Elaboración del Cronograma

Matt Levey (Mr Garrett’s office)

6.4.1 Mr Matthew Levey was a policy advisor to Mr Garrett at the relevant time. He liaised between Mr Garrett, DEWHA, external stakeholders and internal stakeholders within the Australian Labor Party.63 _{His first memory of the HIP was that, in late 2008 (possibly}

in December) Mr Garrett told him that Mr Rudd’s office had communicated that they were interested in a ‘big idea on energy efficiency policy’.64 _{He had conversations with}

Ms Wiley-Smith, with whom he had a strong working relationship.65 _{Shortly before}

19 January 2009, a policy advisor in Mr Rudd’s office contacted Mr Levey and said, according to a note taken by Mr Levey:

Spoke to Andrew Charlton [another member of the staff in the Prime Minister’s office]. Looking at economic stimulus package, quick economic effect, low impact, insulation, stimulus checklist…66

56 Statement of Brunoro at [18], STA.001.002.0001, 17 March 2014. 57 Statement of Brunoro at [19], STA.001.002.0001, 17 March 2014. 58 AGS.002.033.9324, 1; See also Transcript (15 May 2014) 4805 (K Rudd). 59 AGS.002.008.0353, 1; AGS.002.008.0354, 1-5; and AGS.002.008.0359, 1-6. 60 Statement of Dickson at [30], STA.001.099.0001, 22 June 2014.

61 AGS.002.034.0221, 1.

62 AGS.002.034.0627, 1-2; see also AGS.002.034.1522, 1. 63 Statement of Levey at [7], STA.001.003.0001, 18 March 2014. 64 Statement of Levey at [12], STA.001.003.0001, 18 March 2014. 65 Statement of Levey at [15], STA.001.003.0001, 18 March 2014. 66 Statement of Levey at [17], STA.001.003.0001, 18 March 2014.

6.4.2 He also spoke with a Mr Stephen Oxley from DEWHA to this effect:

PM&C working on green jobs stimulus package with SHAP Mark II options, energy efficiency audit and three options. Energy efficiency audit plus grant for rebate of $1,000. 1–300,000 households then more for two and three. Contemplating this on the table to draw State in delivery arrangements subject to states negotiation. PM&C intending to brief PM on his return. PM&C still very keen for technology neutral. PM wants to talk insulation and solar early to mid-February announcement

They are at $1,000 figure. Asked by Employment Department.67

6.4.3 This accords with the narrative set out earlier which demonstrates a change in focus from energy efficiency initiatives to an energy efficiency policy as part of stimulus measures occurring in mid-January 2009.

6.4.4 Mr Levey then met with Mr Garrett (perhaps on 19 January 2009). His note of the conversation is as follows:

Keep plodding along to deliver optimum package. Want to provide an additional two to three-pager, wraps it up more in language of what we are attempting to do, has names, rollouts, things critical to emphasise. Hard thinking about language, technology specific, nation changing, engagement, sporting clubs, community groups, non-government organisations, others. Something from households least prepared down to middle class, suburb –greening the suburbs, PM says he doesn’t get big ideas from department. Look at earliest optimum version.68

6.4.5 Mr Levey took this to mean that Mr Rudd did not get big ideas from his own Department and Mr Garrett was being asked to provide some.69 _{The note is Mr Levey’s summary of}

the Mr Garrett’s words.70

6.4.6 Mr Levey had further contact with Ms Wiley-Smith and Mr Oxley.71 _{In one of those}

discussions, he was told by her that there was no way to negotiate the New Policy Proposal (that I discuss shortly) coming into effect later than 1 July 2009.72 _{More is said}

later in this Report about the impossibility of achieving the 1 July 2009 commencement date without seriously compromising safety and other important facets of a properly framed program. He was informed that DEWHA officers were being asked to do so by ‘central agencies’, in this case PM&C, and that a two -year program had been proposed.73

6.4.7 His recollection was that Mr Garrett and DEWHA were sympathetic to a rollout longer than two years because their priority was energy efficiency and because, he discerned, there was a sense that ‘doing it faster’ would not necessarily provide the energy efficiency investment that best suited each household.74

67 Statement of Levey at [19], STA.001.003.0001, 18 March 2014. 68 Transcript (21 March) 504 (M Levey).

69 Statement of Levey at [22], STA.001.003.0001, 18 March 2014. 70 Transcript (21 March) 504 (M Levey).

71 For example, see Statement of Levey at [44], STA.001.003.0001, 18 March 2014.

72 Statement of Levey at [44], STA.001.003.0001, 18 March 2014; Transcript (21 March) 508 (M Levey). 73 Statement of Levey at [28], STA.001.003.0001, 18 March 2014.

