Peter Garrett (Kingsford Smith, Australian Labor Party, Shadow Parliamentary Secretary for Reconciliation and the Arts) Share this | Link to this | Hansard source

I rise to speak on the second reading of the Future Fund Bill 2005 and the amendment moved by the member for Melbourne. As members would know, the idea of the Future Fund seemed to emerge out of thin air. Whether it was a thought bubble within the bureaucracy or a thought bubble within the Treasurer’s office or a thought bubble of the Treasurer’s, we still do not know. But it was an idea that came seemingly out of nowhere and, when it arrived, very little detail was attached to it. Politics, it is said, is a contest of ideas. As a consequence we have an idea that is now before us as proposed legislation. Our duty as opposition members is to consider the idea embodied in this proposed legislation.

It is worth while to go back in history and review the circumstances and the statements that were made at the time the Treasurer brought the Future Fund to us. On 10 September 2004 the Future Fund policy was announced by the Treasurer. He claimed that its mandate was ‘to increase national savings, offset unfunded super liabilities and maximise the government’s net worth’. Particular emphasis was given at the time to the notion that the offsetting of unfunded super liabilities for public servants was a primary reason for the creation of a Future Fund. The Treasurer additionally called this ‘the most dramatic response to the Intergenerational report’—the Intergenerational report that he commissioned on ageing—‘that the government had produced.’ It is hard to see how a proposal to deal with a shortfall in superannuation liabilities within the Public Service was a response to the Intergenerational report, which in effect dealt with the problems we will face as the baby boomer generation reaches retirement age. Nevertheless, that was the Treasurer’s rhetoric at the time.

In 2004 the government contemplated the full privatisation of Telstra. It needed a means or a method of dealing with both the financial governance and political issues that attached to the issue of the remaining privatisation of Telstra. Interestingly enough at the time, the Australian Chamber of Commerce and Industry responded to the Treasurer’s proposal but mainly by way of criticism. The chamber identified that the proposal would have a limited effect on national savings and that the dollars that were intended to go into the fund were not available for current worthwhile reforms. As all of us in this House who receive emails on a regular basis from the ACCI know, that would include worthwhile reforms such as tax reform. The chamber also pointed out that the issue of the superannuation liabilities of public servants was not critical. It has been pretty much solved by the switch to an accumulation scheme. It could have been met in the future by government borrowing. The government could have simply topped up, over time, existing public sector superannuation funds which have a satisfactory rate of return. Politically, perhaps, this would have been difficult seeing as union representatives make up at least half the boards on the two public sector super funds.

The chamber went on to point out that the dollars could be diverted to uneconomic investments and so on. Clearly, some of the issues that were addressed by the ACCI the opposition have taken up. Other views were expressed in the debate at the time by the Treasury and its officials, names well known in Canberra—Mr Evans and Mr Henry. Mr Evans asked: why is it good policy to hand over tax, worth billions of dollars, to fund managers who will simply take high commissions on funds? Should we not be looking at tax reform? Should we not be funding research and development? Should we not be looking at measures which boost productivity? Mr Henry asked: how much will be invested overseas? And then there is the question of what national interests and ethical considerations will apply. This goes to the heart of one of the questions we are raising about the Future Fund. How will the Future Fund apply such considerations?

The Future Fund has a size component into the future which means that there is an inexorable logic that its investment decisions will be subject to the greatest scrutiny and the greatest pressure, both within the market and the political environment. Indeed, it is estimated that in the vicinity of $80 billion to $90 billion could be available within four to five years. This depends on the future of the remaining privatisation of Telstra, but the fund will be a huge player—notwithstanding the fact that under the existing legislation there are measures in place; in part, at least—to ensure that the fund is able to discharge its responsibilities in a way which is consistent with best market performance.

A number of issues that I, and I am sure other speakers, will raise today show that the government really has not thought this through as well as it should. Other commentators said that the government was simply hiding the budget surplus, that the fund was about keeping the budget surplus away from spurious cabinet spending submissions and from the National Party, notorious pork-barrellers since Federation. In regard to the first observation all we can say is that it is up to the cabinet ministers, when they go into the cabinet, to put good views for their submissions, which will rise and fall on their merits—in part, at least. On the second observation we can say plenty. It has been said before in this House, particularly given the recent defection from The Nationals to the Liberal Party of a leading National Party member, that we are witnessing the increasing political presence of Independents in what were formally National seats.

