Department of State Development, $674,320,000

Administered Items for the Department of State Development, $7,629,000

Membership:

Mr Knoll substituted for Mr Marshall.

Mr van Holst Pellekaan substituted for Mr Tarzia.

Minister:

Hon. A. Koutsantonis, Treasurer, Minister for Finance, Minister for State Development, Minister for Mineral Resources and Energy, Minister for Small Business.

Departmental Advisers:

Dr D. Russell, Chief Executive, Department of State Development.

Dr P. Heithersay, Deputy Chief Executive, Department of State Development.

Mr R. Janssan, Executive Director, Strategy and Business Services, Department of State Development.

Mr T. Tyne, Executive Director, Mineral Resources, Department of State Development.

Mr V. Duffy, Executive Director, Energy Markets and Programs, Department of State Development.

Mr B. Goldstein, Executive Director, Energy Resources, Department of State Development.

Mr N. Panagopoulos, Director, Resource Royalties, Department of State Development.

The CHAIR: I declare the proposed payments open for examination and refer members to Agency Statements, Volume 4. I call on the minister to make an opening statement, if he wishes.

The Hon. A. KOUTSANTONIS: No, thank you.

The CHAIR: Does the lead speaker wish to make an opening statement?

Mr VAN HOLST PELLEKAAN: Yes, I do.

The CHAIR: Before you go ahead, I ask that the advisers to be introduced and then you can make your statement.

The Hon. A. KOUTSANTONIS: Dr Don Russell is the Chief Executive of the Department of State Development. Dr Paul Heithersay is the Deputy Chief Executive. Mr Rick Janssan is the Executive Director of Strategy and Business Services. Behind me, the very graceful looking fellow is Mr Ted Tyne, who is the Executive Director of Mineral Resources. Alongside him, with the Port Power tie, is Vince Duffy, Executive Director of Energy Markets and Programs. Behind him is Mr Barry Goldstein, who will give you a bad joke by the end of the day. He is the Executive Director of Energy Resources. Mr Nick Panagopoulos is the Director of Resource Royalties.

Mr VAN HOLST PELLEKAAN: I will make a very brief opening statement on behalf of myself and the opposition. Mineral resources and energy is a very broad area and it is an area in which the opposition has great interest and seeks to be as supportive as is absolutely possible. With regard to the mining industry, this is an incredibly important sector with lots of challenges with a decrease in demand worldwide and ever-increasing environmental obligations, which have certainly put pressure on players in this sector.

Of course, there are positives as well: it is a very mature market, technology is improving all the time and, as I am sure we would all agree, there is great room for growth within South Australia in this sector. It is a very important employer and of course contributes to our exports but, yes, it is going through some very difficult times at the moment. And I would like to acknowledge and thank those who work safely in the resources and energy sector and contribute to our state's development.

With regard to energy, it is a particularly complex area of work and covers one of household's most basic expectations which is reliable, safe and affordable electricity all the way through to some of the most complex and new technology available in the world. It is, of course, governed by regulations that come from state, federal and independent regulators; so it is a very complex area of work. Certainly, the opposition supports all people who lead or contribute in any way whatsoever within these industries.

My first question for the minister is from Budget Paper 5, page 57. Looking specifically at extractive royalties applied to local government operations, of the 68 councils in South Australia how many councils will be affected by this new tax?

The Hon. A. KOUTSANTONIS: I do not know how many; hopefully all of them because I do not want them competing with the private sector. I support the idea of competitive neutrality. If private operators are being priced out of the market because of government owned or council-owned quarries, that is an unfair advantage on the public sector against the private sector, and I would hope that, unless there is market failure, all councils do what they can to ensure that the private sector is getting as much work as it possibly can.

Mr VAN HOLST PELLEKAAN: If you do not know how many councils, how did you or your department come up with the estimate of the government revenue from the change in tax?

The Hon. A. KOUTSANTONIS: The Local Government Association currently lists 68 councils within South Australia; 39 of these had production of extractive minerals in the last 12 months from borrow pits not regulated under the Mining Act.

Mr VAN HOLST PELLEKAAN: Was that 58?

The Hon. A. KOUTSANTONIS: Thirty-nine, that are not regulated under the Mining Act. Currently, there are 19 councils—14 of those in the metro area—that are not providing any information to the department with respect to extractive mineral production.

Mr VAN HOLST PELLEKAAN: When you got that information from the LGA did they give you any other information or give you any feedback?

The Hon. A. KOUTSANTONIS: I think it is fair to say that Mr Burgess from the LGA is very unhappy with the government's policy, and I have undertaken to work with him where there is legitimate market failure, that is, where there are council areas that cannot access private quarries that have not ever competed with private quarries, and I am happy to look at that. By and large, I will not have metropolitan councils—large councils, wealthy councils—pricing the private sector out of the market using ratepayers' subsidy. That is completely unfair, and I will not allow it.

Mr VAN HOLST PELLEKAAN: Minister, in those discussions with Mr Burgess, President of the LGA, can you share with us how you might help those small councils that are not wealthy but are genuinely put under extraordinary pressure because of this?

The Hon. A. KOUTSANTONIS: No, because I am working with the LGA to come up with a solution. I have asked the LGA to go away and think about it and work with Treasury and State Development about the best options, and I will look at that when they come back with something. I do not want to pre-empt any of it.

Mr VAN HOLST PELLEKAAN: As part of those discussions, are you considering deferring the increase the way you agreed to for the extractive minerals increase a year ago?

The Hon. A. KOUTSANTONIS: Let us be clear about it: the intent of the competitive neutrality principle that I am trying to implement is that if there are private quarries that can offer roadbase on commercial terms to councils and they are being undercut by councils through their own pits because they do not pay royalties, that is a practice that needs to end and they need to be factoring in the cost of their extractives with royalties.

I am not after the revenue. What I am after is the private sector not being priced out of the market. If the LGA come up with a formula, I will look at it; I am happy to because my intent is not to stop roadworks occurring, my intent is to stop ratepayers subsidising public quarries at the expense of the private operators who take all the risks.

Mr VAN HOLST PELLEKAAN: Minister, before deciding upon this policy, did you consult with the Minister for Local Government and Regional Development and, if so, what was his feedback?

The Hon. A. KOUTSANTONIS: The cabinet considerations are confidential.

The CHAIR: Member for MacKillop.

The Hon. A. KOUTSANTONIS: Are you going to declare your interest first?

Mr WILLIAMS: No, I do not have any interest in a borrow pit.

The CHAIR: What page are we on?

Mr WILLIAMS: The same page, the same line of questioning. With the minister's answers, I am concerned whether the minister fully understands what is a borrow pit. To give an example, the road between Bordertown in the north of my electorate and Pinnaroo, which I think is now in Chaffey and was in Hammond, runs through a very isolated part of South Australia; in fact, a fair length of that road runs through the Ngarkat National Park.

When that road was constructed, I suspect back in the 1970s, the constructing authorities, which I think were the then highways department and the local councils, simply went along and extracted material from beside where the road now exists, and you can still see the hollows where they went in and extracted the materials to build up the road. None of the materials on that road actually came out of a crusher or quarry situation, other than the finally top coat. So, it was not competing with any commercial quarrier but simply was taking material from the verge of where the existing road is and putting it onto the road, and that is what a borrow pit is.

The Hon. A. KOUTSANTONIS: I understand, and I have a lot of sympathy for those cases. What I do not have sympathy for are the large scale industrial operations being run by some metropolitan councils.

Mr WILLIAMS: My understanding is that, if a council runs an industrial quarry as such, it is already subject to royalties.

The Hon. A. KOUTSANTONIS: Well, it is now.

Mr WILLIAMS: It has been for a period, as far as I am aware.

The Hon. A. KOUTSANTONIS: Well, you need to speak to the extractives industry that came to see me and lobbied very intensely for this. I will be putting this Hansard and your concerns to them directly.

Mr VAN HOLST PELLEKAAN: I have heard what the minister said about his reasons for wanting to do this, and that his focus is on the large wealthy metropolitan councils. Can the minister share with us, from the information your department has or you got from the LGA, whether this is something every metropolitan council is involved with?

The Hon. A. KOUTSANTONIS: Before I address your question I will go back to the member for MacKillop to clear it up. Yes, if they were running a quarry under the Mining Act they were paying royalties, but nearly two million tonnes of extractives are coming out of councils per year that are unlevied. Of that two million tonnes, what proportion is putting the private sector at a competitive disadvantage? That is what I am trying to address. I think we can come up with a happy compromise with the LGA, but this two million tonnes per annum has to end.

Mr VAN HOLST PELLEKAAN: I will follow that a bit more. Are you saying the two million has to end or the two million that is in competition with the private sector?

The Hon. A. KOUTSANTONIS: Yes. My intent is not to stop councils working cleverly with their ratepayers to make sure that people have access to their properties in rural and remote areas. What I do want to stop are some councils that are taking advantage of the Local Government Act and are quarrying nearly two million tonnes per year and not paying any royalties on them. Again, it is not the money I am interested in but the competitive advantage they have over private providers. That needs to end.

Mr VAN HOLST PELLEKAAN: How will the government monitor the extraction? I suspect it is a very difficult thing to know what every council is doing in every council area and understand if they are digging up to improve their own roads and keep their own costs down. How will you actually monitor the extraction to achieve your goal?

The Hon. A. KOUTSANTONIS: I would imagine that governance within local councils would require them to report accurately to the regulator. We have audits, but basically it is an honour system and I would be very disappointed, and the Auditor-General would be very disappointed, if we found that some councils were ignoring statute.

Mr VAN HOLST PELLEKAAN: The question that you were not able to hear before was: are all the metropolitan councils actually involved in this at the moment—quarrying without extractive minerals licences?

The Hon. A. KOUTSANTONIS: We are basically on a mapping exercise here to find out where a lot of the councils are getting their extractives from, because it is an honour system. I can give you a more detailed answer of the councils involved but, of the two million tonnes that I am talking about, they are all regional councils.

Mr VAN HOLST PELLEKAAN: They are all—

The Hon. A. KOUTSANTONIS: Regional councils.

Mr VAN HOLST PELLEKAAN: In a previous answer you said your focus was the wealthy.

The Hon. A. KOUTSANTONIS: I do not want metropolitan councils using borrow pits from regional councils and not paying extractives on it.

Mr VAN HOLST PELLEKAAN: You are not suggesting it is happening at the moment.

The Hon. A. KOUTSANTONIS: I do not know; we have to find out.

Mr VAN HOLST PELLEKAAN: I refer to Budget Paper 3, page 55. In the 2014-15 budget, royalty revenue for 2013-14 was estimated at $295 million and the current budget estimates that 2016-17 royalty revenues will increase to $315 million, so a $20 million increase. For this expected revenue to be fully realised, would commodity prices have to reach the same levels as they were back in 2013-14 or is that based on a significant increase in volume—because it is not clear to me where that increase would come from?

The Hon. A. KOUTSANTONIS: I will get Nick Panagopoulos to answer that question for you. He is my expert on royalties.

Mr PANAGOPOULOS: Effectively, for our royalties forecasting we extract information from Consensus Economics, so we use their forecast of future numbers. Whilst they are not great, the forward forecasts are for a stabilisation of some of the commodity prices and some slight increases in the longer term. So going out to—I think your question was 2016-17 or 2017-18—

Mr VAN HOLST PELLEKAAN: Yes, it was essentially the difference between 2013-14 and 2016-17, given that prices have changed a lot in that time.

Mr PANAGOPOULOS: We are seeing an upswing in prices, with some production increase as well.

Mr VAN HOLST PELLEKAAN: An upswing of prices?

Mr PANAGOPOULOS: From what they are today, yes, absolutely.

Mr VAN HOLST PELLEKAAN: From where they were in 2013-14? So you are forecasting higher prices in 2016-17 than they were in 2013-14, if it is an upswing?

Mr PANAGOPOULOS: Yes, that is right. Our forward forecasts include an upswing of prices, full-year effects of expiry of new mine rates and—

Mr VAN HOLST PELLEKAAN: Sorry, expiry of?

