Consequently, the Victorian Government has announced additional savings measures to ensure a solid operating surplus to make way for future increased infrastructure spend.

A thorough read of the Victorian Government’s policy and direction requires an understanding of the current fiscal environment, the economic context and the key policy drivers.

In this brief we will outline these policy drivers and the path the government has taken to date and where it may lead.

For a full copy of this report, please call The Agenda Group on 9615 4615.

The following sentence will likely be the least interesting sentence you will read today. The Victorian Treasurer on 5 March 2012 released the Government’s response to the “Inquiry into Victoria’s Regulatory Framework” conducted by the Victorian Competition and Efficiency Commission (VCEC). But as boring as it sounds, it is important for business in Victoria.

The inquiry commenced in June 2010 and VCEC delivered its report to the Treasurer in April 2011; eleven months later, the Treasurer has provided his response.

The Victorian Government has committed to reducing “red tape” by 25% by July 2014. Ignoring for the moment how such a reduction can be measured, a cut of this magnitude is significant and will not be easy for regulators and Governments to deliver – particularly when the Treasurer also states that “the regulatory environment must also ensure that community interests are protected”.

Nevertheless, the VCEC report and the Treasurer’s response provide guidance on where some of this activity might be found. The VCEC report made 42 recommendations covering seven distinct areas of which five could be described as being part of the regulatory cycle:

• Improving the regulatory management system
• Optimizing impact assessments
• Achieving consistency in implementation
• Striving for excellence in administration and enforcement
• Embedding evaluation and review

The other two areas are the motherhood statement of “reducing regulatory burden” and consideration of how best to deliver State-based regulation in a federal system.

Of the 42 recommendations, the Treasurer’s published response indicates that the Government supports 15 in full; 20 in part; four are to be considered following further review and three are not supported at all.

In summary and not surprisingly, the Government has indicated it wants to improve stakeholder consultation by commencing discussions sooner in the process; to start with the default position that non-regulatory options should be adopted if at all possible to achieve policy objectives; to pursue administration of regulation which minimises administrative and compliance costs; and to promote evaluation and continuous improvement as key components of any regulatory activity.

While all the above sounds encouraging, until implementation occurs, it’s difficult to provide specific advice on the implication of the VCEC review and the Government’s response. What we do know is that the Government considers this review to be just part of a process of reform, which will also be informed by the report of the Independent Review of State Finances (which was due to provide its final report in February 2012) and facilitated by further revisions to the Victorian Guide to Regulation which was most recently revised in August 2011.

Until then, we must wait to see how each of the proposed reforms will be implemented. Some would appear to be relatively easy for a Government to mandate – such as Ministers issuing a Statement of Expectations for each regulator that includes an explicit requirement that regulators establish and publish timelines for regulatory approval processes. On the other hand, the proposal that the Department of Treasury and Finance identify specific areas in which market-based instruments may be appropriate, and work with relevant departments to investigate, develop, test and implement market based solutions, while sounding noble, also appears to be complex, time consuming and not to put too fine a point on it, problematic.

All in all, the VCEC and the Treasurer’s response progress regulatory reform in a philosophical way. Implementation, however, is where the chance exists for real benefits to accrue.

• A shake up in the skills sector – including implementing a workforces skill strategy and corporatising TAFEs.
• Improving the school system by moving to an outcomes-focused system; improving the quality of teachers (and their remuneration), and evaluating the role of childhood development.
• Improving innovation by enhancing links between industry and the research sector.
• Increasing innovation throughout the Victorian public sector.
• Improving the regulatory regime – including potentially reducing the number of regulators from the current 68.
• Reforming regulatory impact statements.
• Improving efficiency in transport and alternative ways to fund transport.
• Strengthening links between regional Victoria and Melbourne.
• Optimising Victoria’s urban water supplies. This includes clarifying water sources- potentially utilising storm water and recycled water as sources.
• Responding to declining energy sector productivity by calling for a national review.
• Looking at the role of the NBN in Victoria- which VCEC argue is a productivity improver.

Given the likely significance of this report, stakeholders with an interest in any of the above areas would be well advised to familiarise themselves with the recommendations and make sure their views are heard by the looming deadline, now only about a month away.

A few years ago, many in the sector seemed to have the naive view that increased Commonwealth involvement in both selecting and funding projects would solve many of the existing problems. There seemed to be an implicit assumption that an independent Commonwealth body would be able to act in the national interest and display the Wisdom of Solomon. The reality has been somewhat more prosaic. While Infrastructure Australia (IA) has done some useful work, states have realised that not only will their pet projects be competing against other jurisdictions, but also that the Commonwealth might assess priorities differently.