The Nationals are becoming a desperate and strained political party, and in desperate and strained circumstances desperate political measures are sought. The ghost of McEwen is gazing down on this House as he watches The Nationals rushing about trying to claim a new mandate for themselves. But what mandate can they claim if people are not voting for them and if their own members are deserting them? The only one that they can claim is that they can deliver from the bush and they can deliver disproportionately to their own political influence or representation within the coalition. I will come back to this a little later on, but there is no question that what was agrarian socialism has simply become pork-barrelling. We had much evidence of this in the House last year in the ‘regional rorts’ program and Roads to Recovery. It is a travesty really that we sit here in the House and watch millions of dollars after millions of dollars go into roads in regional areas which are mainly in Liberal and National Party electorates.

There are clearly consequences that attach to the government making a decision of this sort, but on the concerns that those in the National Party have about the possible use of funds I want to address the issue of the state of the natural and economic environment that they inhabit. A simple figure of $60 billion has been arrived at by research done by the Australian Conservation Foundation and the National Farmers Federation as the investment required from the Commonwealth, states and private bodies to repair natural landscapes. These are productive landscapes that our rural producers effectively rely on to continue to produce food to be able to export to other countries around the world—to have clean water flowing through the rivers. I do not hear The Nationals talking about the necessary investment that is required to actually repair the natural and productive landscapes of the bush, but I wish I did.

In the midst of all this there is a debate about infrastructure. One of the arguments we are putting strongly to the House is that at the very least consideration ought to be given for investment opportunities which would include infrastructure investments to be made out of a fund of this kind. Indeed, Labor would establish a Building Australia Fund to do just that.

It might be worth while reviewing briefly the infrastructure debate, because it needs to happen in the context of our discussion about the Future Fund. The most important point—and it was made again by the member for Melbourne yesterday—is that investment in public infrastructure is linked directly to productivity growth and economic prosperity. It is that linkage which will be the key to our future capacity to grow in a sustainable fashion. We would assert here very strongly that the government has a primary and direct role in providing infrastructure and investment in infrastructure—or the means for investment in infrastructure, as would happen under the proposed fund. There are many reasons to do this for the public good, because in some instances infrastructure investment would be in the nature of a natural monopoly. Infrastructure has other attributes. I think the most important one is that it deals with the vexed issue that political parties and policymakers in the parliament have, and that is of absenting themselves from their political day-to-day considerations and considering the national interest into the longer term; in other words, investing for intergenerational equity. Very clearly that is what infrastructure investment is all about. It is long-term investment—it goes to those matters within the economic framework of Australia which are used or affected by all Australians.

The point that the member for Melbourne made in an earlier speech was that we are quickly approaching the point where, if appropriate decisions are not taken, there will be a crisis in infrastructure. Engineers Australia, amongst others, have made similar comments. For example, Australia’s stormwater infrastructure needs to be renewed. There is a vigorous debate in New South Wales and certainly amongst my constituents about water. But we cannot have any debate at all about water unless we have the confidence that our water infrastructure, and particularly our stormwater infrastructure, including stormwater infrastructure that is suitable for the increasingly difficult challenges we face with water shortages in the cities, is improved. That requires a massive investment right across the country, because the issue needs to be addressed in most of our capital cities. There is also upgrading required for the Melbourne-Sydney-Brisbane rail line, the rolling out of broadband and so on. Whilst the figures do show that the involvement by the states and the federal government in investment in infrastructure is not at the total crisis stage at this point in time, because there is stable activity across both the sectors, it is very clear that crunch time is just around the corner. This is being considered by the Productivity Commission at present and we await the government’s response with real interest.