Mr PANAGOPOULOS: Expiry of new mine rates, so full-year cycle of expiry of new mine rates. Between now and 2016-17 we have the full-year impact of the Iluka mine new mine rate expiry, the full-year impact of the OZ Minerals mine new mine expiry, and by the middle of June 2016 we will have the OneSteel or the Arrium new mine rates expiring.

Mr VAN HOLST PELLEKAAN: Thanks, Mr Panagopoulos. Minister, can you share with the committee the projections in upswing in prices by sector? I think most people would be expecting an upswing in gas, but I do not think that most people would be expecting an upswing in oil or minerals, so if you could tell us sector by sector. Even if it is just in a percentage sense, just something that you could share in a relatively short space of time, that would be good, because I think that information would be fairly surprising.

The Hon. A. KOUTSANTONIS: Rather than us attempt now to clumsily formulate a document we do not have—because we do not have the breakdown you are asking for in a document that we can easily quote from—what I think we will do to give you a more accurate picture is we will go away and give you an analysis on the basis of what we think is the best way to answer your question.

Mr VAN HOLST PELLEKAAN: That would be great. On the same page, royalty revenue for 2014-15 is estimated to be $70 million lower than its previous forecast. What percentage of the $70 million less than expected was as a result of lower commodity prices? It is actually all wrapped up in the same question. If you are happy, you can take that on notice. It is different years particularly but it is the same information.

The Hon. A. KOUTSANTONIS: I am advised that the 2014-15 forecast is $38 million lower than the forecast in December 2014. The total royalty revenue forecast for 2014-15 of $252.7 million previously was $290.7 million. It comprised a decrease of $15.3 million in minerals, and a decrease of $22.7 million in petroleum. The key drivers of the movement include an electrical failure of BHP Billiton's primary mill at Olympic Dam on 28 January. The impact of that is nearly 70,000 tonnes lower production between February and September 2015. It is a royalty reduction of nearly $15 million. Another driver is the continued deterioration in the price of crude and other petroleum products, including LPG ethane. In January 2015 Brent crude dropped below $US48. That is a six-year low. That accounts for a large percentage of the movement.

In terms of our 2015-16 forecast, it is $15.2 million lower than previously forecast. The total forecast for 2015-16 of $288.7 million, previously $303.9 million, is comprised of a decrease of $100,000 in minerals and a decrease of $15.3 million in petroleum. The key drivers of the forecast are an upside from the softening of the Australian dollar, lower forecast price expectations for petroleum products and an anticipated improvement in mineral commodity prices in Australian dollar terms across the board. It is not a good picture going forward, and any further international instability would make it worse.

Mr VAN HOLST PELLEKAAN: Minister, in combination with the answer to the previous question about looking to royalties to 2016-17 expecting an upswing, that would mean that there must be a very dramatic upswing that is forecast. Given what you just said about prices going down now, my question before was from 2013-14 to 2016-17.

The Hon. A. KOUTSANTONIS: I understand. My guess is that you are going to have a very long career in this place. My guess is that you will be here in 2016-2017 probably asking me questions about the forecasts I made in my 2015 budget in comparison with the 2016-17 budget and we can compare those.

The thing about this business is that it is cyclical and very hard to predict. I do not think it is a return to trend. If it were a return to trend, it would be a much larger upswing, but these are a consistent improvement that has been approved by Treasury as well. But are they perfect? No, they are not. You only need to speak to your colleagues Mr Bill Marmion and Mr Nahan in Western Australia to understand the imprecise way people forecast royalties.

Mr VAN HOLST PELLEKAAN: In the same book, page 57, back onto extractive royalties but not a new impost on councils and looking at the announcement from last year, what percentage of companies chose to take up the opportunity to defer their royalty payments?

The Hon. A. KOUTSANTONIS: I am advised, one.

Mr VAN HOLST PELLEKAAN: Has there been any reduction in or any impact on the volume of extractives at all connected to the tax?

The Hon. A. KOUTSANTONIS: Not that I am advised, no.

Mr VAN HOLST PELLEKAAN: Does the government expect to receive $3.2 million from this measure on average over the forward estimates?

The Hon. A. KOUTSANTONIS: That is the advice I have received, yes.

Mr VAN HOLST PELLEKAAN: I refer to Budget Paper 4, Volume 4, page 90, exploration expenditure, 'economic priority 1 Unlocking the full potential of South Australia's resources'. Minister, did the government meet its objective to increase private investment in mineral and energy resources' annual exploration expenditure from $648 million, in 2013-14, to $750 million, in 2014-15, as per its economic priority 1?

The Hon. A. KOUTSANTONIS: Did we meet our targets for petroleum exploration?

Mr VAN HOLST PELLEKAAN: Yes, minister. Did the government meet its objective to increase private investment in mineral and energy resources' annual exploration expenditure from $648 million, in 2013-14, to $750 million, in 2014-15, as per the government's economic priority 1?

The Hon. A. KOUTSANTONIS: I will not have an answer until September, I am advised, but we set targets, and the Premier said this when we set these ambitious targets: we will not meet all of them, but let us begin.

Mr VAN HOLST PELLEKAAN: There is nothing wrong with sensible, ambitious targets. I certainly agree with that, but of course they do have to be based on solid foundation and good reason for people to believe that there—

The Hon. A. KOUTSANTONIS: Well, I will give you an example. The combined minerals and petroleum exploration figures for the 12 months to March 2015 reached a record high of $698.7 million for South Australia. That is not June to June, but that is 12 months to March 2015. I think it is important that we set targets, even if we are embarrassed if we do not meet them, because it pushes the Public Service, it pushes the regulators, it pushes industry to try to do everything we can to facilitate investment.

Mr VAN HOLST PELLEKAAN: The 5,000 additional jobs in this sector that were announced as a target in November 2014, is that an example of an embarrassing target or is that still on track or—

The Hon. A. KOUTSANTONIS: I do not take any pleasure whatsoever in seeing jobs in the minerals sector being lost—

Mr VAN HOLST PELLEKAAN: Neither do I.

The Hon. A. KOUTSANTONIS: I did not say you did. However, I will say this: this government works very hard to make the state an appealing place to invest. There are policies that do hamper investment. Indeed, this parliament has received evidence from the largest ASX company in this state about the dangers of regulatory risk, and that regulatory risk has been highlighted by policies of the opposition. I am not saying you are to blame for us not meeting this target, I am not saying that at all.

Am I embarrassed about not having met this target? Anyone involved in the minerals industry knows that there are commodity prices that swing up and down, and we will do everything we can to facilitate jobs growth. Am I embarrassed by it? No, I am disappointed, as I imagine members opposite would be as well—other than, perhaps, some in the South-East who do not particularly care too much for the oil and gas sector.

Mr VAN HOLST PELLEKAAN: I am not aware of any members of the opposition who—

The Hon. A. KOUTSANTONIS: Really? Because Tony Pasin and the member for Mount Gambier have Lock the Gate signs in the front of their offices, so perhaps you should speak to them. I am advised that Lock the Gate actually runs its operations out of Mr Pasin's office.

Mr VAN HOLST PELLEKAAN: I was in the member for Mount Gambier's office about two weeks ago and I did not see that sign there.

The Hon. A. KOUTSANTONIS: I have a picture of it. If you like I can send it to you.

Mr VAN HOLST PELLEKAAN: It might be a very old picture.

The CHAIR: That will not be necessary. Next question.

Mr VAN HOLST PELLEKAAN: Minister, back on track. Regarding this target, I say quite openly that I accept ambitious targets, no problem at all, but they have to be based on a strong foundation. What was the foundation in November for that 5,000 jobs promise?

The Hon. A. KOUTSANTONIS: Well, like the Western Australian government and like the commonwealth Treasurer, we were hoping there would be a recovery in the iron ore price, that we would see a recovery in the copper price, that we would see the Australian dollar come down, that we would see an improvement in petroleum and brent oil price, and we hoped to see more investment. Unfortunately that has not occurred, unfortunately there have been a lot of international factors that have caused commodity prices to drop, and they have dropped to levels that are unprecedented. However, I am optimistic about their recovery, and the one thing I know about this industry is that if commodity prices recover, and recover quickly, so does their investment.

Mr VAN HOLST PELLEKAAN: Did you have advice in November that those hopes were well founded? Did you have advice from the department or externally that—

The Hon. A. KOUTSANTONIS: I always act on the advice of my department. I have complete faith in them.

Mr VAN HOLST PELLEKAAN: —told you that those hopes you have just outlined for us were realistic, that there was a good foundation for them to be true?

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: Would you share that advice with the committee, on notice?

The Hon. A. KOUTSANTONIS: It depends. If some of the information from it has been derived from the private sector it may be commercial in confidence, but we will see what we can give you.

Mr VAN HOLST PELLEKAAN: I would not expect that any information or advice you would have about international price expectations would be commercial-in-confidence so —

The Hon. A. KOUTSANTONIS: It would be dependent; gas, for example, is sold through contract derived by direct negotiation by some of these companies. So it does involve a lot of internal information they share with us, because we are one of the best regulatory regimes anywhere in Australia for gas. Hence the concern of such large companies about the policies of the opposition.

Mr VAN HOLST PELLEKAAN: I do not accept that, that's for sure—

The Hon. A. KOUTSANTONIS: I will refer you to Mr James Baulderstone, who is the vice president of eastern operations at Santos, and his testimony to the committee that you voted with the Greens to establish.

Mr VAN HOLST PELLEKAAN: There is no opposition policy that causes Mr Baulderstone or anyone else any concern.

The Hon. A. KOUTSANTONIS: You should speak to them, because they highlighted —

Mr VAN HOLST PELLEKAAN: What actually happened was that we agreed to allow a Labor-dominated and Labor-chaired committee that was already doing the work to continue doing the work. Your colleagues had already commenced the work, your colleagues are completely in charge of that committee. Now, they will act independently of government and the parliament to do the best work they possibly can, but it is a Labor member-dominated committee that started that work. We certainly did agree to allow them to continue—

The Hon. A. KOUTSANTONIS: With the Greens, yes. You and the Greens voted together to establish this inquiry and Labor voted against it. Yes, you're right.

Mr VAN HOLST PELLEKAAN: Your party had already started—

The Hon. A. KOUTSANTONIS: It probably derived when you had that karaoke session with your leader, singing Never Tear Us Apart.

The CHAIR: Order!

Mr VAN HOLST PELLEKAAN: Minister, I have sung karaoke once in my life. It was about 30 years ago. I did such a bad job, it's never happened since.

The CHAIR: I am not sure what budget line karaoke carries.

Members interjecting:

The CHAIR: Order, everybody! I would like a question.

The Hon. A. KOUTSANTONIS: I don't think you'd ever sing karaoke with the Greens.

Mr VAN HOLST PELLEKAAN: No, I will not sing karaoke with anybody!

The CHAIR: Order! Member for Stuart, let's have a question.

Mr VAN HOLST PELLEKAAN: Minister, Budget Paper 4, Volume 4, page 90, Exploration Expenditure. Do you think that the Labor Party's gas reservation policy will have any impact on exploration in our state?

The Hon. A. KOUTSANTONIS: Labor has no reservation policy, and I will quote from the APPEA news release, because I am sure that SA Liberal media, when they asked you, or whoever it was who told you, to ask this question, there is no—

Mr VAN HOLST PELLEKAAN: I can assure you, nobody has asked me to ask a question.

The Hon. A. KOUTSANTONIS: The APPEA tweet that you should have read was: 'Labor conference right to reject domestic LNG reservation policy.' So there is no reservation policy and you should go back to your offices and tell whichever young upstart who told you to ask that question that they are wrong. We have no reservation policy.

The only government that has a reservation policy in this country is the Western Australian Liberal government, which reserves gas. The South Australian Labor government will never reserve onshore gas within our jurisdiction, point blank. We took it to the election, we stand by it.

Mr VAN HOLST PELLEKAAN: And the opposition has no policy to—

The Hon. A. KOUTSANTONIS: I know you have policies. I agree.

Mr VAN HOLST PELLEKAAN: —and we have no policy to do anything similar. I support you in the position that you have just taken—

The Hon. A. KOUTSANTONIS: Oh good, you should tell your leader.

