Peter Garrett (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Reconciliation and the Arts) Share this | Hansard source

I rise to speak on the second reading of the Future Fund Bill 2005 and the amendment moved by the member for Melbourne. As members would know, the idea of the Future Fund seemed to emerge out of thin air. Whether it was a thought bubble within the bureaucracy or a thought bubble within the Treasurer’s office or a thought bubble of the Treasurer’s, we still do not know. But it was an idea that came seemingly out of nowhere and, when it arrived, very little detail was attached to it. Politics, it is said, is a contest of ideas. As a consequence we have an idea that is now before us as proposed legislation. Our duty as opposition members is to consider the idea embodied in this proposed legislation.

It is worth while to go back in history and review the circumstances and the statements that were made at the time the Treasurer brought the Future Fund to us. On 10 September 2004 the Future Fund policy was announced by the Treasurer. He claimed that its mandate was ‘to increase national savings, offset unfunded super liabilities and maximise the government’s net worth’. Particular emphasis was given at the time to the notion that the offsetting of unfunded super liabilities for public servants was a primary reason for the creation of a Future Fund. The Treasurer additionally called this ‘the most dramatic response to the Intergenerational report’—the Intergenerational report that he commissioned on ageing—‘that the government had produced.’ It is hard to see how a proposal to deal with a shortfall in superannuation liabilities within the Public Service was a response to the Intergenerational report, which in effect dealt with the problems we will face as the baby boomer generation reaches retirement age. Nevertheless, that was the Treasurer’s rhetoric at the time.

In 2004 the government contemplated the full privatisation of Telstra. It needed a means or a method of dealing with both the financial governance and political issues that attached to the issue of the remaining privatisation of Telstra. Interestingly enough at the time, the Australian Chamber of Commerce and Industry responded to the Treasurer’s proposal but mainly by way of criticism. The chamber identified that the proposal would have a limited effect on national savings and that the dollars that were intended to go into the fund were not available for current worthwhile reforms. As all of us in this House who receive emails on a regular basis from the ACCI know, that would include worthwhile reforms such as tax reform. The chamber also pointed out that the issue of the superannuation liabilities of public servants was not critical. It has been pretty much solved by the switch to an accumulation scheme. It could have been met in the future by government borrowing. The government could have simply topped up, over time, existing public sector superannuation funds which have a satisfactory rate of return. Politically, perhaps, this would have been difficult seeing as union representatives make up at least half the boards on the two public sector super funds.

The chamber went on to point out that the dollars could be diverted to uneconomic investments and so on. Clearly, some of the issues that were addressed by the ACCI the opposition have taken up. Other views were expressed in the debate at the time by the Treasury and its officials, names well known in Canberra—Mr Evans and Mr Henry. Mr Evans asked: why is it good policy to hand over tax, worth billions of dollars, to fund managers who will simply take high commissions on funds? Should we not be looking at tax reform? Should we not be funding research and development? Should we not be looking at measures which boost productivity? Mr Henry asked: how much will be invested overseas? And then there is the question of what national interests and ethical considerations will apply. This goes to the heart of one of the questions we are raising about the Future Fund. How will the Future Fund apply such considerations?

The Future Fund has a size component into the future which means that there is an inexorable logic that its investment decisions will be subject to the greatest scrutiny and the greatest pressure, both within the market and the political environment. Indeed, it is estimated that in the vicinity of $80 billion to $90 billion could be available within four to five years. This depends on the future of the remaining privatisation of Telstra, but the fund will be a huge player—notwithstanding the fact that under the existing legislation there are measures in place; in part, at least—to ensure that the fund is able to discharge its responsibilities in a way which is consistent with best market performance.

A number of issues that I, and I am sure other speakers, will raise today show that the government really has not thought this through as well as it should. Other commentators said that the government was simply hiding the budget surplus, that the fund was about keeping the budget surplus away from spurious cabinet spending submissions and from the National Party, notorious pork-barrellers since Federation. In regard to the first observation all we can say is that it is up to the cabinet ministers, when they go into the cabinet, to put good views for their submissions, which will rise and fall on their merits—in part, at least. On the second observation we can say plenty. It has been said before in this House, particularly given the recent defection from The Nationals to the Liberal Party of a leading National Party member, that we are witnessing the increasing political presence of Independents in what were formally National seats.

The Nationals are becoming a desperate and strained political party, and in desperate and strained circumstances desperate political measures are sought. The ghost of McEwen is gazing down on this House as he watches The Nationals rushing about trying to claim a new mandate for themselves. But what mandate can they claim if people are not voting for them and if their own members are deserting them? The only one that they can claim is that they can deliver from the bush and they can deliver disproportionately to their own political influence or representation within the coalition. I will come back to this a little later on, but there is no question that what was agrarian socialism has simply become pork-barrelling. We had much evidence of this in the House last year in the ‘regional rorts’ program and Roads to Recovery. It is a travesty really that we sit here in the House and watch millions of dollars after millions of dollars go into roads in regional areas which are mainly in Liberal and National Party electorates.

There are clearly consequences that attach to the government making a decision of this sort, but on the concerns that those in the National Party have about the possible use of funds I want to address the issue of the state of the natural and economic environment that they inhabit. A simple figure of $60 billion has been arrived at by research done by the Australian Conservation Foundation and the National Farmers Federation as the investment required from the Commonwealth, states and private bodies to repair natural landscapes. These are productive landscapes that our rural producers effectively rely on to continue to produce food to be able to export to other countries around the world—to have clean water flowing through the rivers. I do not hear The Nationals talking about the necessary investment that is required to actually repair the natural and productive landscapes of the bush, but I wish I did.

