Attorney-General's Department, $109,678,000

Administered Items for the Attorney-General's Department, $98,533,000

Membership:

Mr Marshall substituted for Ms Chapman.

Mr Knoll substituted for Mr Gardner.

Minister:

Hon. J.R. Rau, Deputy Premier, Attorney-General, Minister for Justice Reform, Minister for Planning, Minister for Housing and Urban Development, Minister for Industrial Relations, Minister for Child Protection Reform.

Departmental Adviser:

Mr G. McCarthy, Chief Executive, ReturnToWorkSA.

The CHAIR: We are looking at ReturnToWorkSA—the Minister for Industrial Relations through the Attorney-General's Department. I declare the proposed payments open for examination and refer members to the Agency Statements, Volume 1, and ask the minister to introduce his adviser.

The Hon. J.R. RAU: I have with me Mr McCarthy, who is the Chief Executive of ReturnToWorkSA.

The CHAIR: Are you planning to make a statement?

The Hon. J.R. RAU: I just want to say a couple of quick things which are more in the nature of an overview, really, but I do not want to take much time up. Just as a little bit of background as to where we have been and where we are, as at 30 June 2013, WorkCover's unfunded liability was $1.366 billion with a funding ratio of 63.7 per cent and an estimated break-even premium rate of 3.44 per cent. The average premium rate was 2.75 per cent. In other words, the scheme was losing money.

The first stage of reform of the scheme was completed in 2013 with implementation of the Workers Compensation Improvement Project recommendations, which saw a new charter and performance statement, and also saw amendments to the WorkCover Corporation Act to increase board accountability. These came into operation on 21 November 2013. In late 2013, WorkCover increased its active management of the scheme. As at June 2014, the unfunded liability had reduced to $1.132 billion with a funding ratio of 71 per cent and an estimated break-even premium rate of 3.13 per cent. The average premium rate remained at 2.75 per cent.

The Return to Work Bill 2014 and the Employment Tribunal Bill 2014 were passed by both houses of parliament on 30 October 2014. As at December 2014, the new scheme was fully funded at 100.7 per cent with a $20 million net asset position. The average premium rate for 2015-16 is 1.95 per cent. Just to make that clear, then, since 2013, we have managed to move the unfunded liability from $1.366 billion to plus $20 million, achieved full funding, and the average premium rate as an actual average premium rate reduced from 3.44 per cent down to 1.95 per cent.

By the end of June this year, and again reflecting the very fine management that has been operating in the new return-to-work scheme, some interesting indicators are as follows. Income support costs for 2014-15 (and bear in mind that in 2014-15 we are still on the old scheme) are 20 per cent below the equivalent levels in 2013-14.

Mr MARSHALL: What did you say was 20 per cent lower?

The Hon. J.R. RAU: Income support costs; in other words, how much we are paying out for weekly wages to people. Medical treatment costs have been reduced by 6 per cent compared with 2013-14. Physiotherapy costs are down by 34 per cent compared with 2013-14. Income support claims for the year to date were 19 per cent below 2013-14, and the number of income support claims moving past two, 13, 26, 52 and 132 weeks have had reductions of between 20 and 29 per cent.

I emphasise, all of those are under the old scheme, so all of those are indications of improved management and the effects of the changes we put in a year before, changing the management system and the charter. The return-to-work scheme which started on 1 July this year represents the most substantial change in work injury insurance in South Australia in nearly 30 years, and it will provide benefits both to people in the workforce and, obviously, to employers.

Can I just make the point now, although it is probably a little bit more relevant for later on, that changes in the system for insurance for injured people at work is not the end of the reform that I think needs to occur in this space. What we are doing here is saying, 'Okay, when there is a failure in the system and a person gets injured, what do we do with them? How do we get them back to work? How do we make sure they do not lose money?' That is what we are dealing with here.

The next and obvious step we have to look at is stopping them getting injured in the first place. So, the other piece of attention that we are paying presently is to SafeWork SA to see if we can improve the way they perform, so that even fewer people wind up getting into this scheme than presently get into this scheme. That is an ongoing piece of work.

Mr MARSHALL: I thank the minister for his opening remarks and his catalogue of how he has improved the mess that WorkCover has been in in the past. I think even the government would admit it was a scheme which was running extraordinarily poorly, and there have been some significant improvements in the management of the scheme in recent times, but they are really correcting problems that have been allowed to occur and build up over the preceding decade.

Can I say that the opposition has wholeheartedly supported the reforms in WorkCover and the new management structure. We support it in terms of legislation and we supported the new act. We did that because we thought that the current performance of the scheme was completely unsatisfactory, both for employers, and, importantly, for employees in terms of getting back to work.

We are happy to continue to work in a cooperative way with the government for further reforms because we do note that, even though there has been a very substantial improvement in the scheme, we have essentially only gone from the most expensive scheme in the country to the second-most expensive scheme in the country. So, there still exists considerable opportunity to get somewhere back toward the national average. Before we all pat ourselves on the back and congratulate ourselves on an outstanding performance, we are still the second most expensive scheme in the nation.