Much of the government’s touted economic success has come on the back of asset sales and also a bit of dividend stripping in the case of Telstra. Since the change in accounting arrangements with the introduction of the GST, it is a little more difficult for us to see what the figures of government expenditure as a percentage of GDP are but they are basically equivalent to the figures of the 1989-90 period—around 24 per cent or 25 per cent. The last five years for the Howard government I think would see government expenditure as a percentage of GDP in the range of 23 to 24 per cent.

At the same time something interesting is happening in that we have had ever-increasing tax revenues and a commodity price boom. But now we face the situation of baby boomers coming out of the workforce within the next 10 to 15 years and a decline in working age Australians becoming a very real issue for the government to address. This has not been taken up in the discussions around the Future Fund. Neither has the question of the decline in manufacturing and the huge need for us to increase our performance in that area. Without tourism in particular, our services exports figures are very poor. The investment necessary in medical research, in innovative technologies and in culture have all diminished over time under the Howard government. Yet, again, when you look at long-term policy considerations, this has not been addressed in the discussion about the Future Fund.

Government members who spoke in this debate last night made much about the alleged sins and omissions of previous Labor governments, but I simply put it to members opposite that it is time for them to think about the future and stop harping, in their own particular way, on the long gone past. When they think about the future, they need to think and speak about the purpose of and the extent to which the decisions that they as a government make—that the Treasurer and cabinet make—are going to be put to good use and for the benefit of all Australians. A lot of energy has been expended here attacking the political and fiscal sins of previous governments but nothing of substance has been said to address the issues that we have raised in here about the Future Fund.

There are real challenges in train and Labor has something to offer with respect to those challenges. In relation to the Future Fund, Labor offers a specific and simple proposition, which is that the fund income stream ought to be applied for infrastructure purposes. There are many purposes that people are well aware of in this House. I have only made brief reference to three of them—stormwater infrastructure, rail infrastructure and natural, ecological infrastructure. The second reading amendment proposes that the Future Fund invest on a prudent commercial basis and manage and administer funds consistent with a number of criteria. It is clear that it ought to be best practice portfolio management—there would be no argument with that; achieve desired returns without undue risk—no argument about that either; and enhance Australia’s reputation as a responsible, ethical investor. That seems to me to go to the very heart of the approach and the amendment that we are putting forward in the House. If through a fund of enormous size such as this Australia is not going to be able to declare what its ethical responsibilities are, then we are abrogating our responsibility on both sides of the House. Finally, the fund’s purpose is to build productive capacity in the Australian community.

There are many concerns that have been raised in the House about the governance arrangements in relation to the Future Fund and particularly in relation to the wide level of ministerial discretion. I hope that the government will listen and take some of those concerns on board. I am also aware of the fact that there is a Senate Economics Legislation Committee inquiry due to report on this bill in a couple of weeks. In our own policy process, our Building Australia Fund has addressed many of the issues that are raised in consideration of what the Future Fund may or may not look like and what its actual purpose ought to be. I commend some of those deliberations, including the policy work that has been done by Labor, to members opposite and ask that they might look at them with an unprejudiced eye.

There is a vision that we need to applaud when governments or policymakers actually come up with things which will benefit all of the country in a real and profound way into the long term. To that extent, the Future Fund or, as Labor will call it, the Building Australia Fund has that potential. But the pitfalls are many. Strict governance and a capacity to invest in those aspects of infrastructure which go to national importance, national resilience, dare I say,  economic, ecological and social in the long run, will be critical to the determinations that are made in this House. I commend the amendment to the House.

Ms Anna Burke (Chisholm, Australian Labor Party) Share this | Link to this | Hansard source

I rise today also to speak on the Future Fund Bill 2005. I welcome a group of young people arriving in the gallery because it is their future we should be thinking about and not the future of a whole lot of public servants. I do not mean in any way to denigrate public servants, having been one myself. I know them to be a great bunch of human beings who work very hard and deserve to retire on decent super. But putting aside the hard-won surpluses that these young people’s taxes are paying for to meet our future liability to public servants is a complete waste of that money; it should be going to the future of those young people in the gallery. It should be going towards education, it should be going to research and development and it should be ensuring that their future is guaranteed, not the future of a bunch of public servants who will retire and be paid out their liabilities without any difficulty. The current requirement on the budget is being easily met for current Public Service liabilities. So to create a fund that will fund Public Service liabilities seems to be very short-sighted. It seems to be a waste of a resource.

