James Stevens (Sturt, Liberal Party) Share this | Hansard source

I rise to support the second reading of the Investment Funds Legislation Amendment Bill 2021, though not the amendment being moved by the opposition. Of course, this bill does a range of important administrative things for the operation of the Future Fund. To begin with, I comment on how lucky we are to have the Future Fund and what an amazing legacy it is of the Howard government, and particularly then Treasurer Peter Costello, who, quite fittingly, now chairs the Future Fund Board of Guardians.

The Future Fund has just shy of $250 billion funds under management, with $200 billion of that in the Future Fund structure initially envisaged back in 2006. Of course, at that time, after many surplus budgets delivered by Treasurer Costello, the debt left to the Howard government by the previous Labor administration was paid down. Future surpluses, coupled with the final stages of the privatisation of Telstra, allowed for the creation of a Future Fund which was in particular necessary given the unfunded liability that was in existence because of future Commonwealth Public Service superannuation payments that were not provisioned for as a balance sheet item by the Commonwealth government prior to that. Those future liabilities were going to continue to put pressure on the budget if a decision like creating a future fund to cover those liabilities was not taken.

Now we're in a position where we have, as I say, nearly $250 billion in total, but the component that's there to help support the liability of Commonwealth Public Service superannuation—those prior to the scheme we have now, of course. We don't have the defined benefit schemes anymore, except of course in defence and some of the judiciary et cetera. In the general Commonwealth Public Service there are not those schemes that used to be in existence before the introduction of compulsory superannuation. The workforce going forward provides for its own superannuation, through each Commonwealth public servant receiving their superannuation payment from us as a government, which we are required to do like any employer is required to do in this nation. There is the legacy of the entitlements that are fairly owed to people who are on those old defined benefit schemes, and the first responsibility and priority of the Future Fund is to provide for that.

The $200 billion we've got to provide for that future liability is something very reassuring. It reminds us of the fiscal challenges we've had over the last 20 months or so, and of the important and necessary decisions to borrow money to invest in our economy and in supporting businesses and individuals because of the challenges of meeting the COVID pandemic health response and economic impacts. It's a great relief to have the legacy of decisions like the creation of the Future Fund back in 2006. That $200 billion is an enormous amount of money we have because of those decisions. Think of where we'd be if we didn't have that money provisioned and we had those unfunded liabilities still in place. We would be having a whole different set of policy debates and discussions in this place right now because we would have to be figuring out a conventional fiscal solution to those liabilities, which would clearly put an enormous amount of pressure on the budget. So we're in a good position there.

I commend the Future Fund on their investment performance over the years. I think their average long-term return is sitting at 8.8 per cent. Their objective is about 6.6 per cent, so they're continuously exceeding that each and every year. That of course means the size of that pie continues to grow. Not only can it provide for what it was initially intended to; as its investment performance is more successful than its targets, that opens up new opportunities for investing in other worthy future interests of our government. The Medical Research Future Fund, which sits within the Future Fund's management responsibilities, is a good example of the sort of thing—if or when in the future we are in a position to look at the successful, greater-than-expected growth of the Future Fund and think about where we can invest surplus funds we might generate through the Future Fund. It is an enormous opportunity to consider things like medical research through that process.

This bill takes on two important changes. I was surprised that the member for Cooper made the point—I was surprised when I read it as well—that it was former finance minister Lindsay Tanner who first foreshadowed these sorts of reforms, more than 10 years ago. We have both been in government over that time, so, frankly, there's not much benefit in political pointscoring and arguing about why it is, having foreshadowed the need for this more than 10 years ago, that we're getting to it now. But I'm pleased we're getting to it now. I'm optimistic and hopeful that the bill will get the support of the House, move through and come into effect—particularly the two significant changes that I'm briefly going to comment on.