My questions will begin from Budget Paper 3, page 73, the paragraph referring to ReturnToWorkSA. In the minister's opening statement, he referred to essentially the writing off of the unfunded liability. When did that occur? Did that occur in December? Was there a balance sheet transaction?

The Hon. J.R. RAU: I think it might have actually happened in March. The actuaries sort of look back into the system, don't they?

Mr McCARTHY: It was the December valuation, so when the bill passed in October, that essentially completely restructured the financial liabilities of the scheme. So, at that point in time, the actuary was able to revalue the scheme, notwithstanding the fact that the new legislation actually did not start until 1 July 2015. The December 2014 evaluation was then able to take into account what the future liabilities would be reflecting the new legislation.

Mr MARSHALL: The minister has spoken previously about the break-even rate, and then also the actual rate that was charged. In terms of the rate which is charged going forward, the minister has made it clear that it will be 1.95 per cent, but can you update the committee as to what the break-even rate is going forward?

Mr McCARTHY: That is the break-even rate as at the December valuation, but we will shortly be doing the June valuation. At that point in time, we will be able to see where that break-even premium rate resets itself, given the additional six months' worth of history that we have experienced since December.

The Hon. J.R. RAU: Can I say that the object has always been, as far as Mr McCarthy and I have been concerned, that the scheme should be entirely self-funding and it should not be losing money, which it was. Now the break-even premium rate and the actual premium charged are intended to be identical. It may be that from time to time the valuations of the scheme will blip around a bit because of things like discount rate charges, and whatever, but I am pretty confident that the architecture of the thing is such that we should not be going above its present number. It may well go below its present number and, it if is sustainably below its present number, that would suggest that over time the premium would come down.

The other thing I want to make clear because I did not do it in the beginning is that I acknowledge the support the government has had from the opposition, in particular, the Leader of the Opposition, for the reform in this area, and it is a good example of a cooperative exercise between the government and the opposition. Can I say that, like the Leader of the Opposition, I do not regard the present improvements as being the end of the story and I am certainly not jumping up and down saying we have conquered the whole thing. I am saying we have made a good start, but we have to keep at it. We cannot be satisfied with just what we have done so far.

Mr MARSHALL: For clarity, the current rate charged does not create an ongoing accumulation or liability—it is at the break-even point—and you will be receiving a new actuarial advice to the end of June? If that is the case, can you outline when that will be provided and when it will be made public?

Mr McCARTHY: Yes, it will be released when the accounts are released in September. We will know at that point. The actuary is still working through it at the moment, so we do not know what the outcome of it will be. I can tell you that we have seen continuing improvements in the scheme since December and I am optimistic that we will see continued improvements in the scheme but, until we get the actual numbers from the actuary, I cannot be more definitive than that.

Mr MARSHALL: If that break-even point comes in at below 1.95 per cent, is it the government's intention to immediately reduce the rate or is it the government's intention just to have an annual setting of the rate?

The Hon. J.R. RAU: It is basically a matter for the board but, normally, it is an annual setting of the rate and it is done at around December for the following financial year.

Mr McCARTHY: The December accounts are when the actual average premium rate is determined for the purpose of premium setting. The June valuation is for the annual accounts but, for the purposes of evaluating the break-even premium rate or the average premium rate for premium purposes, that is done at the December valuation.

Mr MARSHALL: But is it the intention of the board, then, just to have one rate setting per year, even if, for example, the actuarial advice comes in that you have made further improvements in the scheme, the break-even point is significantly lower than the 1.95 per cent and it is closer to the national average? WorkCover would not adjust the rate but would just set it once a year and provide an accumulation on the balance sheet of WorkCover?

Mr McCARTHY: The premiums are collected once a year. Even though they might be collected in monthly instalments for some people, the actual premium is calculated at June. If we were to make a decision to reduce the premium rate based on the June valuation, that would not come out until September, at which point we would have already collected the premiums for this year. To actually determine the premium rate now when we will not be collecting the premiums, if you like, until June next year would be premature. That is why we are better to wait until December because we expect that in December we would see further improvements in the scheme which would give us an opportunity to perhaps have greater opportunities for premium reductions.

Mr MARSHALL: Do all comparable schemes around Australia operate on the same basis with just the one per year rate?

Mr McCARTHY: Victoria does, New South Wales does not, but its premiums are actually set annually, the same as here. So, in New South Wales and Victoria they have a once a year setting of the premium, but the employees are able to renew their policies at the time they take the business out, whereas here in South Australia everybody renews at the same point in time.

Mr MARSHALL: If there is an accumulation on the balance sheet, a surplus—and I know this is almost impossible to believe in South Australia, but if there was, what options are open to the board in terms of that money? Does it just accumulate and therefore affect the rate going forward or are there other opportunities open to the board in terms of transferring those funds to general revenue?

The Hon. J.R. RAU: I will let Mr McCarthy supplement what I am about to say, but, first of all, there are any number of ways that a surplus of the type that you are talking about might be utilised. For example, the scheme might hold some money in contingencies for under performance in its investment arm, for example, and that might be a prudent business decision for the board to make.