6.4.8 Mr Levey’s notes and the evidence he gave to the Commission confirm that the proposal then under consideration, at least from DEWHA’s point of view, was one that involved a regional brokerage model.75

6.4.9 Mr Levey could not recall DEWHA talking to him about safety concerns at these early stages.76 _{But he did meet with Mr D’Arcy of ICANZ on 29 January 2009. His note of that}

meeting records the following:

Implementation and inspection has major problems. Lack of accreditation. Need for installers to do it properly. Maybe lack of adequate insulation. Not a rebound effect. Need for random audits that they can’t just throw random insulation in roof. Have an accreditation number as well as a serial number … [emphasis added]77

Minister Garrett

6.4.10 The Prime Minister’s office contacted Mr Garrett’s office requesting development of an energy efficiency policy.78 _{Mr Garrett said there was ‘a call’ for policy ideas in the field of}

carbon reduction and energy efficiency measures. At first, it was not contemplated to be one that needed to have a stimulatory effect. He had a discussion with Mr Rudd on, perhaps, 19 January 2009.79 _{He could not recall the detail of it, but knew it was about}

what kind of policies could be delivered as a Government in the ‘energy efficiency space’. 6.4.11 This discussion preceded Mr Levey being instructed by Mr Garrett to prepare a short

document about a possible policy.

6.4.12 Mr Garrett was not ‘specifically informed’ that Ms Brunoro and Ms Wiley-Smith were undertaking the work they did. That does seem unusual given that they were officers within DEWHA. And it was not until close to the announcement of the HIP that Mr Garrett learned of what was to be made public.

6.4.13 Mr Garrett had no reason, he said, to believe that his Department lacked the capacity to design and deliver the HIP before it was announced. That is because he thought it should be the case that departments should make their own arrangements to ensure that they could.80 _{And it is despite DEWHA being a policy rather than a program}

delivery department.

Kevin Keeffe

6.4.14 Mr Keeffe subsequently became the Program Manager for the HIP. It is evident from his notes that he was in contact with Mr Levey before the HIP was announced.81 _It

is also clear that Mr Keeffe was aware of Mr Plevey from EE-OZ in December 2008. The significance of that awareness is apparent when Mr Plevey’s warning to DEWHA in late February 2009 is discussed later is this report.82

6.4.15 Mr Keeffe met with Mr Garrett on 19 December 2008. They discussed the means to implement energy efficiency measures. Mr Keeffe’s note reads:

‘PM & C—consolidated process—stimulus package…Centrelink/NGO delivery? Rollout 1 July 2010—low income group—COAG—implementation’.83 75 For example, Statement of Levey at [41], STA.001.003.0001, 18 March 2014.

76 Statement of Levey at [38] and [50], STA.001.003.0001, 18 March 2014. 77 Statement of Levey at [47], STA.001.003.0001, 18 March 2014. 78 Statement of Garrett at [17], STA.001.069.0001, 8 May 2014. 79 Statement of Garrett at [34], STA.001.069.0001, 8 May 2014. 80 Transcript (13 May 2014) 4550 (P Garrett).

81 KEE.002.001.0529. 82 See Chapter 9. 83 KEE.002.001.0532.

6.4.16 This note certainly bespeaks an understanding on the part of both Mr Garrett and Mr Keeffe in mid-December 2008 that they were working towards a program directed at low income households. That is consistent with my conclusions above.

6.4.17 It is evident from Mr Keeffe’s note of 13 January 2009 that he was aware of the SHAP and that PM&C was in discussion with Mr Rudd regarding a green jobs stimulus package that included household energy efficiency measures.84 _{Mr Keeffe’s note continues:}

‘Two year measure—300,000 homes energy audit—delivery model’.85

6.5 Focus on insulation: genesis of the HIP

6.5.1 I am satisfied that the development of the HIP in any specific sense commenced only in mid- to late January 2009. Responsibility for the formulation of the policy lay with PM&C. Mr Johnston recalls a meeting within PM&C in early January 2009 in which he was informed that the Government intended to launch a stimulus package and energy efficiency measures would form part of it.86 _{Mr Johnston recalls being told that}

the stimulus measures would be developed in PM&C and not as part of a taskforce approach.

6.5.2 Of course, much other work was being done to develop the various components of the Nation Building and Jobs Plan, announced on 3 February 2009. I focus only on the development of the HIP.