Mr VAN HOLST PELLEKAAN: —and I think this is a very good example of where politics can run things off the rails because the discussion we are having now is exactly the same as the discussion about fracking. Neither of us has a policy in either area which will hurt the industry—

The Hon. A. KOUTSANTONIS: Au contraire, because—

Mr VAN HOLST PELLEKAAN: —but your party is investigating one.

The Hon. A. KOUTSANTONIS: No, we are not. We did not initiative the investigation. He voted with the Greens to establish it. The Labor members in the upper house voted against it. It is a policy you took to the election and I will be distributing your Hansard to The Border Watch to inform them that their local member of parliament had misinformed his constituents when the Liberal Party said they had a policy of establishing the inquiry into unconventional gas, because you have just stated to this committee that it is not your policy. I find that very interesting.

Mr VAN HOLST PELLEKAAN: No, minister: what I said is we have no policy against it. That is not the same thing as not being prepared—

The Hon. A. KOUTSANTONIS: So other than moving it and voting for it you're not—

Mr VAN HOLST PELLEKAAN: —to allow a Labor-dominated committee to investigate it—

The Hon. A. KOUTSANTONIS: That's right, so other than voting for it and moving it and taking it to the election you have no policy on it.

Mr VAN HOLST PELLEKAAN: —and maybe that is a big difference. We are prepared to listen to people.

The CHAIR: I ask all members to remember that the time we have here today is precious. If we could confine ourselves to questions and answers, we will get a lot further down the track. Can we have our next question and try to just concentrate on questions and answers?

Mr VAN HOLST PELLEKAAN: Yes, Chair, I will, and I hope everybody reads the Hansard extremely carefully.

The CHAIR: That is not a question.

Members interjecting:

The CHAIR: I will have to suspend the committee if we cannot continue in a normal manner.

Mr VAN HOLST PELLEKAAN: Budget Paper 4, Volume 4, page 88, Net cost of sub-program. Given the concerns the minister has mentioned in the mineral resources and energy sector due to commodity prices, can the minister explain why the minister is cutting the mineral resources budget by approximately $6 million, or 15 per cent, and increasing revenues from fees and charges?

The Hon. A. KOUTSANTONIS: Can I summarise your question? Tell me if I am right or wrong. You are claiming that there is an increase in fees and charges and a drop-off in investment. Is that what you are saying?

Mr VAN HOLST PELLEKAAN: Sorry, say that again.

The Hon. A. KOUTSANTONIS: Are you saying that there is an increase in fees and charges and a decrease in investment?

Mr VAN HOLST PELLEKAAN: A decrease in departmental expenditure.

The Hon. A. KOUTSANTONIS: There are a lot of series of one-offs that have been budgeted for that are coming to an end. It sets out on that page that the $4.8 million decrease in expense is due to a PACE program coming to the end, the Brukunga Rock Dumps Strategy is a planned reduction, changes in overhead allocations between financial years, a reduction in the expenditure for the Mining and Petroleum Services Centre for Excellence, the Eyre Peninsula Land Use Support Initiative ends in 14-15. The $800,000 increase in income is due to the increase of cost recovery through regulated fees and charges. We do a lot of work, we are catching up with charging industry the full costs of regulation, as we should.

Mr VAN HOLST PELLEKAAN: And that catch-up, minister, what is that all about? Is that fees and charges that have not been charged and there is outstanding debt or is it new fees and charges?

The Hon. A. KOUTSANTONIS: Where are you quoting from? The catch-up?

Mr VAN HOLST PELLEKAAN: No, the answer you just gave. You talked about the $0.8 million increase in income primarily due to increased recovery cost charges through regulated fees and charges. Is that outstanding debt that you are bringing forward that you did not charge before or is it actually imposing new fees and charges?

The Hon. A. KOUTSANTONIS: We made amendments to the Mining Act. The government requires the delivery of all regulatory services move towards a full cost recovery model in order for the department to continue its high level of delivery of regulatory services and to improve administration of the mining assessments and increase administrative efficiencies.

The government's 2014-15 Mid-Year Budget Review amendments to the Mining Regulations in 2011 were introduced. These amendments include: a 5 per cent increase to all administrative fees under schedules 1 and 2 of the Mining Regulations to better reflect the real costs associated with the government's management of exploration and mining activity under the Mining Act; the introduction of an assessment fee for lease and licence applications to better reflect the extensive regulatory costs to the government, particularly in relation to major mining proposals; and general amendments to remove legal inconsistencies with the Mining Act 1971 to improve clarity of ministerial powers and processes.

The assessment fee introduced a sliding scale fee structure for determination of the assessment component of the application fee to mining lease, retention lease and miscellaneous purpose licence applications. The increase in administrative fees, and in particular the assessment fee, were modelled on three key factors: one, the recovery of costs incurred by the government to efficiently and effectively undertake its administrative and regulatory services; two, alignment with our state's major project development fees charged under the Development Act 1993; and finally, a comparison with similar fees charged in other Australian jurisdictions.

It is important to note, I am advised, that where practical, applicants are encouraged to submit their mining term applications for civil projects as a consolidated package. For applications lodged as a package, the department through statutory delegation has a discretion to waive multiple assessment fees to reflect intent to cap the total costs of assessment fees and ensure fees are commensurate with the complexity of the applications.

There is one more point I want to make. To give you an example, as to the Rex Minerals application on Yorke Peninsula, the statutory fees and charges involved in that mining application were $1,500 and I can assure the committee the cost of assessing that application was far in excess of $1,500. It was dramatically higher than that, well above half a million dollars.

Mr VAN HOLST PELLEKAAN: Thanks, minister. You gave a lot of examples but essentially the overwhelming majority of it was cost recovery.

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: Does the industry get any additional service for these increased fees?

The Hon. A. KOUTSANTONIS: No, because South Australia was attempting to build an industry and now that we have a core base it is now appropriate that we move to a model where there is full cost recovery for regulating. The service they give is they get to maintain, I believe, the best regulators in the country who have no equal. I say that quite passionately and I think on the quiet, member, you would probably agree.

Mr VAN HOLST PELLEKAAN: Minister, you mentioned that the reason for decreasing expenditure was because there is a range of four or five projects that were coming to a conclusion. SACOME, in their submission to you, certainly did ask that you do not decrease expenditure and that you and the government keep productively and usefully and effectively spending money in this sector on some new projects. What was the reason for not accepting that request, or not acquiescing to that request?

The Hon. A. KOUTSANTONIS: There are always demands on the budget. Industry associations are always asking for more money to be spent in their areas. The government is committed to bringing the budget into balance and providing a surplus. The government is committed to its long-range tax cuts that are unprecedented in their size and scope, and they all cost money. If the opposition wants to increase expenditure they can. We are investing nearly half a million dollars on a copper strategy which has been welcomed by industry not only in South Australia but nationally. So, we are still investing. We are still spending money on programs like PACE, but we are living within our means. The government must bring the budget into balance.

Mr VAN HOLST PELLEKAAN: Thank you, minister. Budget Paper 4, Volume 4, page 90, Exploration expenditure, again, and in reference to the government's economic priority No. 1: Unlocking the full potential of SA's resources. You would be familiar with this document. Given it is nearly 12 months since the government set these nine objectives to achieve success, please update the committee on how you are progressing with those nine targets.

The Hon. A. KOUTSANTONIS: I am advised that the Premier launched the ten economic priorities in 2014, which aims to take bold action and seize new opportunities to develop and build our economy and a strong partnership between industry, government and the community. Economic priority 1: Unlocking the full potential of South Australia's resources, energy and renewable assets, will assist the delivery of a globally significant and competitive minerals and energy resources sector, which is critical to delivering jobs, growth and prosperity for South Australia's economy.

A five-point plan to unlock the full potential of South Australia's resources, energy and renewable assets includes: PACE; implementing recommendations of the oil and gas round table, sealing the Strzelecki Track; the South Australia copper strategy; a low carbon investment plan; and the South Australia iron ore strategy.

The five-point plan directly supports improving trade, strengthening linkages between business, universities, research institutions and government to drive innovation, commercialising more intellectual property and creating round tables for South Australia's strategic growth industries. Key strategies to deliver early progress on the priority objectives include—

Mr VAN HOLST PELLEKAAN: Excuse me for a second, minister. I am asking specifically about the nine points that are at the bottom of this page in that document: within 12 months, to achieve success in this priority (being priority No. 1) South Australia will need to do these nine things. So, I am just looking for an update on that progress, please.

The Hon. A. KOUTSANTONIS: Well, I am getting to that. The five-point plan directly supports improving trade, strengthening linkages between business—I have already read that. Where are we?

Objectives: increase private investment in mineral and energy resources annual exploration expenditure from $648 million in 2013-14 to $750 million in 2014-15. I have given you a précis of how that is going. The combined mineral exploration figures for 2014 were lower than 2013-14. Mineral exploration expenditure has fallen below SA's strategic plan target of $200 million per annum due to ongoing challenging global financial conditions impacting on exploration companies. The estimated mineral exploration for 2014-15 is $120 million. The government policy initiatives to stimulate private investment are being considered.

The government is currently finalising the business case to identify the most prospective options for a bulk commodity port on Spencer Gulf and will be making an announcement later this year. The fall in the international spot price for iron ore from a high of $186 per tonne in February 2011 to, I think, even lower than $60 a tonne now has negatively impacted on demand for South Australian iron ore. The iron ore strategy is being developed to promote the marketing of this commodity and drive demand for South Australian magnetite as a global source of premium product for steelmaking.

We are working to assist BHP Billiton through the demonstration plant, the heap leach demonstration trial. All necessary approvals, both state and federal, are in place; however, we are currently awaiting the commercial investment decision by the board. We want to achieve $140 million in exploration and appraisal investment within the Cooper Basin. Product price decline is affecting onshore exploration and appraisal budgets. The low oil price put an appraisal component into all development projects. Hence for 2015, development, exploration and appraisal will all count towards licence commitments, which is very useful to a lot of the juniors.

Exploration investment in the offshore Bight Basin remains on track, I am advised, with companies preparing for drilling commitments in 2016-17 through to 2019. We also have an aim of progressing implementation of recommendations of the Roundtable for Oil and Gas Projects in South Australia, with 90 of the 125 recommendations underway. More than 90 recommendations have been implemented in part or were in progress by the end of 2014—a total of 70 per cent of recommendations are underway.

In February, the government opened the Onshore Petroleum Centre of Excellence training facility at Tonsley, in collaboration with Santos, Senex and TAFE. This facility elevates South Australia as the national premier destination for learning and innovation in onshore oil and gas. We had an oil and gas supplier forum held on 23 June with over 200 attendees. I could keep on going through all these, but I suspect it is just going to take up all your time. Would you rather I just answer this on notice?

Mr VAN HOLST PELLEKAAN: On notice; that would be great. Okay.

The Hon. A. KOUTSANTONIS: There is a whole series of things we have completed.

Mr VAN HOLST PELLEKAAN: Thanks. I refer to the same book, page 93, under highlights, Progressive recommendations of the regional mining infrastructure plan. At the SACOME lunch on 12 June last year, the government, through minister Mullighan, committed to build a business case for a port to be completed in 12 months—that commitment was given just over 12 months ago—and for a port to be built within four years. Has the business case been completed? I know it has not been released, but has it been completed?

The Hon. A. KOUTSANTONIS: I just read out that we will be releasing it later this year.

Mr VAN HOLST PELLEKAAN: Has it been completed?

The Hon. A. KOUTSANTONIS: I am not going to pre-empt the release of the report.

Mr VAN HOLST PELLEKAAN: Okay. Are you still on track, as a government, to build a port within four years?

The Hon. A. KOUTSANTONIS: The commitment is not for the South Australian taxpayer to build a port: the commitment is to build a business case, identify a location and incentivise, in every way possible, through approvals and easements and other regulatory means, the production and building of a port. The truth is that, while commodity prices are low, the South Australian government will not invest in an unusable port. I think the taxpayer would rightly condemn me if we built a port that no-one is going to use.

However, there are very good arguments for us investing in existing ports that can be easily expanded, that are already running, that can take more commodities—bulk commodity ports—and take more products out. I am looking at the member for Giles with great interest because Whyalla is a keen candidate and a very good candidate. My preference is the Upper Spencer Gulf, which I have a great affinity for. I would like to see them benefit the most from any investment in a port. Whyalla is a very good candidate. It is a shame Port Augusta is not deep enough.