Of course, in theory, cost-benefit analyses done by Federal and State organisations would produce identical results, but for a variety of reasons this will rarely happen in practice. The dispute between the Federal Labor Government and the new Liberal Government in New South Wales over competing rail projects in Sydney is a classic example of how opinions can differ about what is the best project to pursue.

Competition between rail projects has a certain novelty. For decades, there was much debate between roads organisations and public transport activists about which of their modes needed more funding but, in recent years, there seems to have been almost as much internal debate about which public transport projects should be funded. Some prominent public transport activists have been critical of the Regional Rail Project in western Melbourne, the project which received the lion’s share of the first round of IA funding.

In Sydney, even those keen to see an increase in public transport services to the growing outer north-west of Sydney have differing views as to how this should be best delivered.

This was highlighted at a recent transport conference in Sydney. Delegates were given a detailed presentation on the proposed delivery of North West Rail by Rodd Staples, Project Leader, North West Rail Link. Yet, even before Staples spoke, earlier speakers had provided alternative visions. First, there was the suggestion that, rather than providing a path into the Sydney CBD via the North Shore, NW Rail should instead be directed towards Parramatta. Then, the argument was presented that the best way to provide top quality public transport to the North West was to flood the corridor with buses.

In the same week that the conference was being held, the Sydney Morning Herald had a front-page splash headlined “Paris-style train plan for city”. This outlined one vision of how a metro-style operation could work in Sydney, but again others have produced different models. The metro concept was also a centrepiece of the Transport Plan released by the previous Victorian Labor Government in 2008. It proposed a metro to relieve the growing congestion caused by the fact that rail patronage in Melbourne has almost doubled in recent years. The Baillieu Government is still pondering whether this is a proposal which it wants to pursue or whether, for $12 billion, other alternatives might be more worthwhile.

State Governments have a difficult challenge. If they are going to spend $8 billion on North West Rail or $12 billion on a metro in Melbourne, they would want to be sure the projects stack up. It just underlines the fact that of all the skills political decision-makers require good judgement would always be top of the list.

The march was peaceful and generally quiet. No megaphones and only sporadic, unorganized chanting. No particular mode of dress and a broad distribution of ages from Baby Boomers to Generation Y who looked like they’d rather be known as Generation Why Not. The more frightening individuals were those who marched with a more purposeful air and hidden faces. Generally a scarf or raised t-shirt was used to maintain anonymity although a few were wearing plastic masks which made them look like extras in a cheap Hollywood schlock horror movie.

As with everyone else striding along the Strip, it’s not an easy walk. Footpaths disappear from the side of the road when the infrastructure developers consider it to be a more useful community service to direct pedestrians toward the entrance of a casino. So right outside the Planet Hollywood casino, the trail of marchers seemed to disappear as the sidewalk turned back in on itself and shifted the moving mass inward to the casino entrance.

And the occasional renegade was walking on the other side of the road, perhaps in order to hear the mellifluous, recorded tones of Olivia Newton-John asking if they had never been mellow only for her voice to disappear when the theme from the Pink Panther introduced the dancing fountains outside Bellagio.

One couldn’t help thinking that the Occupy movement in Las Vegas had the same integrity and credibility as the rest of this town with its fake Venetian canals, a mock Eiffel Tower and other artificial enhancements on two legs. It’s hard to take seriously the important issue which is the Occupy Wall Street movement and transplant it to the city which had just hosted the World Congress on Female and Male Cosmetic Genital Surgery.

She worked as an adviser to the Minister for Roads and Ports in the Kennett Government from 1996 to 1999.

Catherine subsequently joined the private sector working both as a private consultant and then for ALH Group, a leading licensed venue operator, as their Regulatory Affairs Manager. Her responsibilities included advice on liquor and gambling legislation and reform, smoking regulations and venue security across five Australian states.

An advocate for the company’s interests to both Local and State Governments, Catherine was an elected Counsellor to the Australian Hotels Association (Vic Division). She also liaised extensively with a range of industry associations.

Now at The Agenda Group, Catherine provides clients strategic advice on government relations and communications in complex legislative and regulatory environments.

Catherine holds a First Class Honours Degree in Political Science from the University of Melbourne.

Following the sale of the Port of Brisbane late last year, the Port of Melbourne will be the last of the major eastern seaboard container ports to remain in government hands.

As Australia’s largest containerised port, the Port of Melbourne ought be an attractive proposition for potential owners, all the more so given the enormous forecast growth in trade and shipping movements expected in coming decades ( estimated to quadruple in the next 25 years).

The Queensland Government sold the Port of Brisbane for $2.1bn in November last year, with the winning consortium promising to provide a further $200m in infrastructure works.