Conceivably the money might be applied to change the prudential margin applicable to the scheme. It is a sort of a function of both of these things in some respects, I suppose, but it is the case that if the scheme has more money it can, perhaps, recalibrate its investment portfolio strategies, because if you have a scheme which has got a lot of debt or needs to perhaps put its hand on cash pretty quickly, that does explain a lot about the investment portfolio strategy it might be using. If they are not in that particular circumstance they have alternatives in terms of the types of investment that might be sustainable.

Mr McCARTHY: There are two clear objectives that I think the new legislation has. One of them is the more subjective element, which is the hardest one to manage which is the better health outcomes. The other one is a much more affordable scheme. The 1.95 per cent is the starting point for that, and the objective, as I understand it, is not to build up massive amounts of surpluses but to see this scheme become as affordable as it is in other jurisdictions. I think that probably answers the question that you are looking for.

Mr MARSHALL: I am just wondering what the options are. Is there an option like there are in other statutory authorities for money to be transferred to general revenue?

Mr McCARTHY: There is an option in the current legislation that has been approved that if the scheme—and I will need to get this right, and I can come back to you with the exact details of it, if I could take that on notice. But essentially there is an opportunity for what is called a tax equivalent payment if the scheme is in an underwriting surplus. The scheme has to be in surplus, it has to be at 75 per cent prudential margin, or calculated on the basis that it had a 75 per cent prudential margin, and there has to be an underwriting profit. There is a little bit more to it than that but we can come back to you with the exact details of that. So there has to be a few stars aligned, if you like, before there could be a tax equivalent payment made.

Mr MARSHALL: But who makes that determination? Is it the board or is it the Treasurer?

Mr McCARTHY: It is a black and white determination. It is actually in the legislation as to how that is determined. That is what I am saying to you: I can come back to you with the exact wording of that.

Mr MARSHALL: In other words, the legislation provides that if you do meet those three criteria you are not to accumulate and you are to transfer back to Treasury.

Mr McCARTHY: It enables what is called a tax equivalent payment to be made.

Mr MARSHALL: To your shareholder which is the state government.

Mr McCARTHY: The government.

Mr MARSHALL: Who is it that ultimately signs off on the rate of 1.95 per cent.

Mr McCARTHY: It is the board.

Mr MARSHALL: So the board makes a recommendation to the Treasurer.

Mr McCARTHY: No. The board signs off on that rate.

Mr MARSHALL: So there is no consultation with Treasury whatsoever with regard to the rate before you publish it?

Mr McCARTHY: There has been discussion with the government, yes, but ultimately it is the board's decision.

Mr MARSHALL: With other statutory authorities, where they have been able to say, 'Well look, we could either have an accumulation on our balance sheet or we could actually have a lower rate, for example, of CTP insurance in South Australia,' the government has said, 'We'll go for the accumulation.' That would not occur in WorkCover. You would not say, 'Look, we think we could take this to 1.75 per cent,' and the government says, 'We think we'll be prudent; we'll just stick it at 1.95 per cent. It will lead to an accumulation, it will trigger the three criteria and there will be a transfer to the government.'

Mr McCARTHY: That is correct. It is the board's decision; it is not the government's decision.

Mr MARSHALL: But the board consults with the government before publishing?

Mr McCARTHY: It discusses its decision on the rate with the government before it is published, yes.

Mr MARSHALL: And just for clarity, the government appoints all members of the board?

Mr McCARTHY: Yes.

Mr MARSHALL: I just thought I would ask that question.

The Hon. J.R. RAU: Can I just make it clear that, speaking from the government's point of view, we have no interest in the scheme building up a huge, fat bank. We do—

Mr MARSHALL: That is what they said, with respect, about the Motor Accident Commission. There is about to be an about $2.5 billion transfer.

The Hon. J.R. RAU: I want to make it really clear that from my point of view, and from the government's point of view, there are two priorities here. One is to get injured workers back to work as quickly as possible and the other one is to get the premiums down as far as possible. To the extent that accumulating a big pot of cash in this scheme would delay or be an alternative to the reduction in premium rates, that would be something to which I would be opposed, to the extent that the board would bother wanting to chat to me about it. I think the charter—which is the standing KPIs, if you like, which are issued from time to time by me and the Treasurer jointly—make it pretty clear that our expectation is that that is where we want the scheme to go.

Mr MARSHALL: Yes, but you could say the same criteria and objects exist in the act for the Motor Accident Commission. Anyway, there is no point in continuing that, but I am glad that we have that on the record. I think that is exactly where we need to be. On the same reference, how are the historically low interest rates impacting the valuation of the scheme's—and they are not liabilities any more—currency, I suppose?

Mr McCARTHY: It does have an impact. Certainly, if interest rates were to return to what you might call historical norms it would have a significant ability for the scheme to further reduce our premiums.

Mr MARSHALL: Where they are sitting in a moment, though, does not pose any further threat to continued reductions—

Mr McCARTHY: They can go lower. Everybody has thought they are as low as they are. We have actually had an improvement in the discount rates for this June valuation over the December valuation, but they are all over the place at the moment. At this point the scheme can withstand what might be if we were to have a small reduction in the discount rate; we could withstand that.