6.5.3 Ms Wiley-Smith (then Acting Assistant Secretary of Community and Industry Partnerships Branch of the Renewables and Energy Efficiency Division–REED– within DEWHA) was asked for assistance, given her previous work, outlined above. Ms Brunoro who worked with Ms Wiley-Smith, assisted her. As I have noted above, Ms Brunoro had earlier been seconded to the energy efficiency taskforce operating from PM&C. Both reported to Mr Carter (Ms Wiley-Smith more directly than Ms Brunoro) who was the First Assistant Secretary of REED. Ms Brunoro was, at the time, Acting Director in the Community Partnerships Team within DEWHA. Her involvement with the HIP was from its outset, and continued up until 22 April 2009, at which point she was seconded to another Government agency (the CSIRO).

6.5.4 On 12 January 2009, Ms Wiley-Smith sent to Mr Johnston some background information. At that stage it was still proposed to deliver any package in consultation with the States and Territories.

6.5.5 Under the heading ‘Jobs benefits’ in one of the documents it was stated:

Further, installation of these products requires relatively unskilled labour—in particular, insulation installers do not require extensive training and can be brought on line quickly—which increases the likelihood that the scheme will result in job creation in the short term.

The majority of insulation materials used in Australia is manufactured locally, representing in excess of $450M in annual sales and approximately 5,000 jobs. Expanding the current insulation installation network is a relatively straightforward matter as installers do not require extensive training and can be brought on line quickly.87

84 KEE.002.001.0539, 1. 85 KEE.002.001.0540, 1.

86 Statement of Johnston at [17], STA.001.093.0001, 2 June 2014. 87 Statement of Johnston at [19], STA.001.093.0001; 2 June 2014.

6.5.6 This information had come from ICANZ, in its submission to the Victorian equivalent of what became the HIP.88 _{Of course large businesses such as the members of ICANZ}

had their own training programs. They also focussed only on the installation of insulation manufactured by those businesses.

6.5.7 Mr Johnston states that a submission was prepared for the SPBC, based on the Energy Efficiency (Green Jobs) package referred to above. It included a New Policy Proposal ‘Climate Proofing Our Homes.89 _{At that stage no funding had been approved by the}

Cabinet for such a policy.

6.5.8 Mr Rudd’s Office maintained an interest in what was occurring. On 19 January, Ms Horvat sought further information from Mr Johnston about the capacity of the insulation

manufacturing industry.90

6.5.9 Probably as a result of this enquiry from Mr Rudd’s Office, PM&C delivered a number of questions to Mary Wylie-Smith on 19 January 2009. One question asked was:

If a decision on the package was made in the next day or two how long would it take administratively for the government to start rolling out the money?

6.5.10 The answer was:

Consideration could be given to launching the initiative initially as a rebate, which would be straightforward to administer based on the systems used for existing rebate programs (solar hot water), but simultaneously work on developing alternative delivery arrangements, such as voucher system/NGO delivery for later implementation.

A range of delivery agencies should be considered. In particular, consideration should be given to negotiating delivery arrangements with the states and territories, many of which already administer similar rebate programs. This could be done as part of the National Strategy on Energy Efficiency … The administering agency would need approximately six months lead time to bring this program fully online—subject to being able to recruit, train and accommodate the staff needed to run the program, and subject to being able to develop the IT system needed to manage a program of this scale. A rudimentary program could be operational within three months, but there would be potentially serious delivery capacity issues revolving around the constraints identified above.

The Canberra market may not be able to supply staff with the right skill set to deliver the program (largely revolving around data entry and payment processes). Consideration could be given to locating the program administration centre in another city or major regional centre…’91

6.5.11 If this was the source of the belief (expressed by Mr Rudd in his oral evidence) that the public service had advised that the HIP could be designed and ready for rollout on 1 July 2009, then in my view, that belief was capable of being tenuous at best. It can be seen from the document itself, and from the circumstances prevailing at the time (a program directed to low income households, and to be delivered in consultation with the States and Territories) that no suitably reliable advice was being given that what became the HIP, administered solely by the Government, could be ready to roll out in six months.

88 The Victorian Energy Efficiency Target Scheme—AGS.002.007.1003, 1-17. 89 Statement of Johnston at [22], STA.001.093.0001, 2 June 2014. 90 Statement of Johnston at [25], STA.001.093.0001, 2 June 2014. 91 AGS.002.086.2906, 1.

If that was what was relied upon by the SPBC in choosing a 1 July start date, it was seriously misconceived.