Industry analysts suggest the sale or granting of a long term concession for the Port of Melbourne could realise proceeds of at least $2.4bn for the state of Victoria.

Such proceeds could be very timely indeed for a new Baillieu Government which has clearly stated a new policy preference supporting alternatives to the further expansion of the Port of Melbourne.

In February this year the Baillieu Government announced a feasibility study into relocating the export and import of cars to Victoria’s second largest port, the Port of Geelong.

And in the following month, the Minister for Ports Denis Napthine, announced the Government’s intention to develop Hastings as Victoria’s newest container port, to ‘generate more competition and economic flow on benefits for all of Victoria’.

The Government has already taken its first steps down this path by legislating to overturn the previous Brumby Government’s decision to combine responsibility of the two ports (Melbourne and Hastings) in one entity, by decoupling management of Hastings from the Port of Melbourne Corporation.

Forecast capital requirements for the upgrade of Hastings is at least $10bn over the next ten years, the vast bulk of that required for road and rail freight route upgrades.

In the short term, the Victorian Government could meet increasing ship freight demand by extending Melbourne’s Webb Dock, as called for by Shipping Australia and other industry players. The extra capacity could either be utilised by the existing two operators, or through the often-mooted introduction of a third operator.

Expanded capacity at the Port of Melbourne would, in theory, fatten it up for sale and bring the Government higher proceeds.

However such a move may fly in the face of Government objectives of curtailing longer term growth at the Port of Melbourne and sharing a greater portion of the freight load with Hastings and to a lesser extent the Port of Geelong.

How a privately owned Port of Melbourne, and a publicly owned Port of Hastings, could co-exist harmoniously would seem problematic.

The sale of Melbourne may help fund the development of Hastings, but every container movement transferred to Hastings from Melbourne through government policy or regulation will either lessen the attractiveness and proceeds from a sale of the Melbourne Port, or lead to expensive compensation claims down the track against the Government.

In this context any potential purchaser of the Port of Melbourne would seek to mitigate revenue risks through a contract setting out compensatory provisions for material adverse effects brought about by the Victorian Government’s actions (Transurban has these types of protections against Government imposition on traffic demand for its Citylink asset).

Such measures would inevitably complicate and slow down any sale process, as well as have some impact, good or bad, on the sale price.

Landside issues further complicate the picture at the Port of Melbourne – particularly land use pressures (the proposed E –gate redevelopment is just one example) and town and transport planning agendas.

Clearly proceeds from the potential sale of the Port of Melbourne won’t be cheaply bought.

All of this may make for a policy and political challenge beyond the capacity or interest of the new Victorian Government at this early stage of its life.

It’s worth remembering that even the reformist Kennett Government, which privatised the Port of Portland, baulked at the thought of privatising the Port of Melbourne.

While stakeholder management has become something of a mantra for communications professionals, perhaps the best way to ‘manage’ stakeholders is to support and encourage their active participation in decision making.

Community engagement is a methodology that seeks input from stakeholders affected by a problem or decision.  That input is then used by the organisation to make a decision.

But for community engagement to be effective, organisations need to be genuine and transparent.  They need to be open to sharing information, listening and following through on the commitment to stakeholders that their input will influence decisions.  If an organisation can’t make this commitment, then they would be well advised to stay away from community engagement.

Effective community engagement draws affected stakeholders into the process by providing meaningful information so that stakeholders can contribute in an informed manner.  Yes, some people will try to run with their own political or social agenda, but a transparent approach to all stakeholders will expose the uninformed or mischievous.

Community engagement does not mean handing over decision making power, and it does not mean diverting from your organisational goals. Better decisions will be made and supported by the stakeholders that count.

Government departments, agencies and local government are increasingly turning to community engagement.

While the sceptics worry about a loss of control, increased resourcing and their own fears of diminishing their own perceived power, the adopters of community engagement are already seeing better decisions and improved stakeholder relationships.

Governments are leading the way in community engagement, but there is a huge untapped upside for the private sector.

The result, handed down this week, is the first Coalition budget in NSW since 1994.

Financial commentators, interest groups and journalists are always interested in a state budget and what it sets out to deliver. Although technically it is simply an instrument that Parliament gives to the Executive to spend money through appropriation, in reality it is much more important than just a financial statement. A state budget sets out the Government’s economic agenda and its general policy direction. This NSW budget is no exception.

NSW Treasurer Mike Baird’s first budget was especially important to get right following the Government’s historic victory in March with a strong mandate for change. He has inherited a weak economy which has been an economic basket case for a decade and one of the poorest performing economies in Australia. NSW has struggled with infrastructure investments and has been slow in a number of other economic reforms – especially around taxation. Today’s State Final Demand figures from the ABS confirmed it was the state with the slowest 12-month growth.