Mr MARSHALL: Just for clarity, you manage those funds yourself internally?

Mr McCARTHY: Not the discount rate, we do not. We have no influence over it. The discount rate is—

Mr MARSHALL: No, but the funds under management are managed—

Mr McCARTHY: The investments are managed by ReturnToWorkSA, but we have no control over the discount rate.

Mr MARSHALL: Do you outsource that work to funds managers, or how does that —

Mr McCARTHY: Yes.

Mr MARSHALL: How many funds managers do you have?

Mr McCARTHY: Essentially we outsource it through Towers Watson to arrange the fund managers but, again, I think it would be best to come back to you with the exact details of that if I could.

Mr MARSHALL: I would be grateful. Are any of those fund managers South Australian fund managers?

Mr McCARTHY: No.

Mr MARSHALL: Have there been any discussions with Treasury and Finance about Funds SA taking over the funds management for ReturnToWorkSA?

The Hon. J.R. RAU: Yes, there have. There is a general view held by Treasury, in particular, but I think broadly across government, that there is some advantage in having government funds (for want of better terminology) dealt with as a single pool. That gives some sort of economy of scale and such like, and Funds SA is the main vehicle for the management of government funds. That said, I think there is an appreciation that ReturnToWorkSA is an organisation with its own discrete needs and requirements and that it may be reasonable for those funds to be managed by the state where the product is what ReturnToWorkSA is looking for. If that product is not there or if it is not at a competitive price then maybe the state is not the best place for it to be managed. So, I think those conversations are ongoing.

Mr MARSHALL: How has the ReturnToWork funds management performed relative to Funds SA management?

Mr McCARTHY: It has been better and in fact if Funds SA had been—

Mr MARSHALL: Perhaps you should be taking over Funds SA.

Mr McCARTHY: It is better because we have a different set of investment requirements, being effectively a long-tail insurance business rather than superannuation funds management. It is not to say that Funds SA could not manage the scheme in line with our portfolio requirements, but if you are comparing it to the portfolio that they were managing for versus the portfolio we were managing for, we have done better. In fact, had we been using the Funds SA investment returns then we would not have been able to deliver a sub 2 per cent premium this year.

Mr MARSHALL: How much better have you been than Funds SA?

Mr McCARTHY: I would have to come back to you with the exact details on that, if I could. In terms of its impact on our ability to deliver a sub 2 per cent premium rate, it would have made that difficult, but I will come back to you with the exact details, if I could.

Mr MARSHALL: Are you performing better because the rules that you have for your investment decisions are different from other government investment frameworks?

Mr McCARTHY: All I can say to you is that we know exactly how we need to position our investments against our liabilities to match them and we get the returns in matching those liabilities as best we can and so we are specifically doing that. As I said, the liabilities that we have are very different to the liabilities that you would have as a superannuation fund. So, if Funds SA were to manage our funds they would need to recognise us as a discrete customer and recognise the need to match our investment returns against the liabilities that we have. It is not to say that cannot be done, but it is very different to the way they have been managing funds for their customers at the moment.

Mr MARSHALL: Does the state government have any role in overseeing your investment strategy? For example, does SAFA have any role in Treasury, Funds SA?

Mr McCARTHY: No, other than the normal audit process.

Mr MARSHALL: The normal?

Mr McCARTHY: Through the Auditor-General, the normal audit process.

Mr MARSHALL: Do you have a requirement for a percentage of your investments to be in South Australian assets or securities?

Mr McCARTHY: Not specifically, no.

Mr MARSHALL: What percentage of your investments are made in South Australia?

Mr McCARTHY: I will have to take that one on notice. I think we have answered that question previously but to be accurate I would like to take that on notice, if I could, please.

Mr MARSHALL: Okay. Thank you. Can the minister confirm what the work health and safety fee is for 2015-16?

Mr McCARTHY: In terms of the SafeWork SA fee, is that what you are talking about?

Mr MARSHALL: Yes, there is a rate and then there is also a fee. I presume, I am not familiar, but there must be an annual fee.

Mr McCARTHY: For this year, it is now calculated quite separately. The 1.95 per cent premium rate excludes the SafeWork SA fee, whereas there was a proportion of the SafeWork SA fee that was previously tied up inside the premium rate, which lacked transparency. So, as part of the ongoing fee the 1.95 per cent has no component for the SafeWork SA fee, excepting we do get a very small handling fee from SafeWork SA.

There is an additional 5 per cent that is added at collection time for SafeWork SA, but that is specifically for SafeWork SA. It is about 5 per cent of the premium, but that is not calculated by ReturnToWork SA; that is a number that is given to us by SafeWork SA which we then collect on behalf of SafeWork SA, and that goes out with the premium notices.

Mr MARSHALL: You currently have two claims agents. Did you renegotiate the contract with those claims agents in light of the new scheme starting on 1 July?

Mr McCARTHY: It is being done right now.

Mr MARSHALL: That has not concluded yet?

Mr McCARTHY: No, because they are annual contracts. They are not financial year contracts, they are annual, so we negotiate those by the end of September to be ready to come in for 1 January.