Mr VAN HOLST PELLEKAAN: Minister, do you expect that private industry will make that investment within four years, as predicted?

The Hon. A. KOUTSANTONIS: If Iron Road or one of those other operations up there gets funding, if the iron ore price recovers, yes, I imagine it would, but again, we are in the hands of the international commodity markets. It is very, very difficult for them right now. I can say the business case is imminent.

Mr VAN HOLST PELLEKAAN: Good news, minister; I look forward to it. On the same page and same general issue of recommendations of the Regional Mining Infrastructure Plan, how many times did the Resources Infrastructure Taskforce meet in 2014-15?

The Hon. A. KOUTSANTONIS: We will have to take that on notice.

Mr VAN HOLST PELLEKAAN: Are there other objectives of the Regional Mining Infrastructure Plan that have been achieved yet?

The Hon. A. KOUTSANTONIS: The goal of it is to build infrastructure, mainly a bulk commodity port. The business case is working around developing a bulk commodity port and the infrastructure that relates to servicing that port and any mine that may be in play. I am very keen to make sure that there is third-party access for our farming communities to make sure that they can get their commodities out the door as fast as they can as well.

Mr VAN HOLST PELLEKAAN: Budget Paper 3, Budget Statement, page 55. I refer to the government's Building a Stronger South Australia—Future Fund document which says:

Contributions will be made when the budget is in an operating surplus position. This will occur from 2015-16 and it is proposed that payments into the fund would be based on:

seven per cent of total royalty revenues per annum

Is it still the expectation to put 7 per cent of royalty revenue in 2015-16 towards the future fund, subject to the budget being in surplus, of course?

The Hon. A. KOUTSANTONIS: Subject to the budget being in surplus, yes. Legislation will be introduced, and I refer to my earlier answer this morning when you were present, I think. Were you there?

Mr VAN HOLST PELLEKAAN: I was, yes. I have a couple of questions that link to some of the things that you said then. So, that is still the expectation—thanks, minister. I refer to Budget Paper 4, Volume 4, page 90, and the number of approvals. It says that two mines received final approval in 2013-14 and 2014-15. Which were the two, please?

The Hon. A. KOUTSANTONIS: Sorry, I am not following you.

Mr VAN HOLST PELLEKAAN: On page 90, it says, about a third of the way down under activity indicators, 'No. of final approvals for new mines'. Which were those mines?

The Hon. A. KOUTSANTONIS: I am advised that the two mines in question are the Rex Minerals Hillside copper, gold and iron ore project north of Ardrossan and the Havilah Portia gold project situated 120 kilometres north-west of Broken Hill. There has also been considered mining approval for the Uley graphite mine on the Lower Eyre Peninsula, Arrium Middleback Ranges and Hillgrove's life-of-mine extension for the Kanmantoo copper mine.

Mr VAN HOLST PELLEKAAN: Budget Paper 3, page 55. This is essentially about Rex Minerals, but under the category of royalty revenue. Has the government done calculations on future royalties from Rex Minerals Hillside mine based on its proposed downsizing and, if so, what are they?

The Hon. A. KOUTSANTONIS: I am advised that we have done no new modelling on any revised mining plan because the company is yet to submit its revised plan to the department.

Mr VAN HOLST PELLEKAAN: So the forecast mining royalties are based on the old plan which you know Rex does not expect to proceed with?

The Hon. A. KOUTSANTONIS: There is no forecast within any of our figures for any royalties from Rex Minerals.

Mr VAN HOLST PELLEKAAN: How will Rex Minerals' recent announcement of a smaller scale start-up project for their proposed Hillside mine impact the number of jobs forecast to come from that project?

The Hon. A. KOUTSANTONIS: In what respect?

Mr VAN HOLST PELLEKAAN: Given that they have flagged that they are going to have a downsized operation.

The Hon. A. KOUTSANTONIS: They have not submitted to us the revised plan so I cannot tell you.

Mr VAN HOLST PELLEKAAN: Would it be fair to assume that it would be less than the 500 that they proposed originally?

The Hon. A. KOUTSANTONIS: As long as they are not digging it by hand, but I do not know. I cannot make assumptions, but yes I think it is fair to say. But, again, jobs are about timing. You have a slower start-up, but you reach the ultimate expansion in the long-term so the overall jobs created could exceed 500. I am not sure I can give you an honest answer to that. I am not trying to be difficult, it is just that if you start smaller, you employ fewer people upfront, but over the life of the project, which could be 20 years, you could employ double the amount because commodity prices recover halfway through and you undertake more labour intensive mining techniques for whatever reason.

Mr VAN HOLST PELLEKAAN: Budget Paper 4, Volume 4, page 89. Looking at the highlight towards the middle of the page, 'Contributed to the continued growth of South Australia's mining industry through case management…' That is the third dot point. Can the government assure the local community that it will be given full information on the new mining plan now proposed by Rex Minerals planned under the smaller start-up which they are yet to share with you, I understand, and that this information will be made available to the public prior to the government's approval or otherwise of the changed operation? You can understand that the community is very interested to know what the changes mean.

The Hon. A. KOUTSANTONIS: Just so that we are clear, Rex have not submitted a revised work plan to us, so there is nothing for us to tell the community. When they do, we insist on a fully transparent application process, where the community is fully informed of the impacts, and we would want Rex to answer those concerns before any approval is given. That is how it worked previously.

What we have to grapple with in this parliament, and what they are grappling with in parliaments around Australia, is that mining encroaches on farming; it is a very emotional debate and I am glad that the Liberal Party are having it internally. It is just difficult, I understand that, and it is going to get more and more difficult as mines get deeper and people start looking for mines in areas that are more heavily populated.

It is a very difficult problem for members of the Liberal Party and, indeed, all rural members, and we are seeing it across the country. Transparency, I think, is our friend, and so as far as I am concerned the more information that people have the better.

Mr VAN HOLST PELLEKAAN: Thanks, minister—I agree with you wholeheartedly. It is going to get tougher and tougher as technology improves and potential mines are near more heavily populated areas, as you said. I have to be clear, too, in asking this lot of questions, that I do not want Rex to incur cost unnecessarily either. I do not want them to have to rehash the same work they have done before. I do not want them to have that burden.

The Hon. A. KOUTSANTONIS: Well, they may need to if they change their work plan completely.

Mr VAN HOLST PELLEKAAN: The community, of course, does have a concern that they had an approval for a big mine—let's say, to make it really simple—and they have now come back saying that they would like to do a smaller mine. The community is concerned that, because they had the tick for the big mine, they might automatically get the tick for the small mine. I will say again that I do not want Rex to have to incur a cost unnecessarily, but I appreciate your answer that the government, your department and Rex will be completely transparent with the community about all those potential changes.

The Hon. A. KOUTSANTONIS: There is nothing to be gained by not gaining your social licence.

Mr VAN HOLST PELLEKAAN: Minister, on the same page, and in fact on exactly the same line, please provide an update on the review of the approvals process, case management assessment and ultimate granting of mineral tenements for mining projects. I understand there is a review going on into those areas.

The Hon. A. KOUTSANTONIS: Sorry, where are you quoting from?

Mr VAN HOLST PELLEKAAN: The middle dot point that starts with, 'Contributed to the continued growth of South Australia's mining industry'. I understand that there is review going on into the approvals process, case management assessment and ultimate granting; is that not the case? There is no review?

The Hon. A. KOUTSANTONIS: The government always reviews its policies and procedures, especially its case management, to make sure what we are getting right and getting wrong. To clarify, I think the advice I am receiving from the department is that, after they do a major approval, they do an assessment on how they conducted themselves, whether they used best practice, whether they could have improved it, what went right, what went wrong. That is just in the ordinary day-to-day business of the department; they do that to themselves regularly and not something I have instructed them to do. Again, these are the best regulators in Australia and they are constantly testing themselves.

Mr VAN HOLST PELLEKAAN: I thought there was a review that finished in February this year.

The Hon. A. KOUTSANTONIS: I could be wrong; I will check and get back to you.

Mr VAN HOLST PELLEKAAN: As I mentioned before, there is an expectation that gas prices are likely to go up. It has been discussed in industry, it has been discussed in the media. Has the government done modelling on the impact on South Australian households of changes to gas prices once LNG is exported from Australia?

The Hon. A. KOUTSANTONIS: That is price parity, international price point—is that what you are talking about?

Mr VAN HOLST PELLEKAAN: Yes.

The Hon. A. KOUTSANTONIS: We have contracted Mr Paul Taliangis of Core Energy, I understand, to do some modelling, but that has only just begun.

Mr VAN HOLST PELLEKAAN: Will those results be made public?

The Hon. A. KOUTSANTONIS: I will assess that after I have received the report.

Mr VAN HOLST PELLEKAAN: Have you asked that company, Core Energy, to consider the potential impact of increases in gas prices on the cost of electricity, through gas being used to generate electricity? Do you see what I am getting at there? There is an impact on households through gas but then there is an indirect flow through to electricity prices.

The Hon. A. KOUTSANTONIS: No, we have not asked them to model the impact on electricity prices through gas generation.

Mr VAN HOLST PELLEKAAN: Sorry, have not?

The Hon. A. KOUTSANTONIS: Have not. We have asked them to impact the modelling of gross state product and tariffs for distribution through pipelines and the impact on price but not necessarily on generation—which is a secondary issue in terms of the inquiry; not in terms of its importance. As we get closer to that we might have a look at it depending, of course, on what our baseload is given our renewable energy target will be 50 per cent.

Mr VAN HOLST PELLEKAAN: Is it too late to do that? If you think about Torrens Island it is likely to have a big impact.

The Hon. A. KOUTSANTONIS: Yes; mind you, South Australia is awash with gas. The problem we have is that international customers are not that keen to pay very much for it; not as much as they used to for oil—depending on what the contracts are that our explorers and producers sign, and we do not have much of a line of sight into that, although the dashboard that AEMO will be putting up in Moomba may assist. However, by and large, will there be an impact? There may be. It could also be a positive impact; we will have to wait and see.

Mr VAN HOLST PELLEKAAN: Page 93, second paragraph from the bottom, 'Provide policy advice and coordination of energy market reforms, including national reforms.' Did the government support the South Australian Power Networks Bushfire Mitigation Program as proposed in the AER 2015-20 determination?

The Hon. A. KOUTSANTONIS: What we did was to give AER all the information it needed on current policies and practices, as a good jurisdiction should, and gave the regulator all the information it needed to make its decision. I do not think it assisted SA Power Networks' submission.

The CHAIR: Can you tell us what page and what volume you are using? We are just having trouble seeing it.

Mr VAN HOLST PELLEKAAN: Budget Paper 4, Volume 4, page 93.

The CHAIR: Thank you.

Mr VAN HOLST PELLEKAAN: So, the government provided existing requirements, existing expectations, but did not recommend for or against?

The Hon. A. KOUTSANTONIS: We gave the regulator all the information she needed to make an informed decision, but without a recommendation. She is the regulator. We do not own the assets, we do not regulate the assets, but when we were aware of SA Power Networks' submission we fully informed the regulator of all the information she would need to make an informed decision about their ask.

Mr VAN HOLST PELLEKAAN: I understand that, and I understand that it was the regulator's decision, but did you make a recommendation as part of your pack of information, as part of your submission?

The Hon. A. KOUTSANTONIS: I am not trying to be difficult: I am just saying that SA Power Networks is a large employer in South Australia and we do not want to do anything to hurt them, but we also gave the regulator all the information she needed to make an informed decision to protect consumers, and she did.

Mr VAN HOLST PELLEKAAN: Did you consult with the Minister for Emergency Services before making that submission or did the Minister for Emergency Services make his own submission?

The Hon. A. KOUTSANTONIS: We will take that question on notice.

Mr VAN HOLST PELLEKAAN: A similar question with regard to bushfire safety. SA Power Networks claim that electricity assets on average start 27 fires in high risk areas each year, so not a fire in a built-up area. What coordination is done with SAPN to mitigate the risk of bushfire as a result of electricity prices?

The Hon. A. KOUTSANTONIS: Mr Vince Duffy can give advice.

Mr VAN HOLST PELLEKAAN: Another capable adviser.