So what was the key theme of the budget? Essentially, it was a business friendly budget that invests in future capacity and will produce operating surpluses in the out years.

The surplus will be an average $200 million in the last three years of the forward estimates following a ‘temporary deficit’ of $718 million in the first year.

It delivers a strong – and much needed – infrastructure spend of $63 billion over the next four years. This has been partly achieved by reducing the operating deficit, cutting popular tax exemptions, increasing mining royalties (which will be paid for by the Commonwealth) and privatising assets to free up capital. It also takes an axe to the public service.

The new infrastructure spend is directed towards social infrastructure, including hospital upgrades, and important transport and road infrastructure – including a contribution to the North-West rail and South-West links.

It is freeing up capital by leasing out Port Botany to an operator (effectively a privatisation) which will drive efficiencies in the nation’s second largest port. The budget also leases out the desalination plant and delivers on the Government’s commitment to franchise Sydney ferries.

On the revenue side, it has taken the tough political decision of removing a stamp duty exemption for first home buyers, freeing up a billion dollars over four years. It has followed Western Australia’s trick of increasing mining royalties which will effectively be paid for by the Commonwealth in a reduction in the Mineral Resources Rent Tax. This is said to cover NSW’s exposure to the proposed carbon tax (although Commonwealth Treasurer Wayne Swan has claimed that this will backfire, resulting in a reduction of Commonwealth support to infrastructure projects).

On the savings side, it has set an ambitious target of cutting $6 billion from the public sector – with a reduction of 5,000 jobs over four years. It will close a number of prisons to address ‘surplus capacity’ and will try to introduce contestability in correctional services to reduce operating costs. Time will tell whether it will achieve these ambitious savings.

The new Government will welcome the tick of approval it has received from Standard and Poor’s – who reaffirmed the AAA rating – with some caution around the ability to achieve the savings target.

This budget has a number of things – increased infrastructure spends, touch revenue decisions, tough savings measures and some positive economic reforms.

Some may argue that the new Government needed to be tougher, but in this modern volatile political climate, the NSW Government’s first budget sets out an agenda that, although tough in places, is likely to be understood – and possibly even welcomed – by the electorate.

It’s a source of concern to former Victorian Premier Steve Bracks, who as a special adviser to the Prime Minister of East Timor, Xanana Gusmao, sees firsthand the billions of dollars in contracts that go begging in the country and more often than not are snapped up by Chinese and Indonesian companies.

At a boardroom lunch hosted by The Agenda Group and attended by representatives from some of Australia’s top companies, Mr Bracks outlined the business opportunities on offer in East Timor and the strategies companies, serious about bidding for work, need to adopt.

Despite a population of just over one million people East Timor’s wealth is much bigger – thanks largely to their natural resources. Their Petroleum Fund stands at around US$7.7 billion and is growing by around $250 million a month because of revenue from the Bayu Undan field in the Timor Sea. It’s reserves like this that have allowed the Government, which can’t borrow as it doesn’t have a credit rating, to begin to invest heavily in infrastructure projects.

While admitting there are challenges for companies who want to do business in East Timor, Mr Bracks pointed out that the Chinese have been in the country for a while setting up networks and building infrastructure such as the country’s first shopping mall, navy patrol boats and a power grid. He says Australian companies should have people on the ground in East Timor, establishing relationships at both the bureaucratic and political level, in order to be in a good position to tender for some large infrastructure projects which are in the pipeline.

Mr Bracks said the work carried out by the Victorian Employers’ Chamber of Commerce and Industry (VECCI) in helping establish a similar body for East Timor has been of enormous benefit and can act as a starting point for Australian businesses wanting to make a break into the country. VECCI President Peter McMullin also spoke at the lunch and backed up Mr Bracks’ point that the key to success in an emerging nation like East Timor was to get in early and establish yourself. VECCI has and continues to lead a number of trade delegations to East Timor and has a dedicated staff member based there to help businesses establish themselves.

Both men highlighted the turnaround in the country’s security situation – a concern that most businesses have when it comes to investing in previously war-torn countries – with Mr Bracks saying the situation had improved immensely.

While highlighting areas such as the development of a new port, repairing the ageing road network and upgrading the airport as on the Timor Government’s wish list, Mr Bracks said companies serious about looking to get into the East Timor market should read the country’s recently released strategic development plan which outlines the key opportunities.

2011 Timor-Leste Strategic Development Plan (SDP)
http://timor-leste.gov.tl/wp-content/uploads/2011/07/Timor-Leste-Strategic-Plan-2011-20303.pdf