Angie Bell (Moncrieff, Liberal National Party) Share this | Hansard source

I rise to speak on the Investment Funds Legislation Amendment Bill 2021. It effects a range of amendments to improve the operation of Australian government investment funds and enhances the ability of the Future Fund Board of Guardians and the Future Fund Management Agency, known as the FFMA, to continue investing for the benefit of future generations of Australians.

The Board of Guardians is responsible for deciding how to invest the assets of each fund. The board consists of a chair and five other members. Members are appointed by the responsible ministers, in accordance with legislation, and are selected for their expertise in investing in financial assets, managing investments and corporate governance. The board invests the assets of the Future Fund, the Medical Research Future Fund, the DisabilityCare Australia Fund, the Aboriginal and Torres Strait Islander Land and Sea Future Fund, the Future Drought Fund and the Emergency Response Fund—I thought it was important to break all this down, in speaking on this bill, for Australians who may be listening. They operate independently of government and tailor the management of each fund to its unique investment mandate.

For those who take an interest, the total funds currently under management are $245.8 billion, with $196.8 billion for the Future Fund, $22 billion for the Medical Research Future Fund, $2.2 billion for the Aboriginal and Torres Strait Islander Land and Sea Future Fund, $4.6 billion for the Future Drought Fund, $4.7 billion for the Emergency Response Fund and $15.5 billion for the DisabilityCare Australia Fund. All the funds have an absolute return objective, and the board keeps the investment objectives and focuses on growing and protecting Australia's capital in the long term. There's a diverse portfolio that is, as far as possible, robust to an uncertain future.

This bill provides: a new employment framework for the Future Fund Management Agency to remove staff from the Public Service and provide a more flexible, updated and appropriate employment model; a partial exemption under the Freedom of Information Act 1982—or the FOI Act, as it's known—for the Future Fund's investment activities; a new disbursements framework for the Medical Research Future Fund to bring greater certainty to funding; the transfer of administrative responsibility for expenditure from the Emergency Response Fund to the National Recovery and Resilience Agency; and a range of administrative amendments to improve the operation of the Medical Research Future Fund and the Emergency Response Fund.

The Future Fund was established under John Howard in 2006. Since then, it has grown by over $136 billion and the board has become responsible for managing five other Australian government investment funds. The Future Fund has a proven track record of managing investment portfolios on behalf of the government and maximising returns over the long-term. As of June 2021 it has delivered a return since inception of 8.4 per cent per annum, exceeding the target of 6.6 per cent—a good result for all Australians thus far and a promising trend for the future economic position of the Future Fund.

The bill makes important amendments to the employment framework for the FFMA to reflect its unique operating environment within global, financial and investment markets whilst still ensuring the agency remains subject to appropriate controls in line with community expectations. The new employment framework will enhance the Future Fund's independence further from government, improve its recruitment and retention of specialised staff, and allow it to continue maximising investment outcomes on behalf of the government.

The partial exemption under the Freedom of Information Act for documents relating to investment activities will provide an appropriate balance between maximising investment returns and ensuring appropriate transparency. The Future Fund regularly produces, negotiates and receives documents from third-party fund managers that include confidential, competitive and commercially sensitive information. The risk of disclosing highly sensitive commercial and proprietary material has led to investment managers withholding information or reducing their engagement with the fund. This presents an investment and governance risk. It can result in reduced access to investment opportunities and negatively affect investment outcomes. The exemption will provide certainty to the Future Fund and their investment partners that sensitive investment information is automatically excluded from release under FOI laws. The FOI Act will continue to apply to documents concerning the Future Fund's non-investment activities, and, in addition, the Future Fund will still publish details of its actual investments and will continue to be subject to parliamentary scrutiny. The removal of Future Fund Management Agency staff from the Public Service and the partial FOI exemption from the Future Fund's investment activities are consistent with arrangements in place for other government entities, including NBN Co, Australia Post and Export Finance Australia, that regularly deal with commercially sensitive information and require more market oriented employment practices.

These are sensible amendments that will improve the operation and performance of the Future Fund. Indeed, those on the other side should agree with these amendments, as their own finance minister in 2009 espoused these very changes. He spruiked that these amendments before the House:

… would aim to reinforce the independence of the board, but still provide values and standards for the agency, particularly with respect to its responsibilities relating to public money.

The new disbursements framework for the Medical Research Future Fund will provide certainty of funding to meet the government's 10-year investment plan and support significant disbursements over the long term to fund vital medical research and medical innovation projects. Under the current framework, disbursements from the MRFF are determined annually by the Future Fund's board. The board's calculation is largely based on the benchmark rate of return for the fund, which is linked to the RBA cash rate. This framework creates uncertain and volatile disbursements, which affects the orderly planning of grants programming from the fund.

With the fund now exceeding its target balance of $20 billion by over $2 billion, the government is implementing a new disbursements framework which will provide a fixed maximum annual disbursement of $650 million from 2022-23. This will allow investment returns above this level to accrue to the fund corpus, which can be accessed in later years when investment markets are more challenging. We can access it when we need it as a nation. That's very important for the future of our country. The reduction in distribution volatility will provide greater certainty of funding for the health and medical research sector and will allow the important commitments under the Medical Research Future Fund 10-year investment plan to be met. The amendments will also enable the government to issue a new investment mandate for the MRFF, with a higher and more suitable benchmark rate of return aligned to other risk-seeking funds managed by the Future Fund board, including the Future Drought Fund, the Emergency Response Fund and the Aboriginal and Torres Strait Islander Land and Sea Future Fund. A new investment mandate will increase expected earnings over the medium term and protect the level of disbursements over the long term, and this will help to fund vital medical research and medical innovation projects. I'm certain that most Australians would agree with these amendments.

The transfer of responsibility for the administration of expenditure from the Emergency Response Fund to the National Recovery and Resilience Agency implements the government's decision to establish the agency with a clear mandate to enhance national preparedness for and recovery from natural disasters. In response to the Royal Commission into National Natural Disaster Arrangements, the government announced in the 2021-22 budget the establishment by our Prime Minister of the National Recovery and Resilience Agency to help support local communities to respond to large-scale natural disasters and undertake new initiatives to manage the impact of future events and the changing climate. The agency is headed up by a coordinator-general, Shane Stone AC, QC, who is well placed, due to his vast experience, working as the former coordinator-general of the National Drought and North Queensland Flood Response and Recovery Agency following the devastating floods of January 2019 in my home state of Queensland. The agency and the fund will ensure that those impacted by natural disasters and drought have access to the support they need for their recovery, while delivering initiatives that reduce the risk and lessen the impact of future events on those communities.

The amendments to the Emergency Response Fund Act 2019 will ensure that the legislative and administrative processes are in place for payments from the Emergency Relief Fund to be administered by the National Recovery and Resilience Agency.

To finish, these amendments will strengthen Australia's financial position for all Australians and our nation's ability to respond quickly to whatever changes our future holds for us.

Debate interrupted.

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