We on this side of the House have been championing for some time the ability to put aside the wins of today to grow a fund for the future. Indeed, the shadow minister at the table, the member for Hotham, moved that in an amendment in a budget-in-reply speech some time ago, at which time the Treasurer ridiculed it loudly and clearly and said it was a waste of money. Twelve or 18 months later, he proposed his own Future Fund, but it is a very narrowly defined fund and the boundaries around it are very narrow indeed. This is meant to be a locked box. Indeed, it will not be a locked box and those Nationals over there, who are very good at grasping money, will be able to grasp this very easily.

I ask why we need to establish a fund to secure super future liabilities when those liabilities can be easily met and they are declining because all defined benefit schemes have been shut off. There will no longer be a drain on the public purse for these liabilities over the next few years. We can very easily ascertain that now. You can do the actuarial calculations and say, ‘This is the amount we need,’ and you can project how you will use the budget to bring it down. It reminds me very much of the days when Jeff Kennett came into power in Victoria shouting that it was a terrible state that we had all these unfunded superannuation liabilities. But it was only ever going to be a problem if everybody retired on the very same day and required the entire amount of their fund to be paid out. Funnily enough, that was never going to happen. But it was amazing that the press and everybody seemed to swallow it as a terrible economic disaster that was going to befall us. It is not a disaster.

We on this side of the House are the champions of super. It is the Labor Party who have ensured that everybody has access to super. Super is something that can be funded easily and it should be up to the funds to invest wisely so that they can cover liabilities and so that the government can easily use their surpluses to meet these liabilities. Having said that, I do not deny the need for a Future Fund. We should be pursuing it, but not to pay future super liabilities. There are far more important things to put this money towards.

The cost of a separate board is calculated at $30 million over four years. While the bill quite clearly says that this money will come from the earnings of the fund, why not put those earnings back into paying for services instead of paying for a board and paying fund managers who are providing investment advice, with investors paying fees and charges for that advice? I am sure David Murray is a very good appointment but the shareholders of the Commonwealth Bank can tell you that David Murray does not come cheap. I am sure he will be getting a fair reward for this position, and I do not deny that that should be the case. But why should we be spending money on that when those taxes could be going somewhere far more beneficial?

As I said, existing funds should be far more aggressive in how they use their money. Current government super schemes have not been earning very well over the last few years. In fact, many of the funds have experienced record declines in their investments. So I certainly hope that when we set up this fund it is actually going to make money, not lose money. There is no guarantee that you will make money by investing. It is one of those things. It is like playing the stock market—there is no guarantee that you will earn money. I hope there are checks and balances in place so that the funds from asset sales go towards increasing revenue.

All of us would have a large stack of cash if we sold our house to pay out our mortgage, but where would we all live? At the end of the day, asset sales are fantastic things; they sell down and pay off debt. But we no longer have that asset to earn us an income. So while the Treasurer can say he has delivered this boom economy, it has all been through fire sales. There has been no long-term reform from this government. This government should remember they have been in government for 10 years. They should stop looking to the past. They are the past. They have been here for 10 years. They should be doing something about the future, and this Future Fund will not do it.

As the previous speaker, the member for Kingsford Smith, rightly pointed out, many in industry have slammed this fund. The ACCI has slammed it most comprehensively, and I quote from the Australian Financial Review:

Australia’s largest business group has slammed the federal government’s proposed Future Fund as a “tax increase” and dismissed Treasurer Peter Costello’s claim that the fund would increase Australia’s saving as “paternalistic”.

In its June Review released today, the Australian Chamber of Commerce and Industry has launched business’s first comprehensive attack on the coalition’s election promise to put aside budget surpluses to pay for the retirement of public servants, which is expected to cost $140 billion by 2040.

The report dismisses Mr Costello’s claim that the fund would “increase national savings, offset unfunded superannuation liabilities and maximise the government’s net worth”.

Instead, the chamber argues that the Future Fund will effectively amount to a “tax increase or a foregone tax reduction”.

