Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

My question is to the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the long-term economic benefits from the establishment of the Future Fund? Will the minister explain to the Senate the importance of allowing the fund to reinvest its annual earnings in order to achieve its long-term target of matching the government’s unfunded superannuation liability? Further, is the minister aware of alternative approaches?

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

I thank Senator Troeth for that pertinent question. Last week, the Labor Party announced that it will make a reckless and irresponsible raid on the Future Fund to pay for its election promises. It will indeed be a smash-and-grab raid on moneys that we have set aside prudently to meet a large and growing government liability. As many commentators have pointed out in recent days, private employers are required to provide for their employees’ superannuation entitlements on an ongoing basis, but every previous federal government of this country has failed to do that.

Honourable Senators:

Honourable senators interjecting—

Paul Calvert (President) Share this | Link to this | Hansard source

Order! There is too much noise in the chamber.

Nick Minchin (SA, Liberal Party, Minister for Finance and Administration) Share this | Link to this | Hansard source

It is the Howard government that is putting in place arrangements through the Future Fund to rectify that situation at a federal level and to provide for that unfunded liability so that future generations of Australians will be able to save some $7 billion a year rather than paying for those liabilities out of their taxes. That is the context in which we have to examine Labor’s irresponsible policy.

Last week, we saw the true extent of this irresponsibility in relation to the Future Fund. Not only are they going to take $2.7 billion out of the capital of the fund, but shadow Treasurer Wayne Swan had to admit that they are also going to spend the fund’s annual earnings on what he called hard infrastructure, which beggars a thought. In other words, the broadband policy is not just the first raid on the fund; under Labor, these raids are going to be an annual event. As the fund declares its annual earnings, the Labor Party is going to grab those earnings for its own pork barrelled projects.

Mr Swan, of course, insists that Labor are committed to ensuring that the Future Fund can match the unfunded liability by the target date, but that will simply be impossible if Labor’s policy is pursued. Under their policy of spending the annual Future Fund earnings on their pet projects, the fund’s balance will obviously by definition stay static in nominal terms, but the unfunded liability is going to continue to rise to $140 billion. It must be able to reinvest its earnings if it is going to reach that target.

It is also clear from what Labor are saying that they are going to interfere politically with the investment priorities of the fund by directing it to invest in their favourite schemes. As Senator Coonan said, they seem to have learnt nothing from the experience of state Labor governments of the late eighties and early nineties. If the fund is subject to constant political interference and is unable to reinvest its earnings, then we can ask how the fund is going to grow to meet that target under Labor’s policy. Where is the money going to come from to meet the $140 billion unfunded liability? They are against any further privatisation, so there will be no more asset sale proceeds going into it. Under Mr Rudd, Labor have already racked up so many new spending promises that it is pretty clear that Labor cannot rely on future budget surpluses as a way to meet the target fund of $140 billion.

If the Labor Party aim to deposit extra money into the fund, then why are they simultaneously raiding it to fund the promises? It is clear they have simply run out of money to fund their election commitments, so they are going to raid the fund set aside for public servant superannuation.

The contrast is stark between Labor and a government under which the Future Fund is able to reinvest its earnings and grow unhindered to meet that $140 billion liability. Under Labor’s cynical and short-sighted policy, the fund will remain static in value terms and be incapable of meeting that target, thus putting a huge tax burden on future generations.