Bob McMullan (Fraser, Australian Labor Party) Share this | Hansard source

Like the member for Chisholm, I support the second reading amendment moved by the member for Melbourne to the Future Fund Bill 2005. I also support the idea of a Future Fund. In fact, I supported the idea when the Treasurer did not. With the member for Hotham, I was advocating what we were calling the ‘intergenerational fund’ when the Treasurer was mocking the idea. I remember him saying: ‘Fancy that! They want to cut taxes, have a surplus and an intergenerational fund. What a silly idea.’ Things which we were then advocating and which he was ridiculing are things he has now done. Unfortunately, he has done it rather poorly, but we all remember the hyperbole.

One of the problems with the judgment that is made about the current Treasurer is that people never look back at what he said in the past. He is quite capable of saying within weeks entirely contradictory things with equal gravity, enthusiasm and certainty when both positions cannot be held simultaneously. He ridiculed the idea of a Future Fund when we proposed it. Now he has come up with a Clayton’s version. If you compare it with what was being advocated earlier in Australia by the member for Hotham, me and others, and in an excellent paper by the Chifley Research Foundation, or compare it with the very substantial initiative taken by Michael Cullen, the Deputy Prime Minister and finance minister in New Zealand, this is a very pathetic effort. This is typical of Peter Costello as Treasurer: big talk but with no reform at all.

It reminds me of a story—which I am sure has been embellished over time—when I was living in Western Australia back in the sixties. A play, which some will remember, called Equus was being performed. There was a male nude scene in Equus and the overzealous Western Australian police charged the young male actor who was in the full frontal male nude scene with indecent exposure. The young actress in the show was called as a witness and was asked her reaction. She said, ‘I thought it was a very big fuss about a very small thing.’ I rather think that describes much of the rhetoric about this legislation. It is probably not as interesting as Equus but it is a rather large fuss about a very small thing, because there is no fiscal policy reform, no effective financial investment reform and no investment infrastructure—none of those things that my colleagues have spoken about.

What we are talking about here is simply a very slight and inevitable revision of the Commonwealth’s asset management. If you are selling a massive number of assets, you start with low debt. Australia has always had low debt. Put aside the hyperbole: Australia, at every stage, including when this government came to office, has had very low public sector debt by international standards. We were never outside what, for example, were the Maastricht guidelines for European Union countries, even at the peak of our debt. If you are selling assets, you start with low debt. You are taking in record amounts of revenue because you are the highest taxing government in history. Therefore, you can spend profligately and still deliver a surplus. You must run up deposits at the bank or pay off debt.

The member for Hotham and I came to the conclusion—when the Treasurer was equivocal at best—that there was a need to keep a bond market in this country. I believe it is an important institution that needs to be retained. Eventually the Treasurer came to that view, too. Initially, he did not seem to have the slightest understanding of what we were talking about, but eventually Treasury educated him. If you are going to keep a bond market, you need to have some bonds out there—you cannot use the surpluses and the proceeds of asset sales for soaking up bonds—then you wind up with deposits. You have two choices: you have deposits at the Reserve Bank, simply earning a rate, or you set up a fund to invest it more effectively. Research by Ric Simes and Nick Gruen show that cautious risk-weighted management should deliver you a two per cent better return on an investment fund than on deposit at the Reserve Bank. That is all we are doing. All the rest is hyperbole.

During the debate on this bill last evening, I heard the member for Perth say that Senator Minchin, the Minister for Finance and Administration, said that the target for this fund is to match the rate that would be received on deposit at the Reserve Bank. I believe the member for Perth—he is an honest man—but it cannot be true. That is so stupid. It is unbelievable that someone like Senator Minchin would say that. It is just so crass and stupid. We must have a target rate for this fund that is at least two per cent above that rate, or why are we not leaving it at the RBA on deposit?

This argument that we are using the money to fund Commonwealth superannuation obligations is a farce. Other than as an accounting truism that an asset offsets a liability on your balance sheet—and that would be equally true if the money was at the Reserve Bank or held in any other form of asset—there is absolutely no need for all this grandiloquent advocacy and great structure to meet Commonwealth superannuation liabilities when they have been met safely, securely and easily out of Commonwealth recurrent expenditures since Federation and when they are likely to decline as a percentage of GDP, not increase.

It is just an accounting truism turned into a rhetorical flourish with no substance. A properly structured intergenerational fund, or a future fund like that in New Zealand, would bring about some reform of our fiscal policy. That is necessary, because I fear that we are about to repeat one of the two great economic management mistakes of the last 30 years. Everybody is obsessed with avoiding one of them, which is the fear of high interest rates. We are so focused on that that we are losing sight of the fact that, through sloth and profligacy, we are about to repeat the mistake that John Howard made as Treasurer in the late seventies and early eighties, which was to fritter away the resources boom. This resources boom will not go on forever. The enormous revenue surge that is paid to this government will not go on forever. We are incurring recurrent liabilities, some of which have been outlined by the member for Melbourne—and we just heard the member for Chisholm—which will escalate over time because they are poorly targeted. They will particularly escalate because they are most likely to flow to people on high incomes and slightly older people. Therefore, with the ageing population, the Commonwealth outlay structure will get worse, not better.

There is no possibility that the Commonwealth will have trouble meeting their superannuation liabilities. What the Treasurer and the minister for finance should be focusing on are those other, untargeted or poorly targeted expenditures. I call for the government to have an intergenerational analysis of their proposed outlay measures when they are introduced, and those over recent years, some of which I suggest will blow out. We need some rigour here. The superannuation tax cut argument that Senator Minchin raised had some capacity to deliver some of that rigour.

See this speech in context