In the midst of all this there is a debate about infrastructure. One of the arguments we are putting strongly to the House is that at the very least consideration ought to be given for investment opportunities which would include infrastructure investments to be made out of a fund of this kind. Indeed, Labor would establish a Building Australia Fund to do just that.

It might be worth while reviewing briefly the infrastructure debate, because it needs to happen in the context of our discussion about the Future Fund. The most important point—and it was made again by the member for Melbourne yesterday—is that investment in public infrastructure is linked directly to productivity growth and economic prosperity. It is that linkage which will be the key to our future capacity to grow in a sustainable fashion. We would assert here very strongly that the government has a primary and direct role in providing infrastructure and investment in infrastructure—or the means for investment in infrastructure, as would happen under the proposed fund. There are many reasons to do this for the public good, because in some instances infrastructure investment would be in the nature of a natural monopoly. Infrastructure has other attributes. I think the most important one is that it deals with the vexed issue that political parties and policymakers in the parliament have, and that is of absenting themselves from their political day-to-day considerations and considering the national interest into the longer term; in other words, investing for intergenerational equity. Very clearly that is what infrastructure investment is all about. It is long-term investment—it goes to those matters within the economic framework of Australia which are used or affected by all Australians.

The point that the member for Melbourne made in an earlier speech was that we are quickly approaching the point where, if appropriate decisions are not taken, there will be a crisis in infrastructure. Engineers Australia, amongst others, have made similar comments. For example, Australia’s stormwater infrastructure needs to be renewed. There is a vigorous debate in New South Wales and certainly amongst my constituents about water. But we cannot have any debate at all about water unless we have the confidence that our water infrastructure, and particularly our stormwater infrastructure, including stormwater infrastructure that is suitable for the increasingly difficult challenges we face with water shortages in the cities, is improved. That requires a massive investment right across the country, because the issue needs to be addressed in most of our capital cities. There is also upgrading required for the Melbourne-Sydney-Brisbane rail line, the rolling out of broadband and so on. Whilst the figures do show that the involvement by the states and the federal government in investment in infrastructure is not at the total crisis stage at this point in time, because there is stable activity across both the sectors, it is very clear that crunch time is just around the corner. This is being considered by the Productivity Commission at present and we await the government’s response with real interest.

Much of the government’s touted economic success has come on the back of asset sales and also a bit of dividend stripping in the case of Telstra. Since the change in accounting arrangements with the introduction of the GST, it is a little more difficult for us to see what the figures of government expenditure as a percentage of GDP are but they are basically equivalent to the figures of the 1989-90 period—around 24 per cent or 25 per cent. The last five years for the Howard government I think would see government expenditure as a percentage of GDP in the range of 23 to 24 per cent.

At the same time something interesting is happening in that we have had ever-increasing tax revenues and a commodity price boom. But now we face the situation of baby boomers coming out of the workforce within the next 10 to 15 years and a decline in working age Australians becoming a very real issue for the government to address. This has not been taken up in the discussions around the Future Fund. Neither has the question of the decline in manufacturing and the huge need for us to increase our performance in that area. Without tourism in particular, our services exports figures are very poor. The investment necessary in medical research, in innovative technologies and in culture have all diminished over time under the Howard government. Yet, again, when you look at long-term policy considerations, this has not been addressed in the discussion about the Future Fund.

Government members who spoke in this debate last night made much about the alleged sins and omissions of previous Labor governments, but I simply put it to members opposite that it is time for them to think about the future and stop harping, in their own particular way, on the long gone past. When they think about the future, they need to think and speak about the purpose of and the extent to which the decisions that they as a government make—that the Treasurer and cabinet make—are going to be put to good use and for the benefit of all Australians. A lot of energy has been expended here attacking the political and fiscal sins of previous governments but nothing of substance has been said to address the issues that we have raised in here about the Future Fund.

There are real challenges in train and Labor has something to offer with respect to those challenges. In relation to the Future Fund, Labor offers a specific and simple proposition, which is that the fund income stream ought to be applied for infrastructure purposes. There are many purposes that people are well aware of in this House. I have only made brief reference to three of them—stormwater infrastructure, rail infrastructure and natural, ecological infrastructure. The second reading amendment proposes that the Future Fund invest on a prudent commercial basis and manage and administer funds consistent with a number of criteria. It is clear that it ought to be best practice portfolio management—there would be no argument with that; achieve desired returns without undue risk—no argument about that either; and enhance Australia’s reputation as a responsible, ethical investor. That seems to me to go to the very heart of the approach and the amendment that we are putting forward in the House. If through a fund of enormous size such as this Australia is not going to be able to declare what its ethical responsibilities are, then we are abrogating our responsibility on both sides of the House. Finally, the fund’s purpose is to build productive capacity in the Australian community.

There are many concerns that have been raised in the House about the governance arrangements in relation to the Future Fund and particularly in relation to the wide level of ministerial discretion. I hope that the government will listen and take some of those concerns on board. I am also aware of the fact that there is a Senate Economics Legislation Committee inquiry due to report on this bill in a couple of weeks. In our own policy process, our Building Australia Fund has addressed many of the issues that are raised in consideration of what the Future Fund may or may not look like and what its actual purpose ought to be. I commend some of those deliberations, including the policy work that has been done by Labor, to members opposite and ask that they might look at them with an unprejudiced eye.

There is a vision that we need to applaud when governments or policymakers actually come up with things which will benefit all of the country in a real and profound way into the long term. To that extent, the Future Fund or, as Labor will call it, the Building Australia Fund has that potential. But the pitfalls are many. Strict governance and a capacity to invest in those aspects of infrastructure which go to national importance, national resilience, dare I say,  economic, ecological and social in the long run, will be critical to the determinations that are made in this House. I commend the amendment to the House.

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