say, cut off.
Mr DOMINIC PERROTTET: I would use the term “transitioned out”—
The Hon. ADAM SEARLE: I know you would.
Mr DOMINIC PERROTTET: —after five years. It is important to note, though, of the injured workers who have a whole person impairment of less than 10 per cent still receive medical benefits for two years, and those injured workers who have a whole person impairment above that to 20 per cent would receive medical benefits for an additional five years. Before I ask Mr Bhatia to contribute further detail, because I think this is a very important line of questioning—
The Hon. ADAM SEARLE: Including the numbers of people.
Mr DOMINIC PERROTTET: I can provide the numbers of people now. The State Insurance Regulatory Authority [SIRA], which now falls within the purview of the Minister for Finance, Services and Property, estimates that 4,500 workers will exit the scheme between September 2017 and June 2018. This includes the Insurance and Care NSW—icare—Nominal Insurer, the icare Treasury Managed Fund [TMF], and self- and specialised insurers. In addition, this includes the pre-October 2012 injured workers, as well as those injured immediately after.
Three thousand four hundred workers with the icare Nominal Insurer will have payments ceased between October 2017 and June 2018. Two hundred and ninety workers with icare TMF will have their weekly compensation payments end between October 2017 and June 2018. The balance of those workers are with the self- and specialised insurers outside of government. When we made some changes to the scheme post election 2015, as you would be aware, we extended benefits to injured workers who may have a whole person impairment at any stage, but to, say, under 20 per cent, to provide prosthetics for life and hearing aids for life.
The Hon. ADAM SEARLE: I think initially you did that by regulation and followed it up with legislation.
Mr DOMINIC PERROTTET: Right. As well, we increased medical benefits for life for those who have a whole person impairment of 21 per cent. Importantly, as part of that reform we established icare. What struck me when I was in the Finance portfolio was that we have a range of clinical discussions and debate around entitlements versus premiums. It was of significant concern to me when I met with a range of injured workers, including many with the Injured Workers Support Network, that we do not necessarily agree all the time. However, what came through from those discussions was that we need to provide greater service and support for injured workers. Under the previous scheme that support did not exist. I ask the chief executive officer to talk about icare, because there is no doubt that we are coming close to the end of the five-year period—
The Hon. ADAM SEARLE: October.
Mr DOMINIC PERROTTET: —and I know from my time in Finance until today, icare has run significant programs to provide support for injured workers. I think it is important for Mr Bhatia to provide that information.
Mr BHATIA: As you know, we are talking about a number of people who are individuals with individual circumstances. There are people who are 42 and there are people who are 55, some living in regional areas and others in metro areas. They have very different circumstances, and how we support them through this transition is obviously a critical need. You are also aware that we act within the legislative framework. Our role is to make sure that we can transition these individuals and provide them with whatever support is necessary. As a result, we have put together an advisory assisted framework, where we are staffed by allied health professionals and by psychologists. To date, we have had more than 600 people we have spoken with on a regular basis, trying to transition them and finding support networks within the community, which are of extreme significance.
As you know, when individuals stay on the scheme for a long period, there is a social isolation element and a community isolation element. There is also a lack of self-confidence, which stops them from going back to doing activities that are either vocational or work related. The plan of the Advisory Assistance Service [AAS] is to help them through that process, including through partnerships with UnitingCare and Vinnies. We have put in experienced case managers for community transition for those individuals. I like to say that we have had conversations with 600 people, but I would like that to be conversations with 2,000 people because that is the number of people impacted.
We are trying to gain trust, because these individuals have had an issue with trust of systems within the previous organisations. We are working hard to make sure that we are an organisation that is human centred and focused on the individual requirements of these people and their carers. We are trying to help them through the situation as best as we can. We are also making sure that these individuals are connected to the other community support systems, whether they be Centrelink on disability systems, and other vocational courses where we can help them through transition processes.
Mr DOMINIC PERROTTET: We have those figures, if you would like me to briefly provide them.
The Hon. ADAM SEARLE: I am happy to put that on notice because I do not want to take up any of Mr Field’s time.