On first glance, figures released today indicate that more money is being poured into Australian features, which are traditionally made for very low budgets, but the improvement is illusionary.

The numbers in the Australian Film Commission's (AFC) annual production survey only look healthier than the previous year because they have been bumped up by Baz Luhrmann's big-budget period romance Australia, just as they were by Happy Feet two years earlier.

Twenty-seven Australian films, including three overseas co-productions, started filming during the 12 months to June 30, according to the AFC. They were worth $232m (A$270m), which was nearly $123m (A$150m) more than the previous year despite five less films being made.

Fifteen of the 27 films had budgets of $2.6m (A$3m) or less and only three - Australia and two co-productions shot overseas, Death Defying Acts and The Children Of Huang Shi - cost more than $17m (A$20m).

Three US and three Indian films spent an additional $88m (A$102m) on filming in Australia during the 12 months. The US films were the DreamWorks SKG production The Ruins, and two Warner Bros Pictures, Fool's Gold and Where The Wild Things Are.

The AFC's annual production survey, for the first time, contained statistics on foreign movies undertaking post-production and special effects work in Australia, even though they were not filmed locally. Eighteen titles spent $7.7m (A$9m) with local service companies. Five of the 18, including Blood Diamond and Harry Potter and the Order of the Phoenix, accounted for three-quarters of that expenditure.

A new system of financing local films, underpinned by a 40 per cent rebate on expenditure payable to the producer, is being introduced into Australia. Film Finance Corporation Australia (FFC), the AFC and Film Australia are, simultaneously, being merged to form Screen Australia.

'There will be more interest in films in the A$20-$30 million range, films that could previously not be financed,' said AFC chief executive Chris Fitchett of the new landscape.

Fitchett said he is confident there will be no lag in production as Screen Australia finds its feet from July 1 next year, because the FFC has been able to green light a lot more productions by stretching the last of its money further because of the rebate.

The biggest challenge of the merger, said Fitchett, is all the administative issues. All staff will move to Screen Australia except Fitchett, FFC chief Brian Rosen and Film Australia chief Daryl Karp - unless one of them is appointed chief executive of the new superagency.

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