Membership:

Hon. T.R. Kenyon substituted for Mr Hughes.

The Hon. A. KOUTSANTONIS: I am advised that electricity network operators have operational plans in place to minimise the risk of bushfires started by electricity distribution network equipment. SAPN and ElectraNet have a program of work that aims to achieve line repair and vegetation clearance compliance by the start of the fire danger season. Section 53 of the Electricity Act 1996, which empowers network operators to disconnect electricity in high bushfire risk areas during extreme weather conditions, based on fire danger level ratings, to avert danger to lives and property, is critical in managing these risks.

It should be noted that a decision to switch off power pursuant to section 53 has occurred on very few occasions in the last decade. Fire danger levels are determined based on the forecast provided by the Bureau of Meteorology and the actual measured wind speeds. SAPN places advertisements in metropolitan and regional papers to advise customers that power may be disconnected during times of high fire danger. Due to the nature of rapidly changing weather conditions on days of catastrophic fire danger, the time frame to issue advance warnings of specific disconnections may be short.

In addition, SAPN provides written advice on the risk of unexpectedly using electricity supply during the summer months. The OTR (Office of the Regulator) regularly requests updates from network operators relating to the progress of achieving bushfire season preparedness. So, that is how we manage bushfire risks through electricity.

Mr VAN HOLST PELLEKAAN: How many members of the Power Line Environment Committee are required to be from the emergency services sector or have significant experience in that area?

The Hon. A. KOUTSANTONIS: I am advised none.

Mr VAN HOLST PELLEKAAN: Moving on to road safety and a similar context, SAPN proposed a $77.5 million road safety program for the 2015 to 2020 determination. I will assume that your answer will be very similar about putting a proposal forward, or putting information forward so that the regulator could make a decision. Can you tell me or take it on notice whether the government consulted with the Minister for Road Safety before providing that information?

The Hon. A. KOUTSANTONIS: I point out to the member that our submission is public and on the AER website, and I would refer him to that. If you would like a briefing on our submission and how we came to make that submission, I am happy to offer Mr Vince Duffy and Ms Rebecca Knights to give him that briefing, but it is public. We made it quite public.

Mr VAN HOLST PELLEKAAN: Okay. Can you take on notice about consultation with the Minister for Road Safety?

The Hon. A. KOUTSANTONIS: Sure.

Mr VAN HOLST PELLEKAAN: I want to turn to Alinta briefly. You and many of your advisers have been very involved with Alinta's decision, and I am fully aware that it is not a government decision, it is a private corporate decision. However, the government will have some significant responsibilities with regard to ongoing issues in the north of the state. Can I start by asking about future electricity supply—security. Once Alinta is gone—and while it has been declining for a long time, I understand they currently provide approximately 15 per cent of the state's electricity—the reality is that they are leaving because they cannot make money, because too often they lose money to competitors in the wind sector. However, the times that they do make money, they make that money because they are actually needed.

With regard to the government's responsibility to ensure an environment under which electricity is supplied affordably and reliably to households, what is the government doing in that space to make up for the fact that Alinta's production will not be in the market?

The Hon. A. KOUTSANTONIS: The Australian Energy Market Operator (AEMO) undertakes ongoing monitoring of the supply outlook in the market against minimum local generation and demand-side capacity requirements in each region. We are able to share with Victoria capacity via the Heywood and Murraylink interconnectors. AEMO has indicated that South Australian reserves are not projected to fall below the minimum reserve level until beyond 2023-24 under high, medium and low economic growth scenarios.

AEMO considers that a fall in electricity consumption in SA since 2011 has been driven by slower economic activity, energy efficiency, significant penetration of rooftop PV and a consumer response, which is quite good, commercial and residential, to rising electricity prices and energy efficiency. The medium growth short-term forecast by AEMO to 2016-17 showed that the annual energy is expected to decrease by an average of 1.3 per cent.

The NEM has delivered very high levels of reliability, with the generation and transmission supplies consistently exceeding the reliability standard of meeting demand 99.998 per cent of the time, measured against the standard of 0.002 per cent unserved energy; that is, energy not supplied to customers due to a lack of bulk capacity. We have achieved a reliability standard in all years except 2000 when there was high demand in South Australia and Victoria and a temporary loss of Victorian generation due to industrial action. Basically, there is plenty of capacity within the system. It is not expected to grow beyond that. There is plenty of safe interconnection.

Increasing the capability of the Heywood Interconnector from 460 megawatts to 650 megawatts in July 2016 will deliver greater access to generation invested at peak times, maintain reliability and facilitate the export of renewable energy out of South Australia. It also has the potential to reduce the level of frequency of extreme wholesale prices. I am quite confident that we will be fine. Like you said, if they were making money and the demand was there, it would not be an issue.

Mr VAN HOLST PELLEKAAN: Yes, that is true on average but there are times, days and weeks, where they make money, where without them there would not be enough electricity supply. Let us hope that that is—

The Hon. A. KOUTSANTONIS: That is not the advice that we have received from AEMO. If you could source that information, it would be very helpful to me.

Mr VAN HOLST PELLEKAAN: The source of the information is anecdotal, minister. I was told by somebody I believe that three weeks ago, for example, the interconnector was not able to supply enough electricity into South Australia. At the time, Alinta—and good luck to them—was pumping it out and making good money.

The Hon. A. KOUTSANTONIS: I am advised that that was a planned outage and that the market knew about it, so I would careful of anecdotal advice. I would encourage you to seek a briefing from Mr Matt Zema at the Australian Energy Market Operator on reliability and supply. I think that would be an important briefing for the opposition to have, rather than receive anecdotal evidence from people that you trust, no doubt. The example you are quoting was a planned outage.

Mr VAN HOLST PELLEKAAN: Thanks. Minister, I want to ask you about your overseas travel. This will not come as a surprise. I was here when the leader asked you about this before so I am not looking to cover that ground, but I do want to clarify whether it was two or three staff members that you took with you.

The Hon. A. KOUTSANTONIS: Two staff.

Mr VAN HOLST PELLEKAAN: It was two staff? Because that might have just been something that was misspoken in the—

The Hon. A. KOUTSANTONIS: There were three of us. I consider myself staff. I work for the Premier and the people.

Mr VAN HOLST PELLEKAAN: Minister, another thing that you mentioned was that one of the reasons you went to the mining conference in Canada was to refresh confidence in the state's resources sector. Can you expand on that, please?

The Hon. A. KOUTSANTONIS: You will not like the answer. I will be honest with you. I think the opposition's pronouncements during the campaign hurt bipartisanship. I know that you are pro-mining. I know that the member for Hartley is pro-mining. I know that the member for MacKillop is pro-mining. But there are people who are saying things that are frightening investors and I need to reassure them that South Australia is still a safe place to invest, regardless of what some members of the opposition think, and that there are more of them who support the resources sector than oppose it. What concerns the industry—and one day you may have to deal with this—is that political grandstanding can affect investment. Speak to Santos about the conduct of political parties in New South Wales and what that has done to their social licence and their investment profile. It hurts.

The CHAIR: This might be a good opportunity to change. You have one extra question?

The Hon. A. KOUTSANTONIS: I haven't finished.

Mr VAN HOLST PELLEKAAN: It is fortunate that you were able to take the trip, minister, before the ALP Liberal conference discussed gas reservation policy.

The Hon. A. KOUTSANTONIS: It was not a Liberal conference—

Mr VAN HOLST PELLEKAAN: I am sorry, the ALP national conference.

The Hon. A. KOUTSANTONIS: —it was a Labor conference, and we rejected gas reservation. The only government in Australia to reserve gas is the Western Australian Liberal government.

The CHAIR: We thank the minister and his advisers and ask for the new set of advisers to move in for our last session.

Membership:

Mr Duluk substituted for Mr Knoll.

Mr Tarzia substituted for Mr Williams.

Departmental Advisers:

Mr J. Chapman, Small Business Commissioner, Office of the Small Business Commissioner.

Dr D. Russell, Chief Executive, Department of State Development

Mr R. Janssan, Executive Director, Strategy and Business Services, Department of State Development.

Mr A. Reid, Deputy Executive Director, Manufacturing and Innovation, Department of State Development.

Mr I. Nightingale, Industry Participation Advocate, Department of the Premier and Cabinet.

The CHAIR: Do we have some new advisers, minister?

The Hon. A. KOUTSANTONIS: Yes, ma'am, we do. We have Mr John Chapman, South Australia's Small Business Commissioner, Mr Adam Reid, who is the Deputy Executive Director of Manufacturing and Innovation, and Mr Ian Nightingale, who is the Industry Participation Advocate. Dr Russell remains—as the constant in my life.

The CHAIR: Do you have a statement of any variety?

The Hon. A. KOUTSANTONIS: No.

The CHAIR: Do we have a lead member here on my left to make a statement of any variety?

Mr TARZIA: No statement at the moment.

The CHAIR: Straight into questions?

Mr TARZIA: Yes. What was the total expenditure for the Office of the Small Business Commissioner in 2013-14 and 2014-15?

The CHAIR: What page are we on?

Mr TARZIA: I refer to Budget Paper 4, Volume 4, page 128. I understand that the question was taken on notice by the minister during the last estimates, and despite a reminder letter that was sent in April, no response was received. You can take it on notice.

The Hon. A. KOUTSANTONIS: I will ask the Small Business Commissioner to respond.

Mr CHAPMAN: In terms of 2015-16, the appropriation from the department is $1.301 million, and the budgeted income that will be applied from the retail bonds fund will be $341,000, bringing the overall revenue to $1.657 million at this stage.

Mr VAN HOLST PELLEKAAN: Why is the budget being cut for the Small Business Commissioner?

The Hon. A. KOUTSANTONIS: A program called It's My Business came to a conclusion. I expect that the former chief of staff of John Olsen to be a prudent financial manager and to run his operations in a way that will not bloat the Public Service, who will spend money efficiently—

Mr Tarzia interjecting:

The Hon. A. KOUTSANTONIS: —like all good Liberals should. Perhaps you should learn from some.

Mr VAN HOLST PELLEKAAN: Everybody should; even the smallest household should spend their money efficiently.

The Hon. A. KOUTSANTONIS: Hear, hear!

Mr VAN HOLST PELLEKAAN: Are you saying that program is the reason for the reduction of $200,000 from the 2014-15 budget to the 2015-16 budget, or the reduction of $400,000 from the 2014-15 estimated actual to the 2015-16 budget?

Mr CHAPMAN: I think will take that one on notice because there is a degree of technicality there that I would like to be 100 per cent sure of.

Mr VAN HOLST PELLEKAAN: That would be great, thank you very much. On the same page, minister, what was the FTE allocation for the Office of the Small Business Commissioner in 2014-15 and the budget for 2015-16?

The Hon. A. KOUTSANTONIS: I am advised that the FTE allocation is 11 for both years, for 2015-16 and 2016-17.

Mr VAN HOLST PELLEKAAN: And it is staying the same for 2014-15?

The Hon. A. KOUTSANTONIS: I do not have the 2014-15 numbers here, but am advised by the Small Business Commissioner that he has not changed staffing.

Mr VAN HOLST PELLEKAAN: Same page, what was the cost of the consultants to undertake an independent review of the statistical information within the Small Business Commissioner's annual report?

The Hon. A. KOUTSANTONIS: I am advised that it was $22,000.

Mr VAN HOLST PELLEKAAN: What steps have been taken to ensure that accurate recording of this statistical information takes place in the future?

The Hon. A. KOUTSANTONIS: I invite the Small Business Commissioner to answer that for you.

Mr CHAPMAN: In terms of the processes we have put in place, we have a regular case review meeting. The cases, in terms of sign off, come to me or the deputy, Frank Zumbo, with a cover sheet in terms of the process, and I personally review which case, check it against the sales force system in terms of how it is recorded. As I say, we regularly go through the cases, so there is an ongoing monitoring of the process.

Mr VAN HOLST PELLEKAAN: How was the error detected? Was it the transition from one commissioner to another? Did the new commissioner come in and detect the error? How was the problem identified?

The Hon. A. KOUTSANTONIS: The commissioner advises me that he was preparing the annual report, saw some anomalies and started asking some questions—

Mr VAN HOLST PELLEKAAN: This was the current commissioner?