Mr MARSHALL: If it is an annual contract, can you confirm what the payments to the two claims agents were last year?

Mr McCARTHY: I can, but I need to be accurate on that. I would like to take that on notice if I could.

Mr MARSHALL: Either last calendar year or last financial year would be helpful. Would you envisage that the workload for the claims agents going forward would be significantly diminished under the new scheme than the old scheme, and is this the reason for the revision of the contract?

Mr McCARTHY: There are two reasons for the revision of the contract; one is that there will be a change in the type of service they provide, in that there is a reduction in the long tail nature of the claim. So, yes, we would from July 2017 onwards, which is the two-year run-off for the old scheme. We have a transition period where we will get the old scheme running off and the new scheme building up, but from July 2017 onwards, yes, we would envisage that there would be a reduction not so much in the activity but in the resources required. It is a much smaller scheme, so to speak. We are renegotiating the contracts around the fees for the type of service that will be required, but also being very specific about what that service is.

Mr MARSHALL: The negotiation that is going on at the moment, is that on an ongoing basis or do you renegotiate them on an annual basis?

Mr McCARTHY: It will be until the contracts expire. The contracts actually expire in July 2017.

Mr MARSHALL: That is exactly the same time as you are envisaging that there will be a significantly diminished workload. Has there been any discussion about the transfer of any other work from the ReturnToWork organisation to those entities to compensate or to give them additional work in lieu of a diminished workload going forward?

Mr McCARTHY: They have certainly asked us questions about what other opportunities there might be, but there has been no decision made around if anything might be able to be done in that space, but it is certainly a question that they have asked.

The CHAIR: I have just had a message that we should be directing our questions through the minister, but we all know what we are doing. We are looking at you first and then you have to direct—

Mr McCARTHY: Sorry.

The CHAIR: No, that is alright. We just need to be procedural.

Mr MARSHALL: Who is sending these messages?

The CHAIR: The ether. Anyway, next question.

Mr MARSHALL: I have completely lost my place now with the ether interfering.

Mr McCARTHY: You were asking if there was any consideration around additional work.

Mr MARSHALL: You are saying that it has not been finalised, that there has been an approach but negotiations are still taking place. I am interested to know whether there was any increased activity in the lead-up to 30 June this year, either in terms of claims submitted or redemptions sought.

The Hon. J.R. RAU: The answer to that is yes to both.

Mr MARSHALL: Can you give us a bit more detail on that, minister?

The Hon. J.R. RAU: I will let Greg say a few things about this in a moment. I made it fairly clear to Greg and to the board my view, and I think ultimately they came to a similar conclusion—that it would be useful for as many people who were long-term claimants on the scheme as possible to be removed from the scheme voluntarily before the new scheme came into operation.

What had been a previous policy embraced by WorkCover, of basically no payouts for people to get them off the scheme—no redemptions—was changed for the purposes of making a once in a lifetime offer for the tail of the old scheme. Offers went out to about 1,200-odd people, originally, something in that order. As at the present time, about 520 have been paid out by way of redemptions, another 155 have indicated that they will accept an offer but are still working through the odds and ends of the process, and another 159 have indicated that they would reject the offer of redemption.

I think the attitude that has been taken is that for every one of those people we can separate from the scheme and let them get on with their lives, that is good for them and it is good for the scheme, and it also means that come two years' time they are not going to get a sudden moment when they realise it is all over. So, yes, there has been a deliberate policy to try to deal with those people and give them an opportunity to remove themselves from the scheme, and many of them have taken that up.

Mr McCARTHY: Just to answer your question, about whether there been a sudden influx in new claims, the answer is, no, we have actually had a reduction in claims.

Mr MARSHALL: No additional claims activity in the lead-up—

Mr McCARTHY: Claims activity, that is a different issue; in terms of new claims, no. We have certainly seen an increase in applications, particularly around the WPI assessment, because there were some strict time frames around that, as you would expect. So, it was not unexpected, but there certainly was a lot more activity in that space around the assessment.

The Hon. J.R. RAU: That is activity based on existing claims rather than an avalanche of new claims coming in; that is the point.

Mr MARSHALL: Yes, but I wonder whether that was taken into account with the actuarial advice in December.

Mr McCARTHY: Absolutely, it was, yes.

Mr MARSHALL: It was envisaged that there would be a flurry of claim activity leading up to the 30 June deadline?

Mr McCARTHY: Absolutely, yes; it has all been valued. I have been around the scheme for too long not to understand what the dynamics of change means.

The Hon. J.R. RAU: The other thing is that it is probably worth mentioning that the gateway provisions for the scheme are now different from what they previously were. I expect to see a continuing reduction in the new claim situation over time.

Mr MARSHALL: How does the average premium cost of 1.95 per cent compare with the equivalent cost of self-insurance in South Australia? Do you monitor that?

Mr McCARTHY: Yes, we do, but not in terms of working out an average, because they are all individual employers. What we can say is that if we compare what we would call our large employers, because that is what you compare them to—because the South Australian scheme is predominantly a small business scheme—and if you look at the performance of what I would call the larger employers, it is almost comparable. There are some very good performing employers that still insure within the scheme. They do very good job of managing their risk.