6.5.12 A document was prepared on 20 January 2009 entitled ‘Additional Information— Modified Sustainable Homes Assistance Package.’ It comments on identified risks:

The two year delivery timeframe has industry relationship implications due to the boom/bust nature of the proposed assistance. For example, a massive expansion of insulation installation across the country would require the industry to significantly expand manufacturing and installation capacity for two years (the industry has signalled that there is reasonable capacity) beyond which time demand would slump. A five year delivery schedule (as proposed in the original SHAP) that addresses the comparatively low level of insulation in Australia would still bolster installation and manufacturing employment without straining capacity and providing no medium to longer term strategy for the industry.

A massive expansion of insulation assistance within such a short timeframe would require a robust compliance framework as the opportunity to attract these financial resources quickly may result in low quality operators and installation practices. Within Australia there have already been numerous reports that some households have paid for insulation where the insulation has not been installed.92

6.5.13 Mr Johnston states that on 21 January 2009 he received an email from Mr Tune which forwarded an email that Mr Tune had received from Mr Rudd’s Chief of Staff the night before—it stated that Mr Rudd wanted to see a package on solar water, insulation and smart meters that day.93

6.5.14 Mr Johnston told Ms Wiley-Smith that consideration was being given at high levels to a household assistance package, but that it might be different from what had previously been proposed.94

6.5.15 There was some suggestion at that stage that there would be a need to ‘ramp up quickly’ and that the rollout would be ‘quick’. Ms Wiley-Smith wrote to her colleagues in DEWHA.95

On 21 January, Mr Malcolm Thompson replied:

We had a budget discussion with Minister Garrett this afternoon…and took the opportunity to mention that we had had an earlier discussion with you guys about some of the implementation challenges—this was a way of drawing out how much he was across things.

It appears that he is reasonably well informed by his staff but appeared to know little more; he did mention that he had a discussion with Minister Tanner about delivery options and obstacles (he was not more specific than this); Gerard [Gerard Early, the Acting Secretary of DEWHA at the time] pointed out the challenges presented by fast and large scale rollout, and the need to ensure that we have the resources to deliver—he understood and acknowledged these points.96

92 AGS.002.008.0318, 1-2.

93 Statement of Johnston at [25], STA.001.093.0001, 2 June 2014.

94 Statement of Wiley-Smith at [10] to [13], STA.001.001.027), 15 March 2014.

95 Statement of Wiley-Smith at [10] and [14], STA.001.001.0271, 15 March 2014; See also Transcript (17 March 2014) 79 (M Wiley-Smith).

6.5.16 Additional information was provided by Ms Wylie-Smith to Mr Johnston on

22 January 2009.97 _{This attached a ‘modified sustainable homes assistance package’}

document. Under the heading ‘Comments on Identified Risks’ it was stated:

The two year delivery timeframe has industry relationship implications due to the boom/bust nature of the proposed assistance. For example, a massive expansion of insulation installation across the country would require the industry to significantly expand manufacturing and installation capacity for two years (the industry has signalled that there is reasonable capacity) beyond which time demand would slump. A five year delivery schedule (as proposed in the original SHAP) that addresses the comparatively low level of insulation in Australia would still bolster installation and manufacturing employment without straining capacity and providing no medium to longer term strategy for the industry.

While the proposal for householders to only pay ‘the gap’ is a positive outcome for low income households and will increase the uptake of the rebate, there may be cash flow implications for the small business sector …

A massive expansion of insulation assistance within such a short time would require a robust compliance framework as the opportunity to attract these financial resources quickly may result in low quality operators and installation practices. Within Australia there have already been numerous reports that some households have paid for insulation where the insulation has not been installed.98

6.5.17 The SPBC met again on Friday 23 January 2009. It considered the proposal that had been put to it by PM&C. It rejected it. Mr Dominic English called Mr Johnston and said that the SPBC wanted some advice on energy efficiency proposals. Mr Johnston was put on speakerphone to the SPBC meeting and answered questions put to him. Mr Johnston advised that for a given amount of money installing insulation in an uninsulated home would provide the single biggest benefit of any energy efficiency measure. Mr Johnston says that this occurred at approximately 2:30pm.99

6.5.18 At approximately 4:30pm that day, Mr Johnston was contacted by a senior PM&C officer, probably Mr Tune. He was told that the SPBC wanted a program developed that would provide free insulation to every household in Australia. This program had to be developed for SPBC consideration in the morning of 27 January.100 _{The intervening period was the}

Australia Day long weekend.

6.5.19 Mr Johnston immediately contacted Ms Wiley-Smith from DEWHA and Mr Paul Emery from Finance. He was instructed to advise them that they should not speak to anybody else within their Departments who did not have a ‘need to know.’101

6.5.20 On 23 January 2009 at about 5pm, Mr Johnston requested of Ms Wiley-Smith that the