The Hon. A. KOUTSANTONIS: The new, current commissioner. That is about as much detail as I can go into because, as you can imagine, there are other investigations that are ongoing.

Mr VAN HOLST PELLEKAAN: Okay. Did the consultant's report identify a cause, a reason for the misreporting?

The Hon. A. KOUTSANTONIS: The advice I have received is that the consultants did not delve into intent: they delved into the discrepancies and identified the discrepancies. That was the nature of their investigation, about ascertaining real numbers, but there are other ongoing investigations that I cannot talk about.

Mr VAN HOLST PELLEKAAN: The other one is delving into intent?

The Hon. A. KOUTSANTONIS: I would imagine, but I am not going to comment on it publicly at all.

Mr VAN HOLST PELLEKAAN: On the same page, Small Business Commissioner, how long was the previous small business commissioner inactive in his position prior to tendering his resignation?

The Hon. A. KOUTSANTONIS: I would have to get back to you on that. I do not have that with me. You are talking about the time from when he ceased?

Mr VAN HOLST PELLEKAAN: The time between stepping aside and resigning.

The Hon. A. KOUTSANTONIS: I will have to get that for you on notice.

Mr VAN HOLST PELLEKAAN: Was a termination payment made to the former small business commissioner?

The Hon. A. KOUTSANTONIS: I would have to take that on notice for you.

Mr DULUK: At pages 100 and 101, ABS figures show that SA had the lowest business entry rate for any mainland state or territory in 2013-14, at 11.4 per cent compared with the national average of 13.7 per cent. The number of businesses operating in South Australia also reduced in this period, with 14 fewer businesses operating by June 2014. Can the minister please advise how cutting the small business programs is helping SA businesses stay in business?

The Hon. A. KOUTSANTONIS: I would like you to reference the ABS data first. What months?

Mr DULUK: It was ABS data, June 2010 to June 2014. I am happy to table it for you, minister.

The Hon. A. KOUTSANTONIS: That is a full year before the most recent state budget. The most recent state budget probably brings about the most comprehensive piece of tax reform for small business in the state's history. Programs are one aspect: tax cuts are really putting rubber on the road, for lack of a better term, and $670 million has been returned to small business, on top of what I consider to be a very good small business package from the commonwealth government which Treasurer Hockey brought down in the most recent federal budget. His tax cuts, along with our tax cuts, make small business a lot more productive and a lot more affordable, and start-ups do especially well out of the South Australian government's tax cuts, on top of the WorkCover changes that were passed in a bipartisan way in this parliament.

Using the opposition's favourite measure, that is, the Institute of Public Affairs, we have gone from the highest taxing ranking state, on their modelling, to the lowest. What are we doing for small business? We are cutting their taxes, getting out of their way, giving them the opportunity to succeed and rewarding the risk takers, those active in the economy, and so is Treasurer Hockey.

Mr DULUK: I suppose there has been a long list of demise in programs, including the Business Enterprise Centre, the Youth Entrepreneur scheme, the small business emergency help line, the SME Investment Development Program and Innovate SA, and I suppose they were all pretty good programs that were helping small businesses. How is the demise of these programs going to help small business go forward?

The Hon. A. KOUTSANTONIS: I do not believe that the government should be subsidising business programs. Businesses are time poor as it is. I do not think the government has the expertise to tell small business how to operate. I think entrepreneurism should be encouraged by the government getting out of their way. I believe entrepreneurism should flourish and the government should not be taxing them when they attempt to transact.

Mr DULUK: So the Unlocking Capital for Jobs program is not seen as a government subsidy of business?

The Hon. A. KOUTSANTONIS: No, it is a market failure. When there is market failure, like with building indemnity insurance, I am happy to intervene; but, where there is no market failure, I believe business can stand on their own two feet, and we have given them the budget and the tax system to do so. I am surprised that there is anyone in the Liberal Party who does not agree with everything I am saying.

Mr DULUK: Just asking questions, minister. In terms of the Unlocking Capital for Jobs program, what is the guarantee fee that Treasury charges?

The Hon. A. KOUTSANTONIS: That is on another line and I have answered those questions in a previous estimates committee hearing.

Mr DULUK: But they also relate to this budget paper as well.

The Hon. A. KOUTSANTONIS: Where? Can you reference it?

Mr DULUK: Within page 100 and 101, because it is in unlocking the $50 million of bank lending to small and medium businesses on page 101.

The Hon. A. KOUTSANTONIS: Yes, but that line is held by SAFA and we took some questions on notice about the guarantee fee and I will get back to the member who asked that. If you like I can carbon copy you on that answer.

Mr DULUK: That would be very kind.

The Hon. A. KOUTSANTONIS: I'm here to help. I'm from the government.

The Hon. T.R. KENYON: Except that you are getting out of the way.

The Hon. A. KOUTSANTONIS: Except that I'm getting out of the way.

Mr VAN HOLST PELLEKAAN: I refer to Budget Paper 4, Volume 4, page 100, Program 7: Opportunities for Small Business regarding expenses. Minister, when you became the Minister for Small Business in March 2010, the expenditure for the Opportunities for Small Business program was $4.1 million in the 2010-11 year to provide support for small businesses in South Australia. In 2014-15 the estimated result for the same program is $2.78 million. Please explain why we have seen this 45 per cent decrease in the cut in the government program.

The Hon. A. KOUTSANTONIS: Because I would much rather invest in tax cuts.

Mr VAN HOLST PELLEKAAN: Sorry?

The Hon. A. KOUTSANTONIS: I would much rather invest in tax cuts. My view is direct subsidy does not work. Businesses do not need handouts, they need a hand up, and what I am doing with the government is cutting their taxes—unprecedented tax cuts. Businesses can now buy plant and equipment from another operator or competitor and not pay tax. They can buy another business and not pay tax on goodwill. They can buy intellectual property from another business and not pay tax.

It is a competitive advantage coupled with removing conveyance duty on real property that no other business community has anywhere in Australia. That is why a $2 million program or a $4 million program will not change the fortunes of South Australian small business. What will change their fortunes is comprehensive tax reform, structural reform, about when they pay tax and how they pay those taxes.

It serves the state no purpose to have me tax a family or an entrepreneur 4.95 per cent conveyance duty on them buying a business, and I can tell you a grant will not change their life either. What they need is structural reform. If they want to take a risk, if they want to go out and risk their home, they have an idea they want to sell, I have no place in their transaction, and that is what this government has done. I hope you support us.

Mr VAN HOLST PELLEKAAN: Minister, I agree with that principle.

The Hon. A. KOUTSANTONIS: Thank you.

Mr VAN HOLST PELLEKAAN: No problem at all, but if you want to take that principle to the nth degree you would remove all of the funding which you have not done—

The Hon. A. KOUTSANTONIS: Well, you know—

Mr VAN HOLST PELLEKAAN: —because the reality is that—

The Hon. A. KOUTSANTONIS: —there are some small businesses that still require something.

Mr VAN HOLST PELLEKAAN: —there is a case for both. There is certainly a strong case for the tax cuts, no problem at all, but there are also businesses which will benefit from government programs to support them as well. It is not as simple as taking away all the support, giving them commercial and economic benefits and throwing them in the ocean and letting them swim. I do support what you said but there is certainly a place for supporting these small businesses. If you really believed everything that you just said to the nth degree—I am not saying that you didn't mean it—you would have removed the program entirely, so you do see value in keeping part of the program but at approximately half the level.

The Hon. A. KOUTSANTONIS: If I take your argument to the nth degree, what you are saying to me is that I should have cut all the programs because you support the tax cuts and, if I take your ideology to the nth degree, you would support no government subsidy of any type, but we are all different and we all have our own personal bias and prejudice towards some programs or another. My belief is that the government should live within its means, should provide budget surpluses and we should lower taxes where possible, and that is what this Labor government is delivering—budget surpluses, lower expenditure, paying down debt and reducing taxes—something no Liberal government has ever been able to do.

Mr VAN HOLST PELLEKAAN: Minister, I was not suggesting to get rid of it entirely. What I am asking is why did you cut it by 45 per cent over the last five—

The Hon. A. KOUTSANTONIS: Because I gave them bigger tax cuts.

Mr VAN HOLST PELLEKAAN: —or so years? Those programs are still incredibly important.

The Hon. A. KOUTSANTONIS: If I asked small business whether they would prefer massive tax cuts that are game-changers according to former Liberal Party staffers like Daniel Gannon or an increase of a program that runs subsidies of $2 million, I think overwhelmingly the answer would be, 'We'll take the tax cuts.' It's just me.

Mr VAN HOLST PELLEKAAN: Thank you, minister. Budget Paper 3: Budget Statement, page 35, looking at the extend payroll tax concessions. I was here this morning when this area was canvassed with the leader so I do not plan to go over all of that, but obviously there is more to talk about. In your answer this morning to the Leader of the Opposition—

The Hon. A. KOUTSANTONIS: The current Leader of the Opposition.

Mr VAN HOLST PELLEKAAN: —you said that the payroll tax is a very, very efficient tax and you said that removing payroll tax would only lead to wages growth. If that is the case, what is the logic for increasing the threshold temporarily year by year?

The Hon. A. KOUTSANTONIS: There is a very good reason for it because a lot of small businesses that are growing rapidly are paying payroll tax for the first time and it can be quite a shock to a lot of those businesses. What this does is help them ease into it and ease into it because they are growing their payroll for the first time. They may have increased sales or they are just growing in the orders they may have, whatever the reason their thresholds are growing. This is a very good, progressive manner of easing people into the payroll tax scheme.

My fundamental belief is that if I had listened to the opposition before the election and just cut payroll tax and nothing else, that only would have benefitted 10 per cent of South Australian businesses. Yes, they employ a large number of people but it would not have been a tax cut for all business, and those tax cuts would have been easily consumed by wages growth in the following years. What we need in this economy is wages restraint, we need improved productivity and tax cuts.

The government and the public sector has a policy of 2.5 per cent wages growth, which is only 1.4 per cent above inflation, so it is still a real wage increase but it is moderate. We have cut taxes and we are improving productivity, so we are ticking all the boxes.

Mr VAN HOLST PELLEKAAN: Having said that removing payroll tax would only lead to wages growth and having also said this morning that you have not done any modelling on payroll tax and the impact on jobs and the economy, is there other information? What is the basis upon which—

The Hon. A. KOUTSANTONIS: Well, speaking with Chris Richardson from Deloitte Access Economics and his public talks through the tax review process, which I note the opposition did not make a submission to. He spoke at length to business about the dangers of politicians advocating payroll tax cuts and what that would mean for productivity; that payroll tax cuts would lead to wages growth and would hurt productivity; that payroll tax was a very good measure to keep wages restrained. He also talked at length about the improved structural efficiency of the economy by removing the dead weight loss of conveyance duty.

Other economists share his views. You can speak to any of the accounting agencies here in Adelaide, or the national ones, former Treasury secretaries like Ken Henry and Martin Parkinson, they all say the same thing, that payroll tax is a very efficient tax and it is not a tax that companies and small businesses pay, it is generally their customers and consumers who pay the payroll tax on items and if payroll tax was reduced all you would see is wages growth.

It is a very easy political argument to make that it is a tax on jobs and if you remove the tax on jobs people will employ more people. It is a very easy argument to make. It is a great seven-second grab. It just bears no reality to what actually goes on in the economy. The tough structural reform is getting rid of the dead weight loss of transactional taxes.

Mr VAN HOLST PELLEKAAN: Having said that, why only increase the threshold for one year at a time year after year?

The Hon. A. KOUTSANTONIS: We have been doing it for a number of years and I reserve the right to do it again next budget.

Mr VAN HOLST PELLEKAAN: But if you believe everything you have just said, why not do it as a one-off permanent change?

The Hon. A. KOUTSANTONIS: Like I said, it is very important that we bring the budget into surplus. It is very important that we maintain the tax cuts and live within our means. I mean, I have the opposition calling on me to increase spending, cut taxes and balance the budget. Sure, that is the cry of every opposition since time immemorial, but what I have done and what the cabinet has done, and what the parliament, I hope, will do in passing these measures, is give South Australian businesses an unprecedented advantage in the most competitive tax regime in the country.

