Bruce Baird (Cook, Liberal Party) Share this | Hansard source

As somebody who chairs the Standing Committee on Economics, Finance and Public Administration, I know, as does the member for Hunter—whom I see is sitting beside the member for Swan—very well of the talent of the people on the Reserve Bank board. There is no-one sitting on the Reserve Bank board who does not have enormous talent, and I would challenge the member for Swan to name one who does not have enormous economic talent. But that is not the issue.

The issue is more about why, if you set the organisation free to compete in the private sector, you would want to take it back. If you take part of the Telstra shares and hold onto them and the price of the shares escalates, that will assist you more favourably. Part of the problem is that you have $30 billion worth of shares going onto the market, which will be the largest float in Australia’s history, and you may decide to phase it out. That would be the reason you would do it. The member for Melbourne seems to have missed the whole point of the issue.

Having talked about some of the hobbyhorse issues and the member for Melbourne, I will turn to what the fund is trying to do. It is trying to address in a meaningful way what has happened in other countries. A whole raft of countries have indicated that they want to follow a similar approach. I think New Zealand and Canada are in that group. Ireland and France have established future funds. Why have they established future funds? Because they have looked at the United States—the world’s largest economy—and they have seen that they have not provided for the future.

I visited the United States in April. One of the issues that the various think tanks are challenged by and constantly point out is that the government take in terms of taxation is about 15 per cent. If you go forward to 2030, in terms of the Medicaid requirements—that is, their medical funds, social security payments and so on—the actual take will amount to 22 per cent of GDP. The question they keep asking is: how will that work? You either have to increase taxation substantially or you have to slash in a major way medical benefits, particularly for medicines et cetera—like our PBS—otherwise it will simply not work. The United States have not addressed the challenge of their demographic shifts. They have not addressed the question of future liabilities.

The Future Fund addresses in a significant way the future liabilities that we are facing. We will have proportionately fewer people in the workforce—and even the member for Melbourne said that. The forecast is that, by 2040, we will have the same number of people in the workforce, but we will have more than twice the number of retired people. In my electorate 18½ per cent of people are over the age of 65. That trend will follow across Australia.

To meet this challenge we need to prepare for the future, otherwise we will be in the same position that the United States are in. Having inadequate preparation means they will have to either substantially lift their taxation levels or slash benefits. We do not want to see that happen and this proposal is preparing for the future in a very responsible way. It is not, as the member for Melbourne would say, simply an indulgence. We have seen the retirement of government debt. We are putting surpluses that we see in the future into this Future Fund, which will provide in a realistic way for the challenges of the demographic shift and also our retirement liabilities.

As a result of the repayment of the government’s debt, $6 billion a year will be released into the real activities of health, education and national security. Unfunded public sector superannuation is the largest liability on the Commonwealth’s balance sheet. As at 30 June 2005, unfunded public sector superannuation liabilities were around $90 billion. That is predicted to climb to an estimated $140 billion by 2020. The member for Melbourne says that is an indulgence, that we are overreacting and that this is a lesser priority.

How can you say that when you will have, on current estimates, liabilities of a superannuation scheme alone of $140 billion? That is the challenge that exists. His suggestion is that maybe we just shore up the existing government super scheme and all will be well. Unless we plan to raise taxes or to slash our benefits, driving the budget into deficit, we will not meet the equation that faces us. The best way is through the Future Fund, which other countries have successfully shown as the way forward.

The Future Fund will be invested, accumulating financial assets sufficient to offset the government’s unfunded superannuation liabilities by 2020. The bill provides for initial capital of $18 billion to be transferred to the fund in 2005-06. The government will also contribute any future surpluses and proceeds from government asset sales to the fund. Also, as the fund grows over time, the earnings of the fund will be reinvested and the assets held by the Future Fund will be protected from the rest of the budget to keep it secure. As I mentioned before, that is what other countries have done. The fund will only be drawn upon at the earliest in 2020 or at a time when an independent assessor determines that the future of the fund’s assets are adequate to offset the unfunded part of the government’s accrued superannuation liabilities.

Isn’t that what we are about? Isn’t that about responsibility in addressing our future liability? Taxpayers will face a much lighter tax burden than they otherwise would face, so it is our children who will experience the benefits of this. The fund represents a sensible financial policy now for the benefit of future generations. Queensland already has a fully funded superannuation scheme, and it has a Labor government. I am not quite sure why there is concern about this approach. The chairman of the board will be David Murray. There is all this talk about the way they might be doing it, the way they will invest their funds and ‘this will be rorted and used for the benefit of the National Party’ et cetera. What a nonsense. It is protected by legislation.

We have one of the finest chief executives in the country to head it up: David Murray. His track record in running the Commonwealth Bank is outstanding. The share price doubled, then doubled again, under his leadership, showing the great confidence the public has in the leadership of that organisation. He knows how the share market works; he knows how to invest to insure for the future. I certainly think he is a very fine person to have in that role.

The Board of Guardians will be assisted by a new government statutory agency—namely, the Future Fund Management Agency. It will undertake the associated operational activities; however, all investment activities will primarily be outsourced to private sector fund managers, which is appropriate. Of course, their performance will be measured against each other, so if one private sector fund manager does not perform against the criteria set up by the Board of Guardians and the chairman, they will be replaced and others will be brought in. It is a very competitive environment; it is not some sleeping, snoozing group of former bureaucrats who have just got their pensions and are looking forward to seeing their union mates down at the pub. This is a professional organisation with professional people who will be looking to the future of our government superannuees, which I would have thought most people would be concerned about.

As for restrictions, the bill provides a framework for these decisions by outlining an investment mandate to guide the board, as well by setting the broad parameters within which the fund is allowed to operate. The Future Fund is a financial asset fund. The board will be able to invest in a wide range of financial assets, including shares and bonds, but it cannot invest in non-financial assets such as direct holdings of property and infrastructure. It will have to report, and that report will be tabled in parliament. The fund will also appear before Senate estimates and be subject to other forms of parliamentary accountability. Members opposite will be able to quiz the chief executive on performance. They will be able to look at the performances of each of the fund managers to see how they are going and raise appropriate questions. They will be able to ask questions in terms of where the money is being invested, not only in terms of the outsourced fund management. They will also be able to ask questions as to whether any of the funds have been diluted to various electorates—and I would think not.

The legislation is basically to ensure that the fund will be protected from a future Labor government—heaven help us all if that does come about—rorting the piggy bank and looking after their mates if they get into government. The approach in the legislation is broadly consistent with the approach taken by other national funds operated by other countries, which works very well. It is about preparing for the future and ensuring that the government’s liabilities are prepared for and are going to be met. It ensures that we do not allow ourselves to be in a vulnerable position where future generations will have to meet the requirements and be subject to increased taxation or a reduction in benefits across the board. This is sensible, appropriate, pragmatic and responsible financial management. I commend the bill to the House.

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