If you isolated out, for example, all the employers that pay over half a million dollars in premium, of which there are not that many—I think off the top of my head it is about less than 100, and, again, I can confirm that for you, but certainly less than 50 pay more than $1 million—the performance of those employers is reasonably good. There are few exceptions to that, but we have had an active program of working individually with those larger employers to help them understand what is driving their behaviour and what they can do to fix that.

Essentially, what we have been doing with the new service model in the scheme is trying to mirror what those larger employers do, including self-insureds, about they way they get in early and the way they support people in the workplace. That is the model that we are trying to mirror or emulate in terms of the mobile case management model we are rolling out to the small to medium employers.

So, what is it that employers that do things well do? They take control in the workplace, they mobilise quickly and they support both the employer and the injured worker when they get injured. That is what self-insureds to, that is what well-performing large employers do and that is what we are trying to emulate with the mobile case management model being rolled out to our small to medium employers. That is why we believe, since we started doing that a bit over 12 months ago, we have had these 20-odd per cent to nearly 30 per cent improvements in the various cohorts of return to work in the scheme.

Mr MARSHALL: How do you compare your rates compared to the LGA rate then?

Mr McCARTHY: I would have to have a look. I have not actually had a look at it as a rate. I would have to come back to you with that because we do not actually work out for self-insureds what their average premium rate might be because, as an employer, they would have a specific industry rate as opposed to an average across the scheme, but I could come back to you with that.

Mr MARSHALL: It is just that you said that you thought that the rate that you are charging is now comparable with people who are self-insured.

Mr McCARTHY: No, I didn't say that. I said that, if you looked at the large employers in the scheme, many of those perform very well and would perform comparably to self-insureds. Just simply being self-insured does not automatically mean that they perform well versus people in the scheme.

Mr MARSHALL: Do you envisage that, for example, there could be a flurry of self-insured employers returning to your scheme, and is that something you are actively seeking?

Mr McCARTHY: It is interesting that you say that. We have got a number, and I mean a number, of what I would call the smaller self-insureds. There are some people who, in size, would just naturally be self-insureds. This scheme is quite unique in that it has a very, very high number of self-insureds compared to other jurisdictions around Australia. There are many self-insureds in this scheme who, if it were not for the way in which the scheme has performed in the past, you would wonder why they would be self-insured.

I can say to you that a good number, and I mean a good number, of self-insured employers have approached us to help them understand what coming back to the scheme might mean for them. They are not the large ones, they are certainly not the ones who employ a couple of thousand of people, but the ones who employ one to 300 people certainly are looking.

The Hon. J.R. RAU: Can I just mention there, too, that there are a couple of factors that might lead some of those employers to consider doing that. One of the factors of course is that the scheme is performing better and the cost of the scheme to the employer is better. I think some people are looking at that and saying maybe that is competitive from a business point of view.

The second thing is that, if you are outside the scheme, you are still responsible for the long-term care of people who are severely injured. With people who are severely injured and are over 30 per cent WPI assessed, if you are outside the scheme, they remain your responsibility indefinitely, whereas if you are in the scheme then they are the scheme's responsibility. If you are very large like Coles or Woolworths or somebody, that is possibly not a big issue but, at some point in time, depending on the nature of the industry I suppose, people may consider whether or not it is better not to have that risk potentially on their books.

Mr MARSHALL: So, we have the interesting situation in South Australia where one insurance scheme run by the government we are basically turning over to the private sector and, in another insurance scheme operated by the government, we are going to go out and try to get people off the private scheme into the government scheme.

The Hon. J.R. RAU: They will vote with their feet if they think it is good but, yes, if they want to come back, we would love to have them.

Mr MARSHALL: What administration fee is paid to ReturnToWorkSA by self-insured employers in South Australia?

Mr McCARTHY: Can I take that on notice? I will come back to you with the exact figures.

Mr MARSHALL: Do you know how that fee is calculated?

Mr McCARTHY: Yes, we do. I will need to come back to you with that. It is a formula, so it is not something I can just rattle off the top of my head.

Mr MARSHALL: Can you give an overview of the average premium spread with regard to different industries? Do you do that analysis and is that published? For example, do you publish a rate that the agriculture sector pays?

Mr McCARTHY: Yes, we do—absolutely.

Mr MARSHALL: You do. Is that in a schedule that can be provided to us?

Mr McCARTHY: Yes it is.

Mr MARSHALL: Thank you very much. Do you compare that to other interstate industry rates?

Mr McCARTHY: We can get comparisons of other industry rates, yes.

The Hon. J.R. RAU: Can I just mention something else, too, that I think is very impressive about what Greg and his team have done. They have got some pretty sophisticated computer tools available to them which actually produce proactive risk management opportunities for the corporation.

A whole bunch of data comes in from the insured group of people and there is a program which analyses that data and actually throws up flags for the risk management part of the business to actually say, 'Hang on, this employer looks like they need a bit of help,' and people actually go out there and speak to the employer. So, there is a proactive element to all of this as well, not just a reactive element.

