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Part 1 : Secretary's Overview

A reform-minded department

Ken MatthewsReform is sometimes regarded these days as a dirty word. It requires change and can sometimes cause discomfort and adjustment problems. But it is often through reform that major benefits can be yielded for the Australian economy and community. It is for these national benefits that the Department of Transport and Regional Services, through its ministers, has continued to press hard for constructive reforms throughout its portfolio.

This year in my annual report overview, I want to give an account of the department's work by telling the story in terms of its contribution to the government's reform agenda. In my view it is an impressive story of reform accomplishment of which the staff of the department can be very proud.

The year under review was dominated by security issues. The department has made considerable progress in reforming and enhancing security in the transport sector this year. This has included progressive enhancements of aviation security, as well as ground breaking work in maritime and port security and increasing work to assure the security of Australian logistics supply chains.

Perhaps the highest profile reform initiative this year has been the AusLink Green Paper and the work to develop the AusLink White Paper, which I expect to be issued in 2003-04. The AusLink reforms will fundamentally change Australia's current approach to the provision of land transport infrastructure.

They will introduce for the first time a national transport infrastructure plan, much improved processes for investing the taxpayer's transport dollar, and better outcomes for all users of transport services - that is, for all Australians. These reforms will yield benefits right across Australia for years to come.

Another high profile reform this year was the considerable work done by the department to achieve the lease to the Commonwealth of the NSW Interstate Rail Track. By year's end these negotiations were nearing completion. If the negotiations are successfully finalised the department will have played a major part in this significant opportunity to achieve real benefits for the users of rail freight services.

Further reforms are being delivered in the area of Australian airspace management. The department is leading the Aviation Reform Group (ARG) which is oversighting the introduction of the National Airspace System to Australia. These reforms are expected to have significant operational advantages as well as cost savings to the Australian aviation industry, and its customers.

Early steps have been taken this year towards further reform of Airservices Australia. Drafting of legislative amendments was completed by the end of the year and investigation of further opportunities will continue in the year ahead. These reforms will enable more commercial behaviour by Airservices Australia, which will benefit the aviation sector as a whole.

The department has also been centrally involved in reform in land transport regulation. Legislation has been passed to formally establish the National Transport Commission (NTC) to replace the National Road Transport Commission (NRTC) from 15 January 2004, although in practice the NRTC has operated as the NTC since 1 July 2003.

The NRTC has had an impressive record of regulatory reform over a number of years. The department has been involved in carrying the successful NRTC recipe from road transport to rail transport and intermodal operations. Again, these reforms should yield benefits to all Australians by lifting the competitiveness and safety record of land transport across Australia.

Complementing the new arrangements to pursue rail regulatory reform on a national basis, there was also important progress this year on the harmonisation of interstate rail operational practices. A Memorandum of Understanding between the Australian Transport Council and the rail industry was signed in July 2003, establishing a cooperative approach to reform of rail regulation, and ownership of the operational codes was transferred to industry at that time.

With rail on the NTC reform agenda and industry able to drive further development and implementation of the operational codes, the department expects that there will be steady gains in the competitiveness and cost efficiency of the rail industry vis a vis other modes of transport. These reform opportunities can only benefit the Australian economy as a whole, with additional environmental benefits.

Transport safety continues to be a major priority for the department. During the year under review we introduced a package of reforms to our approach to transport safety investigations. This saw the passage of the Transport Safety Investigation Bill that enables, among other things, expanded involvement of the Australian Transport Safety Bureau (ATSB) in rail investigations. It also carries across to interstate rail the very successful independent ATSB 'no blame' approach to aviation and marine investigations.

In a very real sense the passage of the Transport Safety Investigation Bill was the culmination of four years of reform and performance improvement in Australia's national approach to transport safety investigations since the establishment of the ATSB.

The department has also been active in implementing the government's decisions on reform of the Civil Aviation Safety Authority (CASA). This has involved drafting legislation and regulations to give effect to the government's aim of improving the responsiveness and performance of CASA, contributing ultimately to safer air travel.

The department has been reform-minded also in the area of international aviation. During the year international air services access arrangements were negotiated and liberalised with countries including Indonesia, Switzerland, Malaysia, Bahrain, the United Arab Emirates, Poland, Vietnam and Tonga.

As the year ends, liberalisation discussions are continuing with several other countries including Singapore. These reforms are aimed at reducing the costs of travelling to and from Australia while not jeopardising the competitive strength of Australian carriers.

During the year, the department continued to pursue reform opportunities afforded by the creation last year of the Australian Logistics Council (ALC). The ALC has filled a vacuum in a sector that has historically not been well represented in national decision making forums.

The transport and logistics sector is responsible for at least 9 per cent of GDP so reforms to improve the efficiency of the sector can yield important benefits to the economy as a whole. Reform work by the ALC this year has included attention to education and training, electronic tracking technology and advice on transport regulatory reform.