It will have a “limited effect” on national saving, and the money would be better spent on other reforms, particularly to the tax system, the report says. Superannuation is less of a problem for future budgets, it says, than is the funding of pharmaceutical benefits.

In addition, the report says there is a risk that the fund will be invested in “uneconomic investments”, and it says that international experience shows a limited need for such a fund.

“It is paternalistic of the government to suggest that individuals spend their money poorly and that they need to be forced to save”, the report says. “If there are taxes or regulations that restrict saving, these barriers should be removed, rather than creating another distortion [higher taxes] to increase saving.”

The ACCI says it expects the cost of pharmaceutical benefits to increase by 2.8 per cent of gross domestic product by 2042, compared with an expected 0.3 per cent of GDP fall in the cost of public service super. The national cost of aged-care is expected to increase by 1.1 per cent of GDP and the cost of age pensions is expected to rise by 1.7 per cent of GDP by 2042.

Clearly, the largest business groups are out there saying that this Future Fund is misdirected. The Treasurer commissioned his own Intergenerational report back in 2001. Where is the next chapter to that report? How is the money from the Future Fund going to benefit future generations? This fund will do nothing in that regard. As this article clearly points out, the issues of aged care and pharmaceutical benefits have not been addressed. Where is the money going to come from to fund those into the future? This fund will do nothing to alleviate that problem.

The Treasurer’s mantra at the time was that all people nearing retirement should stay in the workforce for as long as they can: ‘Work till you drop.’ As many people realise, that is a wonderful thing as long as you have a job you can keep working in. My mother is a great example: at 68, she is still teaching. I think she is mad! But she loves going to work every day and she is lucky because she has been in an environment that will maintain her, that will keep her on, that will happily still employ her. There are a lot of people out there who are not as lucky. In my previous life at the Finance Sector Union, I saw literally hundreds of thousands of people between the ages of 45 and 50 thrown out of work—many of them by the very same David Murray who is going to be heading up this Future Fund. They would have loved to have stayed in the workforce, but there was a raft of redundancies and they were all axed. Those people found it virtually impossible to get back into the workforce because their age was an impediment. The Treasurer has done nothing to ensure future generations are secure. He has done nothing to ensure that when we get to 2020, with the scenario of fewer people in the workforce than out of it, there will be a tax base to ensure that basic services can be provided to all, not just in the area of aged care but in education, research and development, and infrastructure.

Labor believe that, instead of creating a fund whose purpose is dubious at best, we should be creating a fund for nation building. If there are surpluses available, they should be put towards infrastructure. This government has let infrastructure slide over the last 10 years and all it can do is blame the state governments. It points the finger at the state governments. It has created slush fund after slush fund that it says is about nation building, but all it is about is holding onto individual seats. The amount of money that went into the federal seat of McEwen at the last election was phenomenal. It was horrendous to see the amount of money that went into that seat through various dubious programs. It was incredible. And it was not even one of The Nationals’ seats, where much more money went over time.

Where is the accountability for securing our future? There is not any. It is alarming that people within the industry have been horrified—their own word is ‘flabbergasted’—by the lack of information about how this money is to be invested, how this money is to be used. Again I want to quote from the Australian Financial Review:

Money managers jostling to become the asset consultant to the first $16 billion invested in the Future Fund have been “flabbergasted” by the brevity of the government’s tender document, saying it failed to outline what the investment objectives are.

Treasury officials will meet prospective tenderers in Sydney this Friday for a “briefing session” on the one-page tender document that has worried some asset consultants with its lack of detail.

…         …         …

The major concern among the tenderers was the government’s lack of investment objectives that they hoped to become clearer by the time the tender closes on June 2005.

…         …         …

At only 340 words, Treasury’s tender brief on the $16 billion project represents $45 million a word ...

So one little tender document has gone out to the investment market and there are no objectives as to how this money is to be invested. The only objective in the bill is that of national interest. But, funnily enough, the bill has not defined what the national interest is. Our experience of what the national interest is for the government is for them to be re-elected and the money spent in any way, shape, size or form to ensure that that outcome is achieved. It will not be spent wisely; it will not be spent well.