Mr VAN HOLST PELLEKAAN: But minister, if you keep rolling it on year after year, that will not help you balance the budget at all. It will make your forward figures look better, but it will not help your—

The Hon. A. KOUTSANTONIS: The fiscal outlook is showing budget surpluses of nearly $1 billion by the end of the forward estimates. I know the Liberal Party is not used to seeing numbers like that, because you have never delivered a surplus.

Mr VAN HOLST PELLEKAAN: My question was, why just roll it along year after year after year with successive—why not just make it a one-off move, because it does not balance your budget?

The Hon. A. KOUTSANTONIS: The tax cuts are staggered, so they are coming in progressively over time. I said to you earlier this morning I reserve the right to bring them forward at a time when the market is not prepared for them.

Mr VAN HOLST PELLEKAAN: This is payroll tax?

The Hon. A. KOUTSANTONIS: I am talking about the conveyance duty. I am talking about the overall economic picture.

Mr VAN HOLST PELLEKAAN: The question is about payroll tax.

The Hon. A. KOUTSANTONIS: Yes. It is part of the budget measures, so I reserve the right to continue to do it.

Mr VAN HOLST PELLEKAAN: But why not make it a one-off? If you believe everything, as I am sure you do, that you just said—

The Hon. A. KOUTSANTONIS: We did it last year as well, and the year before that. We will roll it out.

Mr VAN HOLST PELLEKAAN: Why not just make it permanent?

The Hon. A. KOUTSANTONIS: We will see.

Mr VAN HOLST PELLEKAAN: Is there a reason? Because it is not going to be balancing the budget. Announcing it year after year, that will not help you balance your budget. It will make your budget look slightly better in forward years, but if you always live in the world where there is actually the increased threshold, it will not help your real expenditure versus income.

The Hon. A. KOUTSANTONIS: I'm in a parallel universe: are you arguing against the tax cuts?

Mr VAN HOLST PELLEKAAN: No, I am not at all. I am asking why do you not make it a permanent change rather than year after year?

The Hon. A. KOUTSANTONIS: I have just said to you, because the cabinet and the government have decided that we will extend it for another 12-month process. I would like to see national reform on payroll tax. There are many South Australian companies which are operating interstate in other jurisdictions and which are paying high levels of payroll tax, especially those operating in Liberal jurisdictions, and I want to see them have a competitive advantage.

I would like to see a national payroll tax scheme, where the money is returned to the states on a per capita basis but set nationally. I would like the commonwealth government to adopt the South Australian scheme, which is the most competitive, according to the Commonwealth Grants Commission, has the lowest tax effort of all the jurisdictions. We would give companies that are operating interstate in, say, New South Wales or Western Australia, where the payroll tax regimes are more aggressive, in those Liberal jurisdictions, a competitive advantage by adopting Labor's more progressive payroll tax scheme which is a lower tax effort which would benefit those businesses.

While the government white paper is in play, I am not making any permanent cuts to payroll tax, but I am advocating on a national basis that the commonwealth government should retake payroll tax and set it at the low level South Australia has it at.

Mr VAN HOLST PELLEKAAN: Thanks, minister. Given that there are six different payroll tax rates, are you considering simplifying those?

The Hon. A. KOUTSANTONIS: It is progressive, so we do not want to give an advantage to the larger multinationals over the small operators who operate exclusively in South Australia. Simplification can mean disadvantage for some, so I would not do anything that would disadvantage operators that operate solely in South Australia.

Mr VAN HOLST PELLEKAAN: Thanks, minister. I refer to Budget Paper 4, Volume 4, page 101—'Improve the business and regulatory environment for all small businesses in conjunction with industry'. When will the review of the Late Payments of Government Debts (Interest) Act 2013) be complete?

The Hon. A. KOUTSANTONIS: Imminently.

Mr VAN HOLST PELLEKAAN: Will it be ready by 17 August, which was the commitment?

The Hon. A. KOUTSANTONIS: I am not going to pre-empt any cabinet deliberations.

Mr VAN HOLST PELLEKAAN: So, is that a cabinet process to do the review?

The Hon. A. KOUTSANTONIS: No, but adopting the findings of the review is, and any legislative changes.

Mr VAN HOLST PELLEKAAN: But I did not ask about that. I just asked about when the review would be complete. I did not ask about what you are going to do with the recommendations.

The Hon. A. KOUTSANTONIS: We will have more to say about it later in the year. I cannot give you a time line, but it will be within the guidelines of the time frame that we had set out. Whether it is the 17^th, a little bit before or a little bit after, I could not tell you.

Mr VAN HOLST PELLEKAAN: A little bit after, I guess, we could all accept. If it was much later than the deadline you set yourself, it would be—

The Hon. A. KOUTSANTONIS: I am having surgery on 6 August, so I might be out for two weeks.

Mr VAN HOLST PELLEKAAN: I hope it goes well for you, minister.

The Hon. A. KOUTSANTONIS: Yes, I am sure you do!

Mr VAN HOLST PELLEKAAN: It would be pretty ironic if the government's review of its own late payments ran late, so I am pretty keen, on behalf the small businesses in our state, to hold you to that 17 August commitment that you made. Minister, has the automated payment system been introduced for small business to claim interest on late payments?

The Hon. A. KOUTSANTONIS: No, it has not.

Mr VAN HOLST PELLEKAAN: When will it be?

The Hon. A. KOUTSANTONIS: Again, I will have to delay any findings post the review.

Mr VAN HOLST PELLEKAAN: So, that automated payment system is dependent upon the review?

The Hon. A. KOUTSANTONIS: The review is into the late payment system. They both speak to each other.

Mr VAN HOLST PELLEKAAN: So, it was not something you intended to do anyway or said that you would do anyway?

The Hon. A. KOUTSANTONIS: I do not have a recollection of what the policy pronouncement was, but I can look it up for you.

Mr VAN HOLST PELLEKAAN: Have you done modelling, minister, on the financial impact on the state as a result of late payments? If you think about it, obviously, it helps the cash flow for the government, it hurts the cash flow for business, but then that has an economic impact as well.

The Hon. A. KOUTSANTONIS: Late payments do not help me at all. I am not sure if we have done any modelling on economic impacts. I understand that the Small Business Commissioner has not done any modelling. I will check with Treasury.

Mr VAN HOLST PELLEKAAN: Sorry, has or has not?

The Hon. A. KOUTSANTONIS: Has not. I will check to see whether Treasury has or has not, but there has been a dramatic improvement in the government's late payments procedure.

Mr VAN HOLST PELLEKAAN: Can you put a dollar figure on that or a percentage of invoices or something similar?

The Hon. A. KOUTSANTONIS: The Office of the Small Business Commissioner continues to closely monitor the performance of the state government in paying its accounts. As part of this process, there is now in place a Late Payment of Government Debts (Interest) Act. The Office of the Small Business Commissioner is a dispute handling body for late payments by the state government able to support businesses all over the state. The office provided me in my capacity as Treasurer with advice in relation to the performance of agencies.

Under Treasurer's Instruction 11, all government agencies are expected to pay accounts within 30 days. I am advised that the figures provided by the Department of Treasury and Finance suggest that as of April 2015 there was $42,917,806.56 in unpaid accounts 31 days or longer across government, which is an improvement from $59,019,949.10 in July 2014. So there has been an improvement and it has been dramatic, but there is more to go.

Mr VAN HOLST PELLEKAAN: Page 101. This is about the target to create a business environment that encourages and supports entrepreneurship and enterprise creation. Please provide an update on the Building and Construction Industry Security of Payment Act, especially given that retired District Court judge Alan Moss's review of the act included comment on the lack of enthusiasm to bring the act into effect.

The Hon. A. KOUTSANTONIS: The review of the Building and Construction Industry Security of Payment Act 2009 was tabled in the parliament on 12 May 2015. The state government has not made any decisions concerning the recommendations. The Small Business Commissioner will provide me with advice shortly on ways in which the government can act to ensure that subcontractors get a better deal in terms of outstanding payments.

It is apparent to the government that there are ongoing concerns in this area from small business; however, I am not going to increase the burden of red tape. I am not going to increase the burden on the building and construction industry and there is a very fine line we are walking here. It is very easy to be all things to all people, but some tough decisions need to be made.

Some people rely overwhelmingly on government regulation to see them through and there are others who say that it will stifle them, so it is a very difficult path to navigate. That is why I have John Olsen's former chief of staff, who has lots of experience in dealing with the private sector, as our Small Business Commissioner to give me advice on how to navigate these very choppy waters.

Mr VAN HOLST PELLEKAAN: When do you expect to be able to come forward with some actions, recommendations or outcomes from that review after you have received the advice?

The Hon. A. KOUTSANTONIS: My view on policy-making is that it should be considered. It should take into account all opposing ideas and then you should think about it some more. I am not about to impose major costs on the building and construction industry because right now is not the right time to do it, but there must be a way of navigating through this which gives everyone a bit more security without it being stifling regulation.

The tools I have are blunt. The thing about government is that we are blunt. When we walk into a room to try and regulate, it can be very overpowering and can do a lot of harm to the economy. We are very careful about the way we conduct ourselves here.

That is why I want the Small Business Commissioner to take his time to consider this and give the appropriate advice, and then I will consult with the MBA, the HIA, contractors, contractors who are not members of any association, and the union. Then I will consult some more because, if I did what the union wanted, there would be taxes and charges in place tomorrow. If I did what some subcontractors wanted, there would be taxes and charges in place tomorrow. If I did what the HIA and the MBA would want, there would be nothing at all.

There is a way through this, but, again, very gently, without doing any harm to any economic growth because the aim of all this is to create jobs. If everyone is making money and we are all creating jobs, everyone gets paid. That is the ultimate aim.

Mr VAN HOLST PELLEKAAN: I agree.

The Hon. A. KOUTSANTONIS: Good.

Mr VAN HOLST PELLEKAAN: But 8.2 per cent unemployment is obviously a long way away from everybody's ultimate aim.

The Hon. A. KOUTSANTONIS: Absolutely. It is no time to be introducing new strict regulations on an industry that needs to grow.

Mr VAN HOLST PELLEKAAN: Same page, minister, and in fact the same line item. What small business specific red tape reduction initiatives currently exist? So, separate of tax, because we have discussed that already, but what small business red tape reduction initiatives currently exist?

The Hon. A. KOUTSANTONIS: I will just ask the Industry Participation Advocate, Mr Nightingale, to say a few words.

Mr NIGHTINGALE: Some of the things that the office has been doing in this regard is looking at removing unnecessary barriers and costs associated with government tenders. Two of the significant pieces of work that we have done are, firstly, looking out one single prequalification process for the whole of government and, in fact, the government also removed fees in respect of the prequalification process of $62,000 in 2014-15.

The second thing we looked at assisting small business with was removing limitations of liability for low-risk contracts which was often making small business unviable in the sense of some of those small contracts. So they are two of the fairly key things that removed burden for small business both in streamlining the prequalification and limiting liability.

Mr VAN HOLST PELLEKAAN: Thanks, Mr Nightingale. Minister, what is the difference between the red tape steering committee and the Simpler Regulation Unit?

The Hon. A. KOUTSANTONIS: The red tape steering committee was a non-statutory advisory body established as part of the 2013-14 state budget and was chaired by the minister for small business, the member for Newland. The purpose of the committee was to build on previous action to reduce red tape, provide industry feedback to government on priority areas impacting small businesses and facilitate red tape reduction strategies.

In 2014, the government established initiatives such as Simplify, the Simpler Regulation Unit and the Small Business Round Table. These provide a more appropriate and flexible mechanism to engage with industry in relation to red tape. In January 2015, the legacy of the member for Newland, the red tape reduction steering committee, was wound up in order to reduce industry confusion, streamline government activities, and provide a more coordinated, flexible and innovative approach to engagement with industry. Next we will be airbrushing you out of history.

Mr DULUK: Page 101, minister, SA Micro Finance Fund. Obviously the budget notes say the SA Micro Finance Fund was launched in 2014-15, and the question is: where is the appropriation allocated for this fund? Is it in the 2014-15 budget or is it in the 2015-16 budget? How much funding has been provided for the current application cycle, and how many business are expected to receive assistance?

The Hon. A. KOUTSANTONIS: We do not have that here and I will take it on notice.