Mr MARSHALL: I just have some questions regarding employee numbers, so if we could turn to page 86 of Budget Paper 3, which has got the schedule for full-time equivalents. It has the schedule there for ReturnToWorkSA. Can you tell me how many employees you had at 30 June 2014? I have the 2015 number here, which is 273.8 employees. Is that an increase or a decrease of where we were 12 months ago?

Mr McCARTHY: It is about the same, but I would have to come back to you with the exact numbers.

Mr MARSHALL: So there were no additional staff required during the transition period?

Mr McCARTHY: Only in respect of what I would call the ICT activity or IT activity. Obviously, we had additional contractor requirements in order to meet the demand for the scheme reform.

Mr MARSHALL: They were not employees of WorkCover; that was a contractual arrangement?

Mr McCARTHY: They were individually contracted or contracted through various means, but we did have to increase our capability in the area of IT in order to meet the very heavy demands placed on us for the IT needs in respect of the reform process, but that is essentially winding down now.

Mr MARSHALL: You are envisaging a substantial drop—about 10 per cent of your workforce—over the next 12 months but, interestingly, beyond the change of the scheme, which really simplifies as of 30 June, there is no reduction whatsoever. What is the reason for that?

Mr McCARTHY: Because we have not given full consideration to that at this point. As we see what unfolds in the new scheme, we do anticipate that there will be opportunities to consider what ReturnToWorkSA should look like in that longer term. For this year, we have simply looked at it just on this horizon of bedding down the new scheme.

Mr MARSHALL: So we should not read too much into the estimates not diminishing after 30 June 2017?

Mr McCARTHY: No.

Mr MARSHALL: You would envisage that there would be—

Mr McCARTHY: There is quite a lot of work that will be going on in the new year in that space.

Mr MARSHALL: You do not want to put a figure on it now?

Mr McCARTHY: No.

Mr MARSHALL: No—very wise. With regard to reducing that number, how will you go about doing that? Will it be a redundancy? Will it be an offer of a TVSP? What will be the methodology for the 10 per cent reduction in your work staff this year?

Mr McCARTHY: I have to be, again, upfront and say that the longer-term strategy for that will be formulated in the new year and I imagine it will be a combination of a number of those opportunities.

Mr MARSHALL: Can I ask some questions regarding Budget Paper 4, Volume 1, page 46 in regard to the establishment of the South Australian Employment Tribunal. What was the total amount of funding paid by ReturnToWorkSA for the implementation of the South Australian Employment Tribunal?

Mr McCARTHY: I will need to come back to you with the exact numbers. I think I do have it here somewhere.

The Hon. J.R. RAU: The information I have suggests that, as at 6 July this year, the establishment cost of the Employment Tribunal incurred to date was $432,385.08.

Mr MARSHALL: Was that paid by ReturnToWorkSA or was that someone else?

Mr McCARTHY: Yes.

The Hon. J.R. RAU: Yes; the answer is yes, it was paid by them.

Mr MARSHALL: It says here, on page 46:

The $0.8 million increase in expenses and income is primarily due to additional funding received from ReturnToWorkSA for the implementation of the [SA] Employment Tribunal.

That is a bit higher than the number you just quoted.

Mr McCARTHY: I would need to come back to you with the exact numbers, but certainly they have come in under. I know it is unusual for this, but it is our understanding that they have come in under what they expected they would need.

Mr MARSHALL: This was only published a couple of weeks ago, and it is out by a factor of 100 per cent.

Mr McCARTHY: I would need to come back to you with the exact numbers, but I think it is a better outcome than what was initially indicated.

Mr MARSHALL: Was that money allocated for a specific purpose with regard to the establishment of the tribunal? Was it IT system related, or a fit-out of an office, or—

The Hon. J.R. RAU: Again, perhaps if we—we will get the detail.

Mr MARSHALL: I would just be interested in the breakdown, whether it was a new IT system, or a new office fit-out, or what it was that—here it says $0.8 million, but you are saying $432,000.

The Hon. J.R. RAU: That is the information I have here, but I think it is probably best that we get a comprehensive answer for you on those things.

Mr MARSHALL: Will ReturnToWorkSA be providing any ongoing funding to the tribunal?

The Hon. J.R. RAU: Yes. Because the tribunal is in effect the dispute resolution arm of the whole scheme, the scheme, in effect, through its premium-raising funds the whole apparatus, including the dispute resolution apparatus. So, yes, it will be ongoing.

Mr MARSHALL: What do you envisage that cost to be?

The Hon. J.R. RAU: Again, I will have to get back to you on that. This is nothing, more or less, than a follow-on of the existing arrangements in effect. The WorkCover scheme supported the WorkCover tribunal, so it is basically a carryon of that same basic structure.

Mr KNOLL: Has the minister been contacted by the Police Association about the concerns with return-to-work legislation? There was a particular case of Senior Constable Brett Gibbons in relation to ongoing issues, and potential problems in the line of duty. Has the minister provided a response to that?

