CHAIR (Senator Ronaldson)—I declare open this hearing of the Senate Standing Committee on Economics. The Senate has referred to the committee the particulars of proposed additional expenditure for 2006-07 and certain other documents for the portfolios of Industry, Tourism and Resources and Treasury. The committee may also examine the annual reports of the departments and agencies appearing before it. The committee is due to report to the Senate on 21 March 2007 and has fixed Thursday, 5 April 2007 as the date for the return of answers to questions taken on notice. Today the committee will begin its examination of the Treasury portfolio, starting with the Macroeconomic Group of the Treasury and continuing in the order shown on the agenda.

Under standing order 26 the committee must take all evidence in public session. This includes answers to questions on notice. I remind all witnesses that, in giving evidence to the committee, they are protected by parliamentary privilege. It is unlawful for anyone to threaten or disadvantage a witness on account of evidence given to a committee, and such action may be treated by the Senate as a contempt. It is also a contempt to give false or misleading evidence to a committee. The Senate, by resolution in 1999, endorsed the following test of relevance of questions at estimates hearings:

Any questions going to the operations or financial positions of the departments and agencies which are seeking funds in the estimates are relevant questions for the purpose of estimates hearings.

I remind officers that the Senate has resolved that there are no areas in connection with the expenditure of public funds where any person has discretion to withhold details or explanations from parliament or its committees unless the parliament has expressly provided otherwise.

The Senate has resolved also that an officer of a department of the Commonwealth or of a state should not be asked to give opinions on matters of policy, and shall be given reasonable opportunity to refer questions asked of the officer to superior officers or to a minister. This resolution prohibits only questions asking for opinions on matters of policy and does not preclude questions asking for explanations of policies or factual questions about when and how policies were adopted.

If a witness objects to answering a question, the witness should state the ground upon which the objection is taken and the committee will determine whether it will insist on an answer having regard to the ground which is claimed. Any claim that it would be contrary to the public interest to answer a question must be made by the minister and should be accompanied by a statement setting out the basis for the claim.

Senator Minchin—The Treasury will obviously have to have an assumption and an explanation has been given as to what that assumption would be based on. It will not be presented as an official forecast of productivity, but it will present all of the data that enables us to discuss what policy implications it has and what policy measures might be available to enhance that long-run average productivity if we believe that is important. It will not be an official forecast, I presume.

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Mr Parker—The purpose of the IGR is to make a projection which then exposes a range of policy issues which flow from that. It is not trying to predict what the economy will do over the next 40 years. There are different bits that you can be more or less confident about. You can be pretty confident about the population dimensions of the IGR because a lot of the population and the demography stuff is just locked in. The fact that total fertility fell precipitously after the baby boom still has effects. There is nothing that can be done about that. The fact that total fertility is now rising a little bit will continue to have quite significant effects over the next little period.

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Senator JOYCE—How do we monitor that?

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Mr Parker—Total fertility?

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Senator JOYCE—Babies per—

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Senator Minchin—Birth rate.

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Senator JOYCE—Yes.

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Mr Parker—Total fertility is a measure of how many children a woman would have if that woman had as many children at each age through her lifetime as are presently being born in Australia. You look at the fertility rate for each year—how many women aged 21 are having babies, how many women aged 22 are having babies, and so forth—and expand that across the total lifespan, and you get to an answer of how many babies an average woman, in a sense, would have in her lifespan.

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Senator JOYCE—So, in lay terms, you are basically saying that slightly more younger women are having babies now?

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Mr Parker—In fact it is more older women who are having babies.

Dr Kennedy—There is an additional factor at play in the mining sector, and that is that there has been a fairly steep decline in oil production over the last four to five years in Australia, which has contributed to that decline in mining productivity. We are expecting that decline largely to have run its course. It is quite a significant part of the overall fall in mining productivity.

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Mr Parker—The productivity point there is that you need the same number of people to man the oil facilities. They just pump less per head.

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Senator JOYCE—That relates to a question that I was going to ask later on. Do you mind if I ask it now?

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CHAIR—The non-government senators have had a pretty fair go for the last hour and a half and I thought I would throw to the government senators. I know that Senator Joyce has a question in relation to the coal industry and I think Senator Watson has—

CHAIR—I think we will have Senator Joyce and then we will have a break for morning tea.

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Senator JOYCE—As a separate issue, you said that there is a strong correlation between the cost of oil as an input and our productivity from mining. Is that correct—is that what you said?

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Mr Parker—No, what we said is that when we measure productivity in the mining sector, the mining sector also includes oil extraction.

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Senator JOYCE—Oil infrastructure?

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Mr Parker—Oil extraction. So, for the purposes of the statistics, all of the platforms out in Bass Strait and the North West Shelf are part of the mining sector. As oilfields deplete it gets harder and harder to pump oil out of them. So the amount of oil that is produced per platform has been declining in Bass Strait and other places. But the productivity story comes about because you still need the same number of people, helicopter pilots and so forth to run each platform.

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Senator JOYCE—So basically you are saying that we still need the same attention to the production of oil but we are not producing as much and it is increasingly going to fall away over time. But that is a different issue.

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Mr Parker—Yes. As new fields replace the North West Shelf, it could go up again.

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Senator JOYCE—That is a different issue.

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Senator SHERRY—The cost of the operation is relatively fixed.

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Mr Parker—Pretty much, yes.

CHAIR—I think Senator Sherry has moved on from p