The government say that the fund is a locked box, that there are guarantees for how the money will be used and that, instead creating a board of directors, they will create a board of guarantors. You might change the name but you will not change the outcome, because the guarantors will be allowed to solicit advice only from external sources. They will be directed by the minister on where the money can be invested.

So the guarantors will be there in name only, whereas usually people who are trustees on boards of superannuation funds go through rigorous election processes. Some trustees are appointed, but many go through rigorous election processes to demonstrate that they will be the best people to look after the money of individuals. The guarantors will be handpicked, and there are no guidelines. The one glaring admission in this bill about these people is that they will not even have to pass a fit and proper test. These individuals will be in charge of the vast bulk of Australian taxpayers’ dollars and windfalls from asset sales, yet they do not even have to pass a fit and proper test. It is a sham, it is a disgrace and it is a glaring admission in this bill.

The Labor Party believe that such a fund should be established but that it should be used in a much more strategic way. It should be used for nation building. It should be used for putting back infrastructure in our port system. Where is the discussion about our ports that are failing us at the moment? Where is the discussion about roads? Where is the discussion about rail? Where is the discussion about water quality, about air quality and about the long-term viability of our environment through the creation of electricity? How are we going to do that? There is nothing in this bill about ensuring the future of our nation.

The government have called it a future fund, but it is a limited fund. It has many flaws. If Labor win the next election—and I sincerely hope that we do, and I believe that we will—we will get hold of this fund and make it appropriate for the nation so that it can deliver to all and not to a few handpicked individuals who might misdirect where the money will be spent. It is on a very limited basis that this fund is to finance a super liability that can be easily met out of the current Treasury coffers.

We on this side of the House will be supporting the bill and the amendment moved by the member for Melbourne. I hope that our future is protected and not just whitewashed as the government has done in this bill.

Bob McMullan (Fraser, Australian Labor Party) Share this | Link to 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.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

That was our idea.

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

Exactly. It was a very good idea. It should be done. We have been advocating it for years and took such a proposal to the last election. Unfortunately, the Treasurer overruled it. I only hope that the Prime Minister overrules the Treasurer. But the Prime Minister’s track record in this area is appalling. He was the architect last time when we frittered away the proceeds of a resources boom, and I think he is likely to do it again.

I do not want to speak at length on this matter. I simply want to say that I support a Future Fund. It is a pity there is no genuine fiscal reform in this proposal and no enhanced fiscal discipline. Outlays are still exploding. The risk to our fiscal future is still substantial. I support the second reading amendment moved by the member for Melbourne. I hope we can use this Future Fund, once it is established, as a basis for better policy in the future.

Simon Crean (Hotham, Australian Labor Party, Shadow Minister for Regional Development) Share this | Link to this | Hansard source

I rise with pleasure to follow the member for Fraser, with whom I did a lot of work in the last term on advocating the notion behind this bill, to support the Future Fund Bill 2005 but to point to its deficiencies—hence the need for the second reading amendment moved by the member for Melbourne and spoken on today by the member for Chisholm and the member for Kingsford Smith. The reason that Labor supports the Future Fund is that it was Labor’s initiative. But the form of the fund proposed in this bill does not go far enough.

There are two basic concerns with this bill. The first relates to the governance of the Future Fund. It does not have independence from government and it will be subject to direction from and possible abuse by the government. We have seen that abuse in the ‘regional rorts’ program, and I will come to that in a minute. The second is that the aims and investment policy associated with this fund are too narrow. Essentially it seeks to apply the proceeds of the fund only to the unfunded superannuation liability of public servants. Dealing with it in normal budgetary terms, this is an issue which itself has not been a problem to date but, significantly, it is now a diminishing problem for the future because of the move to close the defined benefit schemes associated with the public sector and to introduce accumulation accounts for all future public servants.