The Hon. J.R. RAU: I would need to check. I know, off the top of my head, that the Police Association has raised with my office general questions about the implications of the return-to-work legislation for police officers. As I recall, to the best of my recollection, those general discussions were then—I think minister Piccolo may have been contacted about those, but I am just working from memory there; I cannot say. As to the particular individual you are talking about, I would have to get back to you about that.

The CHAIR: What budget line are you looking at, member for Schubert?

Mr KNOLL: We are back to Budget Paper 3, page 73, third paragraph. Just as a follow-up: there are no specific proposals by the government to treat the police as a separate category and potentially provide them with a different set of rules, I suppose, especially in regard to the two-year cap or—

The Hon. J.R. RAU: Not at this stage. I certainly have a view that if there were to be special, in effect, employment conditions for police, the return-to-work legislation is the wrong vehicle for dealing with those matters. They would be better dealt with under the Police Act or some other instrument which is particular to police. That is my view.

Mr MARSHALL: Back to Budget Paper 4, Volume 1, page 46, relating to the South Australian Employment Tribunal. Has the government given any further consideration to including this tribunal under the SACAT arrangements?

The Hon. J.R. RAU: No, not since last year, when we had that debate here. I think since that time things have actually tumbled out in a way where it is fortunate the two were not together. I think the likelihood of them being in the same space is diminishing as time goes along because, to put it frankly, SACAT is a very different creature to SAET, in a number of respects, and I will go high level through them.

The first one is SACAT was always intended to be, and I hope continues to be, not a court for the purposes of the constitutional arrangements. That is significant, because there is a whole bunch of things that something that is not a court can and cannot do which are quite different to what a court can and cannot do.

There is a case which has been causing a lot of havoc around the place called Kable, and Kable is a case about what anything that is a chapter III court cannot do. So I was very keen that we had at least one place in South Australia that is not a chapter III court and SACAT is not, at least to the best of my knowledge, a chapter III court. The employment tribunal, on the other hand, definitely is a court, according to the constitutional classifications.

The second point I would make is that, if you look at the personnel within SACAT, you have a Supreme Court judge who is the president, a District Court judge who is the deputy president, and the rest of them are at a relatively more (and I am not being disrespectful) junior level in terms of their experience, and they are certainly not necessarily all people who are legally qualified, etc. If you look at the employment tribunal, basically, everybody who is on that tribunal is a District Court judge or equivalent, so they are two quite different bodies. I think the idea of, in effect, putting two very different creatures together in the same place is not a good idea and it is not something I am thinking of.

Mr MARSHALL: So I should not read anything into the comments in your own budget papers on page 45 of Budget Paper 4, Volume 1 where it says:

The [South Australian Employment Tribunal] will have similar functions, powers and operating approach as the South Australian Civil and Administrative Tribunal. It will provide efficient and cost-effective processes for all parties involved, act with as little formality and technicality as possible and be flexible in the way in which it conducts its business.

The Hon. J.R. RAU: All of that is true and fair comment but I do not think Treasury officials are particularly interested in the nuances of Kable, and so on.

My point is: yes, they are both intended to be simple, accessible, user-friendly places but the actual methodology of their operation is very different and one of them is going to be able to make orders and final determinations and such things and punish people for contempt and the other is not going to be able to do any of those things. So they are quite different.

Mr MARSHALL: I have a question on Budget Paper 4, Volume 3, page 146. It refers to the self-insured injury management system and a total project cost of $300,000. Can you tell us what that is for?

Mr McCARTHY: I will need to take that on notice.

Mr MARSHALL: I presume it is for a computer system which, according to this document, was meant to be finished in June 2015. Is there a new IT system for the self-insured injury management system?

Mr McCARTHY: No. I will have to take that on notice.

Mr KNOLL: I have a question on SAET at Budget Paper 4, Volume 1, page 46. Can the minister confirm if Leah McLay is a conciliation officer in the South Australian Employment Tribunal? The reason I ask is that it was gazetted but it does not appear on the website.

The Hon. J.R. RAU: I will check.

Mr KNOLL: The second question I will ask, and you can take it on notice if you like, is whether or not Leah McLay is going to be appointed as the new registrar of the South Australian Employment Tribunal?

The Hon. J.R. RAU: I think that is the case, but I want to be absolutely certain. I will let you know

Mr KNOLL: Whilst we are on that topic, there is obviously a current registrar; I think his name is John Correll. Do we understand what is going to happen to him? Is he going to be terminated? Will he receive a redundancy, a TVSP or something along those lines?

The Hon. J.R. RAU: Sorry, I have just been advised that Leah McLay is currently the acting registrar. As to Mr Correll, my understanding is that he and Ms McLay are working together. As you would appreciate, at the moment we have the old scheme, which is winding down, and we have the new scheme, which is winding up. My understanding is that for the time being they are both required but, again, I will try to find out whether I have anything further I can add by way of information about that.

Mr KNOLL: As an aside to that, no final decision has been made on the future of Mr Correll in terms of his ongoing employment?

The Hon. J.R. RAU: Again, I would need to check to be able to give you an answer I am confident in.

The CHAIR: We propose to leave that line open and add to it the Department of the Premier and Cabinet.