Ms Julie Bishop (Curtin, Liberal Party, Minister Assisting the Prime Minister for Women's Issues) Share this | Hansard source

The House has before it two bills to support the establishment and operation of the Higher Education Endowment Fund. The fund is an unprecedented investment in higher education in Australia. By establishing this $6 billion perpetual fund, universities will have access to funds for future capital and research facility needs for decades into the future. Further contributions to the fund will depend on continued strong economic management and budget surpluses. The government has already demonstrated its commitment to the fund by recently adding an extra $1 billion to the $5 billion announced on budget night last May.

The Higher Education Endowment Fund is a true endowment fund, with the requirement in the legislation to maintain its real value over the medium to long term. The grants distributed from the endowment fund will be directed towards promoting excellence, diversity, quality and specialisation in Australian universities. This will build on the already significant reputation of our universities and further contribute to their capacity to compete on the world stage.

Underlying this is an appreciation of how important a well-run and responsive university system will be to Australia’s economic development over the coming decades. In an increasingly competitive global environment, universities will need to clearly identify their strengths and focus their resources. In keeping with this, grants from the endowment fund will be strategic in nature and will focus on achieving the long-term goals of the sector. Other higher education funding programs such as the Research Infrastructure Block Grants, the National Collaborative Research Infrastructure Strategy fund and the Capital Development Pool will continue, as they serve a very different purpose.

I will be advised on the distribution of funds by an independent Higher Education Endowment Fund Advisory Board. In making appointments to the board, I have drawn on suggestions from the sector, from the Business Industry Higher Education Collaboration Council and from the Academies Forum. I expect to announce the board in coming days. The role of the advisory board will be to advise me on the best way to implement and manage the endowment fund. This will include conducting stakeholder consultations, developing program guidelines, making recommendations in relation to grants for capital expenditure and research facilities and advising on philanthropic donations.

The Higher Education Endowment Fund Bill 2007 is the first step in the endowment fund legacy. The main provisions of the bill allow for the movement of moneys into the endowment fund and for those moneys to be invested for the future. Responsibility for investment of the endowment fund rests with the Future Fund Board of Guardians. The bill also provides that, consistent with the Future Fund Act, the board of guardians will be guided in its activities by an investment mandate, a collection of ministerial directions issued by the responsible ministers—the Treasurer and the Minister for Finance and Administration. The investment mandate will set out the benchmark return expected by the responsible ministers. The returns available for distribution to the sector will be linked to the performance of the market. International experience suggests that, in using such a strategy over the medium term, around five years, the level of grants that can be made from the fund should become predictable. However, in the short term there may be some volatility.

The bill further provides for good, sound governance in the management of those moneys. It establishes appropriate safeguards around ministerial intervention and financial management. For example, the bill provides that ministers cannot direct the board of guardians to use the assets of the endowment fund to invest in a particular financial asset or support a particular business entity, activity or business. Such requirements provide assurance that Australian government funds are being appropriately managed as well as providing assurance to the Australian public that the endowment fund will be maintained in perpetuity.

Income from the endowment fund will be distributed as grants to support capital expenditure and research facilities. These grants will promote excellence, quality and specialisation in Australian universities for years to come and will allow more world-class institutions to emerge. The bill does not go to the detail of how the grant funding programs will operate. I want to ensure that the sector has a genuine opportunity to engage with this exciting new initiative and provide input. The guidelines outlining how the funding program will operate will take into account the outcomes of consultation with the sector. There is no requirement for this level of detail to be included in the legislation. It is important that, as the program evolves, specifics about the application process, for example, are able to evolve with it.

Higher education is not a static entity. Strategic priorities change over time, as knowledge and technology change. Allowing for the endowment fund program to also change over time is essential to meeting the needs of the sector and the objectives of the endowment fund. As to the eligible institutions, consistent with the government’s aim of encouraging diversity within the sector, all Australian universities, plus the Australian Maritime College, which is scheduled to merge with the University of Tasmania on 1 January 2008, the Batchelor Institute of Tertiary Education and the Melbourne College of Divinity will be eligible to apply for funding—that is, those institutions listed under table A and table B of the Higher Education Support Act 2003 which are currently eligible to receive capital funding from the Australian government.

On the issue of philanthropy, with the establishment of the endowment fund the government has created a new avenue for business and the general public to make philanthropic donations to the sector. In the first instance, the bill provides that tax deductible gifts of money to the endowment fund will only be able to be accepted on an unconditional basis. At the time the endowment fund was announced, the government indicated that contributions could be earmarked for particular universities and that universities could choose to have their own philanthropic funds managed along with the endowment fund. These issues will be addressed following more detailed consultation with the higher education sector and the board of guardians. The government may then consider amendments to the legislation.

As to consequential amendments, in order to support the establishment and operation of the Higher Education Endowment Fund, amendments to the Future Fund Act 2006 and the Income Tax Assessment Act 1997 are required. As previously stated, I have been assisted in the preparation of this bill by the Treasurer and the Minister for Finance and Administration in their capacities as responsible ministers under the Future Fund Act. Broadly, the amendments to the Future Fund Act extend the functions of the board of guardians to include its functions under the endowment fund act. The bill also makes it clear that there are two investment mandates that the responsible ministers can issue to the board: one for the Future Fund and one for the endowment fund. Correspondingly, the bill clarifies that the board has two investment functions: one for the Future Fund and one for the endowment fund.

As is provided for in the endowment fund bill, this bill amends the Future Fund Act to set out the limitations of the Future Fund investment mandate. The amendments will ensure that the Future Fund is not invested in a way that is inconsistent with the Future Fund’s objectives. In line with responsible governance practice, the bill also specifies that the responsible ministers cannot direct the board to use the assets of the Future Fund to invest or support particular financial assets. The Income Tax Assessment Act is also being amended to allow deductible gifts of money to be made to the endowment fund. These bills represent the social dividend of strong economic management. I commend these bills to the House.

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