Mr TARZIA: Just a supplementary, Chair.

The CHAIR: A question is fine, member for Hartley.

Mr TARZIA: Budget Paper 4, Volume 4, same page, 101. Would the minister be able to provide a list of businesses who are recipients of that assistance? If you could detail the amount and the list of businesses once that due date passes. I think it is open until 31 August.

The Hon. A. KOUTSANTONIS: We will get that to you.

Mr VAN HOLST PELLEKAAN: Same page, but looking at the last target, 'Continue to undertake and contribute activities that support the implementation of the small business charter,' how many meetings did the state government convene to allow small businesses to put their views to the Premier and relevant ministers since the election?

The Hon. A. KOUTSANTONIS: The Small Business Round Table was chaired by minister Hamilton-Smith and me. I do not know how many meetings have been held, but I will find out. There has been a number of them, but I will find out and get you the exact number.

Mr VAN HOLST PELLEKAAN: Is there a schedule of meetings for 2015-16?

The Hon. A. KOUTSANTONIS: I do not have that here.

Mr VAN HOLST PELLEKAAN: An estimate of how many meetings. One of your advisers might know how many times a year.

The Hon. A. KOUTSANTONIS: I am often very cautious about having scheduled meetings and taking people from running their day-to-day businesses just to have a meeting with me so that I can fill criteria, answer a question in estimates and look good that I have had 12 meetings with the Small Business Round Table. I would much rather do it on an as-needs basis. It is a collaborative approach between industry, small business and the government. I will try to get you a forward timetable.

Mr VAN HOLST PELLEKAAN: As I was saying, it is more about an estimate of how many times a year it happens.

The Hon. A. KOUTSANTONIS: It is roughly four a year. That could increase or decrease depending on what is going on at the time.

Mr VAN HOLST PELLEKAAN: When will the charter for small business be completed and implemented as part of the agreement between the government and the member for Frome?

The Hon. A. KOUTSANTONIS: I am advised that there was no set time frame; it is just a matter of meeting ongoing commitments. For example, we facilitate strong representation for small business in government decision-making through the Small Business Round Table, and we appointed two high-profile representatives of small business, Miss Lily Jacobs of Renew Adelaide and Mr Rob Kerin, a former premier of South Australia—the last successful Liberal.

We are supporting entrepreneurs and new business through our investment in start-ups such as Co-HAB and Hub Adelaide. We are ensuring that our businesses have the best opportunity to win government contracts through the work of the Office of the Industry Advocate. There have been 791 businesses attend Meet the Buyer and connecting with business workshops since December 2014. Eighty per cent of the value of government contracts was awarded to South Australian businesses compared with 51 per cent in 2012-13 and 42 per cent in 2011-12.

Our Jobs Plan is supporting SA businesses in transitioning to new high-growth industry sectors. We are delivering a range of manufacturing and automotive industry programs aimed at securing the future of the state's manufacturing sector and diversifying our economy. We are reducing costs and red tape. WorkCover reforms are dramatic: $180 million per year for every single South Australian business, so that is a large quantum of money. A simpler regulation unit is working with business to communally resolve unnecessary burdens and create a system of regulation that supports innovation, investment and jobs.

Payroll tax assistance for small businesses. Small businesses and their representatives are making valuable connections with our key trading partners and accessing export opportunities. Abolishing taxes: $2.5 billion worth of tax cuts over the next 10 years. The government has already abolished stamp duty on non-real property transactions, such as transfers of licences and businesses purchases, goodwill and IP. Share duty on non-listed shares, and the phasing out of stamp duty on non-residential properties. We are committed to the charter for small business following the 2014 election and it is an ongoing process.

Mr VAN HOLST PELLEKAAN: Are there any commitments made between the government and the member for Frome under the small business charter which have not been met?

The Hon. A. KOUTSANTONIS: Not that I am aware of, and if there are I am sure he will let me know.

Mr VAN HOLST PELLEKAAN: On the same page, same target, are there any representatives from small business on the Economic Development Board?

The Hon. A. KOUTSANTONIS: Well, the chair runs a small business, he owns a winery, Lily Jacobs, the CEO of Renew Adelaide, Tania Monro, Rob Kerin. Who represents small business?

Mr DULUK: Not the Labor Party.

The Hon. A. KOUTSANTONIS: If that were true, the opposition would never have lost an election, because we are a small business state, but yet they keep on repudiating you election after election after election. I think you are the only Liberal, member for Davenport, to receive a swing against you in a by-election when the Liberals are not in office—quite a remarkable feat. Davenport is made up of a number of small business owners, and again, for whatever reason, they swung to Labor. Labor is delivering tax cuts to small business.

The Small Business Commissioner, who Liberal members voted against, for whatever reason—we have appointed someone who worked for a fine former premier, Mr John Olsen, who did a lot to improve the productivity of South Australia. I am prepared to receive advice from Liberals, especially good ones.

Mr VAN HOLST PELLEKAAN: I refer to Budget Paper 4, Volume 4, page 100. As the minister would know, the inner west BEC closed its doors on 19 June this year. That BEC had performed over 18,000 client contacts, many of which were start-ups and existing small businesses. Where do you as Minister for Small Business recommend that small businesses go for that sort of support? I have heard everything you have said about the tax cuts, but where do you recommend they go now for that sort of advice and support?

The Hon. A. KOUTSANTONIS: The government is not the answer to their ills. The government does not have the answer for small business. Small business is made up of a group of entrepreneurs and risk takers, doers, people who put everything on the line to get ahead. There is nothing a government agency can teach them, in my view. Small business can benefit by informing government about what we are doing wrong, about how we get in their way. If we have learnings we can share it with them.

BECs are not the be all and end all. There are associations and chambers of commerce they can join. There are a number of chambers they can join that have very low fee structures. There is a Small Business Commissioner they can go to free of charge. They can send emails to their members of parliament, they can work in the hubs, in strips, and talk to each other about opportunities. The idea that the government has the answers for small business quite frankly is an antiquated and old idea belonging more to people like Sir Thomas Playford and Don Dunstan than to the modern economy.

Mr VAN HOLST PELLEKAAN: Minister, page 101: supporting 50 small and medium-sized businesses to enter new global markets. How many small and medium businesses have been supported to enter new global markets in 2014-15?

The Hon. A. KOUTSANTONIS: I refer you to minister Hamilton-Smith for that, but I can give you some detail. I am advised that between 1 July 2014 and 31 March 2015 TradeStart assisted 28 companies achieve over $9 million in export sales. More than 100 new companies signed up to the program between July 2014 and April 2015, of which 38 are first time exporters. The China trip, one that the opposition criticised roundly, was supportive. My view is that we get out of the way of business.

Mr VAN HOLST PELLEKAAN: In providing those numbers, how do you measure or identify having entered a global market? Is it setting up an office, having a certain level of sales or having been there for a fixed period of time? How do you judge success?

The Hon. A. KOUTSANTONIS: I will take that question on notice as we do not have the answers here. It is not my portfolio.

Mr VAN HOLST PELLEKAAN: On exactly the same line, targets: 'unlocking $50 million in bank lending to small and medium businesses'. Has that $50 million guaranteed business loan scheme actually commenced?

The Hon. A. KOUTSANTONIS: Yes.

Mr VAN HOLST PELLEKAAN: How many businesses have accessed it?

The Hon. A. KOUTSANTONIS: I understand one, Australian Fashion Labels.

Mr TARZIA: I was going to ask for a list, but there is only one.

The Hon. A. KOUTSANTONIS: Australian Fashion Labels.

Mr TARZIA: We hoped it would be more, but give it time.

The Hon. A. KOUTSANTONIS: You want more government subsidy? I am not surprised.

Mr TARZIA: No, more than one.

Mr VAN HOLST PELLEKAAN: Minister, page 104 again under highlights—'Launched the SA Micro Finance Fund to help people to translate good ideas and business models into new growth'. Since the SA Micro Finance Fund was launched, how many businesses have received—

The Hon. A. KOUTSANTONIS: You have asked this question already and we have taken it on notice.

Mr VAN HOLST PELLEKAAN: Did you answer it?

The Hon. A. KOUTSANTONIS: Sorry, I have it here; my apologies. It has been asked and I took it on notice, but I have the answer now. Ten firms have received $50,000 in the first round of applications of the new SA Micro Finance Fund. We will get you a list of the names of the companies.

Mr VAN HOLST PELLEKAAN: On the same page, what support does the government provide to small business through the Polaris Centre in the northern suburbs?

The Hon. A. KOUTSANTONIS: The Polaris Centre delivers a range of business support programs for the northern business community, including business advisory services, business fundamentals program, innovation program, coaching and mentoring program, and business networking. We have provided funding of over $400,000 over three years to the Polaris Centre to deliver the Digital Growth program as part of this commitment by the Premier in the most recent state election.

The aim of the program is to allow small businesses to increase their digital expertise and improve their competitiveness and accelerate growth. The centre is an initiative of the City of Salisbury and the University of South Australia and is supported by the City of Playford and the Department of State Development. The Digital Growth program includes:

Digital Start—90 minutes of one-to-one mentoring to help target 80 start-up businesses;

Digital Audit—a structured program for 100 established firms to identify opportunities to improve their digital presence;

Digital Growth Mentoring—a program for 25 businesses that have participated in either Digital Start or Digital Growth Audit to receive targeted mentoring to implement recommendations and strategies; and

Digital Horizons—a series of seminars, workshops or masterclasses promoting applied expertise.

To date, the Polaris Centre is on track to reach its target participation numbers for the program.

Mr DULUK: Supplementary, minister. I fully agree with the work of the Polaris Centre. However, given your previous comments already on the record, why do we need a Polaris Centre? Why can't businesses in northern Adelaide join industry groups, chambers of commerce and the like, which you have already stated is what you believe in.

The Hon. A. KOUTSANTONIS: That is a very good question.

Mr DULUK: That is the one I am asking.

The Hon. A. KOUTSANTONIS: The reason is because of the unprecedented attack on the northern suburbs by the commonwealth government by removing—

Mr DULUK: Rubbish!

The Hon. A. KOUTSANTONIS: You asked me the question and I am answering it.

Mr DULUK: Given that you say we are a small business town—

The Hon. A. KOUTSANTONIS: Don't verbal me.

Mr DULUK: —and not big, then there is no attack.

The Hon. A. KOUTSANTONIS: I listened to your question quietly and now I ask you to listen to my answer quietly. I have shown you the respect of answering all your questions. The commonwealth government's decision not to invest in General Motors Holden is seeing the largest restructure the northern suburbs has ever seen since it was founded by Sir Thomas Playford.

Sir Thomas decided to establish an automotive industry in this state and we used government subsidy to get them here. Every motor vehicle in the world, no matter what its brand or where it is made, has government subsidy. The commonwealth government, when they first came to office in 2013, made a decision not to invest, and that means probably the most dramatic and destructive impact on the northern suburbs in its history since it was established.

I do not generally support government subsidy for business, but there is no auto industry in the world that can operate without subsidy. So, if you want to have a capability of mass assembly of motor vehicles in the automotive industry, you need to subsidise.

Once that subsidy is removed, it falls away and, because it has fallen away, it is only appropriate that the government make investments to try to prop up and keep up and help companies adapt and overcome the large challenges they face. That is why programs like this are well intended. What I would like to see is a commonwealth partner, but I do not have one.

Mr VAN HOLST PELLEKAAN: Budget Paper 4, Volume 4, page 101: do you support the Minister for Investment and Trade's proposal to increase the Jobs Accelerator Fund of $15 million over two years to $20 million per year?

The Hon. A. KOUTSANTONIS: You will have to wait and see at the next budget.

Mr VAN HOLST PELLEKAAN: See who wins in cabinet.

The Hon. A. KOUTSANTONIS: Who dares wins.

Mr VAN HOLST PELLEKAAN: Thanks, minister.

The CHAIR: It is now 7 o'clock. It is time for me to close off this line. There being no further questions, I declare the examination of the proposed payments completed. I thank the minister and his advisers for attending and the members for their cooperation. I lay before the committee a draft report.

The Hon. T.R. KENYON: I move:

That the draft report be the report of the committee.

Motion carried.

At 19:01 the committee concluded.