Senate debates

Tuesday, 20 June 2006

Questions without Notice

Australian Funds Management Industry

2:51 pm

Photo of John WatsonJohn Watson (Tasmania, Liberal Party) Share this | | Hansard source

My question is directed to Senator Minchin, the Minister for Finance and Administration. Will the minister inform the Senate of recent indications of the size and the dynamics of the funds management industry in Australia? How is the government contributing to the growth of that industry and is the minister aware of any alternative proposals?

Photo of Nick MinchinNick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | | Hansard source

I thank Senator Watson for that question and acknowledge his very long-term interest and his expertise in funds management and superannuation. Yesterday was quite a significant day because the ABS released figures showing that in the March quarter the total value of funds under management in Australia exceeded $1 trillion for the first time ever in our country’s history. That is $1,000 billion, for the uninitiated. Just four years ago the funds under management were only $649 billion, so there has been a 55 per cent increase since 2002.

It is a fact that Australia, as a result of this, has the fourth largest managed funds industry in the world, which, given that we only have the 15th largest economy and we account for only 1½ per cent of world GDP, is a very significant factor. There are a number of reasons why we are in this position—

Opposition Senators:

Opposition senators interjecting

Photo of Nick MinchinNick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | | Hansard source

I am happy to acknowledge the interjections from those opposite, who like to claim some credit for this.

Opposition Senators:

Opposition senators—Some? Some!

Photo of Nick MinchinNick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | | Hansard source

Indeed, the Labor government’s introduction of the nine per cent compulsory superannuation payment has made some contribution to this great outcome. We are a generous government; we give credit where it is due. We also attribute blame where it is due. Also, the value of assets under management has risen because of changes in asset values, because of the extraordinary growth in the Australian Stock Exchange, which is a function of the strong economy, for which I think we can take credit, and because of unprecedented corporate profitability. We have assisted this growth in funds under management by bringing in the super co-contribution arrangements and by abolishing the superannuation tax surcharge. We are encouraging savings through superannuation now by abolishing the tax on retirement benefits, which in addition to cutting the tax burden will massively simplify the current complex arrangements. Very significantly, the federal government will be directly adding to the stock of funds under management with the first $18 billion now transferred into our Future Fund to be complemented by further deposits from future surpluses and asset sales. So the prospects for what is now a truly great Australian industry—the managed funds industry—are very bright.

I was asked about alternative views, and I remind the Senate that, although the Labor Party can take credit for the nine per cent compulsory super levy, the Labor Party went to the last election promising that, if they were now in government, they would by now have scrapped the co-contribution arrangements and restored the super surcharge. They also had a policy of raiding the Future Fund to spend on their pet projects. Just yesterday we saw the CFMEU promoting a plan to raid the Future Fund and team up with other funds to pour money into projects of one kind or another. We are not surprised, of course, that the CFMEU and the Labor Party have a similar view on this. We saw 10 days ago just how close the Labor Party and the union movement really are, but it is outrageous and irresponsible for both the Labor Party and the CFMEU to put forward policies that involve raiding the Future Fund, which will obviously compromise its ability to achieve commercial returns and reinvest them so as to grow and meet this massive unfunded superannuation liability which this country still faces. With $1 trillion under management, there is clearly plenty of capacity in the Australian economy to fund infrastructure without the CFMEU and the Labor Party raiding the Future Fund. That is a dreadful policy and one that we will resist and oppose right through to the next election.