But the real question that has to be asked here is this: if we are to set up a Future Fund—in other words, to take the proceeds of the nation’s prosperity and put them aside to be invested in productive investments that make better returns than simply putting them in the bank—if that concept is right and we support and advocate it, why should the proceeds only go to public servants in Canberra? Why shouldn’t the notion be used to advance the interests of all of the nation? Why shouldn’t the proceeds be used to advance the nation-building agenda that this country so desperately needs, which has been so deficient in the last 10 years of this government’s tenure?

That is the reason we move the second reading amendment, not to oppose the concept but to strengthen it. If you are going to adopt Labor’s policy, adopt it in full. Do not just go about it in a piecemeal way: have the courage of your convictions, admit it is a good idea, but do it properly—not this half-baked, piecemeal approach that will only benefit one section of the community. And, most importantly, it is their government as employer that gets the benefit from this—why not the whole of the nation?

I do welcome the fact that the Treasurer and the government are finally doing something about the intergenerational challenges facing this nation. The House will recall that the Treasurer issued the so-called Intergenerational report back in 2002. He thought his job was done—he had commissioned the report; he had received it—and he did it all with great fanfare but, as always, he did not have a clue about what the policy implications were and what sort of public policy he should be putting in place. It is useful also to remind the House that, 17 years ago, a Labor government introduced the most significant intergenerational policy of our generation: compulsory superannuation. We did it in cooperation with the workforce in the country, an agreement whereby workers in this nation agreed to forgo present income—cuts to wages, if you like, or not as big an increase as they otherwise would have been seeking—to secure future income. It was a sensible trade-off. It was underpinned by government legislation guaranteeing compulsory superannuation. That is the scheme that we have today. It is lauded around the world as being one of the great initiatives of a government addressing an intergenerational challenge.

Sure, there are still issues to be dealt with in it: the member for Fraser has talked about the taxation issue, the contribution tax, and Labor went to the last election proposing an initiative. Why, if we are talking about tax cuts and the ability to deliver tax cuts because of the surplus, should we just be looking at tax cuts on present income and not on superannuation income? Of course it should be looked at in both directions. Tax, after all, influences disposable income: it either increases your take-home pay if you get a tax cut on present income, or it increases your accumulation account if there is less being taken out of the contributions going in. This, of course, was an initiative that finance minister Nick Minchin took up some weeks ago—again embracing a Labor policy—but he was slapped down immediately by the Treasurer, who is incapable of thinking about comprehensive policy solutions.

So here we have the great intergenerational challenge being responded to in a positive way when we were in government, having established superannuation, but this government has done nothing to advance that issue in its 10-year reign. Everything that exists of compulsory superannuation today happened because of a program put in place by a Labor government. All this government did was introduce a new tax on superannuation, which it recently abolished, but it has not advanced the basic adequacy of superannuation in this country. Going into the 1996 election, Labor had in place a co-contribution policy. It had introduced it into the parliament: three per cent from the employee matched by three per cent from the government. It would have taken the nine per cent to 15 per cent. The Howard opposition went to the election promising to keep that co-contribution, and effectively scrapped that promise in its first budget. That is Honest John for you, but it is also a wasted opportunity.

Had that policy been implemented, we would have been in a greater adequacy frame in terms of superannuation in this country today. But whose policy was it? It was Labor’s. Just as Labor has consistently been the party of the pensioner, it is the only party for the superannuant in this country, the only party that has taken the initiatives necessary to underpin secure retirement incomes in this country. If you want it to be advanced, you will have to elect another Labor government, because we are the only ones who have ever done anything in that regard.

The intergenerational challenges that we face today are still about superannuation and individuals, but they are much more. What we need today is a policy response that is tackled with a coherent strategy that puts aside savings today to address tomorrow’s problems. So when you have surpluses you are putting them aside to deal with problems that come up in the future. Secondly, we need to make investments today that reduce the fiscal problems of tomorrow. I think there is a fairly simple proposition involved in this concept: if you have a surplus, why would you put it in the bank if you can get a better rate of return by investing it and at the same time securing the future of the nation? As the member for Fraser has pointed out, the work that the Labor Party had commissioned in its previous term—work by Ric Simes and David Gruen—demonstrated that there could be a greater return for the nation by investing the proceeds wisely rather than just squirrelling it away and putting it in the bank.