The first change is the exemptions under the FOI Act. I think it's pretty obvious why the Future Fund would not want to have to comply with the FOI Act, like every other agency needs to. The Future Fund would be spending a lot of money on very valuable advice—on investment decision-making, business cases et cetera, that any prudent funds management company would undertake. That, I suspect, would be worth millions and millions of dollars every year. Commissioning that sort of advice and paying for it is in our interest—we are the ultimate beneficiaries of the Future Fund when they spend that money—as it is that they are the only beneficiary of that advice they commission. You could foresee circumstances where, if they don't have these exemptions from the FOI Act and they are put in a position where they are legally required to release information—that could be millions and millions of dollars of private investment advice they have commissioned and paid for. It fairly belongs to them, and it shouldn't be something that someone else—a potential competitor investor, for example—can get access to at no cost because of the technicality that the Future Fund has to comply with the FOI Act. I think we would all find that regrettable. I think we can all agree that, if the Future Fund pay fairly for certain information using the money we have provisioned—all of us as taxpayers, as beneficiaries, as Australian citizens—that should belong to them.

They shouldn't, in any circumstance, be compelled because of an FOI determination to have to release that advice.

I also understand that the Future Fund have raised issues where they might not have been provided full information from other parties that they engaged in investment discussions and other pertinent discussions as to how to manage their funds, because there is a fear that information turned over to the Future Fund by other parties, independent of any obligation under the FOI Act, would then potentially see the information that they have provided to the Future Fund revealed in the public domain through the FOI Act process. Again, this is all very sensible commercial-in-confidence information, that we can all agree should be protected. We don't want the Future Fund in any way, shape or form to not be able to achieve and pursue the best investments possible that they believe will achieve the investment profile that they, as a board of governors, determine, or that they are in any way limited in the avenues that they can pursue to put the funds that they have custody over in the best possible place to get a strong and safe return for the people of Australia.

So this certainly seems a commendable change, that we remove the risk of them having to turn over information that any other business that is operating any comparable funds management firm would never have to do, because they themselves are not subject to the FOI Act. I stress that of course there are still an enormous number of safeguards—governance safeguards, probity safeguards—in place in overseeing the operations of the Future Fund. This is a sensible change. It means that they won't have that risk with information that shouldn't be in the public domain or accessible to competitors et cetera, and that should remain as commercial in confidence. I think we can all agree that that is a sensible and necessary suggestion, first raised by then Labor minister Lindsay Tanner more than one decade ago.

The second substantial part of this legislation is moving the employees of the Future Fund Management Agency from being members of the Australian Public Service into their own defined employment category within the Future Fund. I think we can all understand the sense in this. Again, it was proposed by then finance minister Tanner 10 years ago. You can imagine that the Future Fund would want to structure the way in which they employ their staff, the way in which they remunerate their staff and the way in which they attract talent. They have to meet the standards of the industry that they are operating in. They have to be able to compete, through the conditions and remuneration et cetera that they have to be able to offer, to get the best people. They have to compete with the standards of organisations similar to them to employ the very best people. So we should empower them to be able to operate in that free environment and not be constrained by the structures of the Australian Public Service around these things.

It's been noted already in these debates that there are other Commonwealth agencies that have the same set of circumstances in place for exactly the same reasons. They have to be able to compete for the best staff possible in an environment where there are other competitors that are structured very differently in the way in which they employ people, compared to some of the rules around the Australian Public Service. So I think that's a very commendable objective as well, and it's something that we should support so that we can make sure the people who are managing this $250 billion of our money—that we are lucky to have—are the best people to be in charge of the custody of that. That is not to say that the people at the Future Fund we already have are not the best people—they are, of course. They are performing exceptionally well, and I have outlined the success of the performance of the investment returns of the fund since it's creation. But we clearly need to make sure, looking forward, that they have the most flexibility that we can provide them to employ the best people. We want the best people looking after that amount of money.

I should have looked this up before this debate to find a more recent statistic, so I won't test my memory and guess, but certainly the Future Fund, as a sovereign fund, is on a per capita basis one of the most impressive in the world. In fact, putting aside per capita, it's also one of the largest in the world, and we should be very proud of that. Coupled with the enormous value of the funds under management in the superannuation system on top of that, we are very well provisioned in this country for the future. The Future Fund is a vital part of that, as I've outlined. Those funds are there to support the defined benefits scheme entitlements that Commonwealth public servants are validly entitled to, and they should have confidence that the government is never going to struggle to meet those commitments.

We are lucky to have this endowment. We are lucky that it is of the size that it is and is being managed as well as it is. We wish it that same success into the future, but in order to secure that we should always look for ways and respond to opportunities to make changes to the statute instruments that its managers operate under so that they can go out and perform to the best of their ability, which is to the benefit of all of the people of Australia. I commend the bill to the House.

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