The film industry is generally perplexed by last night's surprise news that the Australian Government has decided to merge the Australian FilmCommission (AFC), which has the principal role of developing Australian films and film-makers, and Screensound, the organisation which collects and preserves the country's audiovisual heritage.

Legislation will have to be passed in Parliament to give effect to the proposal, which will give Screensound more independence. The combined organisation should be able to more effectively co-ordinate activities and events that increase the Australian community's exposure to screen culture.

The move was announced as part of the annual budget and takes effect from July 1. It will create the second largest film agency, supported with about A$40 million per annum in taxpayers' funds, which is about two-thirds ofthe amount that goes to the government's production investor, the Film Finance Corporation (FFC).

The budget confirmed that the AFC will get A$2.3 million more in 2003/04, much of which will go on documentary, and that the FFC's annual base funding of A$50 million per year is secure until at least 2006/07. About 55% of this amount is destined for feature film production and an additional A$10.5 million will also be added to the pot for adult and children's drama.

The bad news for the industry is that the Australian BroadcastingCorporation's push for an additional A$250.6 million over three years has failed. Nearly A$65 million of this amount was earmarked for 180 hours of new comedy and drama, to be made in partnership with independent producers, many of whom survive by working on film and television simultaneously.

The ABC will get A$742.6 million in 2003/4 for its television, radio andon-line services, while Australia's other public broadcaster, SBS, will get A$151 million.

The National Institute of Dramatic Art, the acting school which has spawned Mel Gibson, Baz Luhrmann and Cate Blanchett, has had its funding increased by A$4.6 million over four years.