Kelly Hoare (Charlton, Australian Labor Party) Share this | Hansard source

Labor will be supporting the Future Fund Bill 2005 in this parliament. However, there are areas where we believe the Future Fund can be further strengthened and protected, particularly from political interference. I will be exploring shortly the issues that other speakers from this side have outlined. The Future Fund is established from the government’s 2004 election commitment. The government has said it is to meet unfunded Commonwealth superannuation liabilities. The government will be providing seed capital of $18 billion. Currently, public sector superannuation is said by the government to be unfunded, and last year the Commonwealth’s public sector superannuation bill was about $90 billion. The Treasurer has stated that the liabilities are forecast to increase to around $140 billion by 2020. What the Future Fund is supposed to do is reduce the impact on future governments’ budgets of the superannuation liabilities.

The Future Fund of course needs to grow. The government has said it will add to it the proceeds of any future assets sales. Under these arrangements, all fund earnings are to be reinvested. The fund will be governed by the Future Fund Board of Guardians. This board will be appointed by the government but can also be dismissed by the ministers responsible. Labor has a concern that the board may not be totally immune from political interference. Indeed, we would prefer to see an amendment to this bill which would tighten up the governance of the fund. For example, the New Zealand model, one of the overseas models on which the Future Fund is based, includes a specific mandate that binds the board to invest the fund on a prudent commercial basis. The New Zealand Minister of Finance can direct New Zealand’s superannuation fund’s guardians to realise the government’s expectations as to the fund’s performance but cannot under the legislation give any direction that is not consistent with the duty to invest the fund on a prudent commercial basis.

The members of the Future Fund board will decide how the fund is to be invested. It is outlined in Bills Digest that the fund:

• will invest only in financial assets, including overseas financial assets. However, the Treasurer has not committed the Fund to invest a specific portion of its resources in Australia, or overseas. The Treasurer has said, however, that Australian investments would probably comprise the bulk of the Fund’s investment holdings
• will not directly invest in property, infrastructure or other projects. But it will be able to invest in pooled funds that invest in these asset classes
• will not take control of listed companies or unlisted companies with more than 50 members
• will invest in a wide portfolio of financial investments
• will exercise its voting rights in relation to companies in which it holds shares, and
• will not borrow, except for short-term borrowing associated with the settlement of transactions or any circumstances listed in regulations.

It is also possible that the proceeds from the sale of Telstra could be transferred to the fund. It is also possible that government-held unsold shares of Telstra could be transferred to the fund. As the Treasurer said in December:

We expect either Telstra will be sold or if the full sale of Telstra does not go ahead it may well be that the Future Fund will hold Telstra shares and in those circumstances the earnings from those shares will be allocated to the Fund rather than the budget ...

It is not feasible for the government to sell its Telstra shares in the foreseeable future. I heard on the radio this morning that the shares are valued at just over $4, at $4.03, and still dropping. If this remains the case until 2020, we may well see Commonwealth retirees being paid out their superannuation in worthless Telstra shares. Labor has moved an amendment to the motion for this second reading, stating:

That all words after “That” be omitted with a view to substituting the following words:“Whilst not declining to give the bill a second reading the House is of the view that:

1.

the Future Fund should only invest on a prudent commercial basis and manage funds in a manner consistent with:(a)   best-practice portfolio management;(b)   achieving desired returns without undue risk to the Fund as a whole;(c)   enhancing Australia’s reputation as a responsible and ethical investor; and(d)   building productive capacity in the Australian community; and that

(a)

best-practice portfolio management;

(b)

achieving desired returns without undue risk to the Fund as a whole;

(c)

enhancing Australia’s reputation as a responsible and ethical investor; and

(d)

building productive capacity in the Australian community; and that

2.

the income stream from the Fund should be used for productive national economic purposes rather than being set aside solely to offset the cost of public sector superannuation as the Government intends.”

Indeed, the Treasurer said in his second reading speech:

Notably New Zealand, Ireland, France and Canada all have similar strategies in place and in none of those national funds are the returns on investment allowed to be siphoned off to fund pet projects of the government of the day. This will also be the case of the Future Fund.

In light of this statement, the Treasurer and the government should be agreeing to Labor’s amendment relating to stronger governance arrangements.

While Labor is supporting the Future Fund, we have committed to converting the Future Fund to a Building Australia Fund and to delivering infrastructure through Infrastructure Australia. Labor in government would direct the board to consider a full range of investment opportunities suitable to the return and risk objectives of the fund. We believe that this would include investments that would enhance the productive capacity of the Australian economy and could include direct infrastructure assets.

Labor has a long and proud history of commitment to building the infrastructure required for Australia’s long-term economic and social needs. Labor’s nation-building projects have included the massive Snowy Mountains Hydro Electric Scheme, commenced by Prime Minister Ben Chifley in 1949. Ben Chifley also established the Commonwealth Housing Commission to work with state governments so that, while the states undertook urban planning, the Commonwealth funded new housing and infrastructure for returned servicemen. This had followed on from John Curtin setting up the Commonwealth reconstruction and training scheme in 1944, which gave more than 300,000 Australian servicemen and servicewomen careers in areas like medicine, engineering, dentistry, science, agriculture and veterinary science. Gough Whitlam built on the Curtin-Chifley legacy by providing Commonwealth leadership in addressing infrastructure gaps faced by growing families in the sprawling suburbs, like inadequate sewerage and hospital facilities. Later, Prime Minister Paul Keating saw to the completion of the standardisation of rail track gauges in 1995.

Labor’s Building Australia Fund would be guided by Infrastructure Australia, which will be set up under a Beazley Labor government. Infrastructure Australia will have the responsibility to develop a strategic blueprint for our infrastructure needs in facilitating its implementation with the states, territories, local government and the private sector. Infrastructure Australia will be an independent statutory body that will report to the Commonwealth minister for infrastructure. It will present regular reports to COAG as part of our plan to have infrastructure a standing item on the COAG agenda.

Infrastructure Australia will receive input from the three tiers of government, the private sector and the general public to identify infrastructure projects of national importance. A Labor government’s Infrastructure Australia will be a coordinated and objective approach to the long-term planning of nationally significant infrastructure. Kim Beazley has said that our Labor government would conduct a national infrastructure audit; establish a national infrastructure priority list; establish a political free zone; create Infrastructure Australia—a Commonwealth body to drive rebuilding; design the right funding structure for investment; and put in place the right competition policy framework.

However, to do this there are many things that we need to consider. We need to consider the scope for governments to invest directly in public infrastructure, the scope and conditions for private sector involvement in the provision of public infrastructure, including through appropriate public-private partnerships, and the most equitable, cost-effective and fair methods of finance. We need to consider ways to maximise effective public ownership, management and maintenance of public infrastructure. We need to improve accountability and transparency of infrastructure financing. We need to look at the most effective method of reducing financial risk to government and minimising the levels of fees and charges. We need to consider ways of ensuring that financing is compatible with skills development and quality employment, and whether risk transfer arrangements are appropriate. We also need to consider the potential role of the private superannuation industry in financing public infrastructure.

In conclusion, while we have stated that we will support this bill, we encourage the government to support our amendment. We remain committed to maintaining the existing assets of the government’s Future Fund in Labor’s Building Australia Fund. We will add to the Building Australia Fund through future asset sales, and Labor in government will apply part or all of our Building Australia Fund income to productive investments, including infrastructure through Infrastructure Australia. This is the way that the fund should be used to enhance the productive capacity of our economy.

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