Moving to the Regional Services side of the portfolio, the department has been pressing hard to implement, through the Council of Australian Governments, a natural disaster reform package.

This reform package, too, offers the prospect of important benefits to the Australian community as a whole, particularly as a consequence of its recommendation to shift the national focus of disaster management arrangements from response and relief to preparedness and mitigation.

There are reforms being developed also in the area of local government financing. An inquiry by the House of Representatives Standing Committee on Economics, Finance and Public Administration into Local Government will report later in 2003. The Local Government and Planning Ministers Council has agreed to consider the report's recommendations and the department aims to provide advice to the government on options for constructive reform in this area.

The year under review saw reform also in the area of regional programmes. A single new programme, the Regional Partnerships programme, replaced most of the portfolio's previous regional programmes. This rationalisation has made it easier for clients to access the government's regional programmes. It has also yielded management and cost efficiencies and provided a sharper focus to the department's regional activities.

There will be further reform opportunities benefiting regional Australia in the year ahead following the receipt by the government of the Regional Business Development Analysis. This major report offers a range of suggestions for the government's consideration with a view to improving the business environment for firms operating in regional Australia.

Finally, but at least as important as any other reform this year, the department was proud to be involved in support of the Deputy Prime Minister in the development of the National Water Initiative.

This historic reform initiative is expected to change forever how scarce water resources are managed in Australia for the benefit of all Australians. It should improve the investment environment as well as environmental and social outcomes across large areas of regional Australia.

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Financial outcome

The department's operating result for the financial year ended 30 June 2003, after adjusting for payment of the capital use charge to government ($24.6 million), was an operating loss of $4.5 million compared with an approved operating loss of $6.4 million for the year. The actual operating loss of $4.5 million was attributable to a number of factors including an approved operating loss of $6.4 million for the deferred timing of expenditure on communication costs associated with the Stronger Regions campaign offset by the net affect of the write-off of some IT expenditures and deferral of planned expenditure on the Linkwater Road on Christmas Island.

Financial assets totalled $109.6 million and Commonwealth equity increased by $88.6 million to $312.1 million. The increase in the level of financial assets and equity was primarily attributable to deferral in the timing of expenditure on certain large capital projects and operating expenses on the Indian Ocean Territories amounting to $75.4 million.

The underlying outcome for the department is a modest improvement in the department's financial position flowing, in part, from the initiation of the department's work out/work up strategy, a subject to which I now turn.

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Reform within the department

It is no secret that the department is facing financial challenges in relation to managing within its departmental expenses budget. Dealing with these challenges will be the major part of the management reform agenda for the year ahead.

It needs to be made clear that the department has been managing, is managing, and is committed to continue to manage within its assigned financial resources.

In dealing with its financial challenges the department has developed a 'work out/work up' strategy. This strategy comprises a package of measures to 'work out' of our potential financial difficulties while laying the foundations for 'working up' our departmental performance for the future. In a very real sense this is an internal reform package which mirrors the outward looking reform initiatives which I have described above.

So far the work out/work up strategy has involved integrating and strengthening some existing activities as well as introducing a number of reforms. These have included:

  • A fundamental reorganisation of the department into five groups (Policy and Research, Programmes, Regulatory, Safety and Investigation, and Corporate).
  • Setting specific financial targets for each group (rather than at the divisional level as we have done in the past).
  • Developing specific business plans by each group, specifically including risk management plans (previously done separately) and workforce transition plans.
  • Preparing plans on a page for each and every SES officer, supported by plans on a page for individual staff members reporting to them.
  • Establishing quarterly performance reporting on business plans.
  • Intensifying the focus on the monthly finance reports on expenditures.

These measures have two purposes: to manage current financial challenges; and to provide longer term, ongoing improvement to organisational performance as a whole.

In an environment of resource constraint a well managed department gives even greater attention to risk management. The five groups of the department have therefore been asked to explicitly address mitigation strategies in their risk management plans, as they manage towards their financial targets. Professional expertise has been made available to assist managers in this task. In addition I have asked the departmental Audit Committee to satisfy itself about the effectiveness of group risk management systems.

Important as these steps are, a key component of this reform agenda will be building a stronger risk management culture among all members of the department. We are working to make risk management an even greater part of the way we do our work in this new environment.

We have encouraged our managers to implement proportionate risk measures, and to measure results. My rule of thumb is that all staff at all levels need to have thought about, understood, and devised ways to manage their six biggest business risks. This makes an important contribution at a local level and continues to build a risk management culture right throughout the organisation.

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A committed team

Constant involvement in reform, both in the work we do and within the department itself, puts great pressure on the staff of the department. The phenomenon of 'reform fatigue' is always a risk in any reform minded organisation.

It is a credit to the members of the department that the level of commitment and our culture of dealing decently with each other and our stakeholders have never fallen away despite all the pressures.

I want to publicly thank my colleagues and friends within the department for their commitment and professionalism under great pressure over the past year. Their performance is a tribute to the quality of the Australian Public Service as a whole.

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Ken Matthews

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