Our ability to front up to these sorts of issues is a test of our willingness to provide for the future. As a nation, it is clear that we are not saving or investing enough. That is the great challenge to us as a nation. But, just as Labor introduced compulsory superannuation for workers, budgets too have got to reflect that principle. Budgets should put aside funds to deal with future pressures. If you like, it is superannuation for the nation. The policy imperative is then to invest in the drivers of economic growth—in education, in skills, in a strong competition regime, in research and development and in our infrastructure. These are the things that will drive and sustain this economy much more strongly. The reason that we are not doing them is not that we cannot afford to do them; it is that the government has different priorities, and they are the wrong priorities. But the nation is held back as a consequence. It is essentially wasted opportunity.

Back in 2004 when I responded to the Treasurer’s 2004 budget I said that some action was required, that the government should make provision for the future and that it should establish a fund and invest for the future. As the member for Fraser has already pointed out, when I made that announcement the Treasurer, Peter Costello, ridiculed it. He said the money was not there, dismissed it out of hand and said it could not be done. He said that this was stupid, that it was the magic pudding approach to policy. Not only how wrong has he been proven; but how inconsistent has he become? The very thing that he ridiculed he now embraces as his own and says: ‘It’s the great solution. It’s the great way forward.’

I know that people understand that both sides of politics keep having a go at each other, but I think it is important that when good ideas occur it does not matter where they come from—they should be acknowledged. There should be a preparedness to work together to try and implement it in the best possible way. Not only did the Treasurer not even acknowledge the inconsistency and the backflip in his position; he did not have the good sense to try and work with us to get bipartisan support to achieve the best possible outcome in relation to this fund. He was actually even more cynical than that. He announced his commitment to the fund during the election campaign on the day that it had been agreed there would be an embargo on new policy announcements. It happened just after the Jakarta bombings. The Treasurer dropped his initiative on the Future Fund when the Leader of the Opposition and the Prime Minister had agreed there should be no policy announcements. So not only has he been hypocritical; he exploits all of the wrong opportunities to make the point.

The Treasurer said in his second reading speech that the bill would ‘put in place arrangements for future generations to allow them to deal with the massive changes that the ageing of the population will bring’. There is no doubt that the ageing of the population will bring massive changes to our health and education systems, to our workforce and to the very structure of our society. People are living longer because we have better health systems. People are retiring earlier because they have more disposable income and they are developing a financial capacity to retire because of the superannuation scheme we put in place. This is going to require us to meet big challenges in not just the economic infrastructure that takes us forward but the social infrastructure—the affordability of it, the availability of decent health and education to look after us individually but also to collectively advance us as a nation. We should be investing now and we should be planning now for these changes, yet all this bill does is to make provision to fund the unfunded superannuation liability of Commonwealth public servants. It is a deficient response of a Treasurer who has proven himself on the policy front to be deficient on policy initiatives, to be visionary and to develop a strategy forward for this nation.

I have a great passion for unleashing the potential of our regions. I have responsibility for this shadow portfolio and firmly believe that the Commonwealth government must play an active role in regional development. Our government of the day says there is no constitutional role for regional economic development. I disagree most strongly. All governments have a responsibility to work with regions to give them better access to the range of programs at federal, state and local government levels and to tap into the leadership, the direction and the strategic approach that leaders in the community have developed.

When I was Minister for Employment, Education and Training I established a structure of area consultative committees around the country. They still exist and they exist because people of goodwill and vision are prepared to give of their time voluntarily. What they need is access to resources to make things happen in a way that responds to their regional needs—not someone in Canberra thinking they know what is best for a region but the region itself saying, ‘These are our priorities; this is what we need.’ It is what I would call location responsive government policies: having to respond to the needs that the region identifies. We have to tap into these structures.

I and other members of the Labor caucus on our Regional Development Committee have been travelling the country and talking with these bodies to identify their priorities and looking, in turn, at the raft of government proposals and programs. It does not necessarily need more money; what it does need is for those regions to have access and know they have access to the range of programs—and for their word to be taken sensibly, not as this government has done through its so-called Regional Partnerships program, which just became a rort that saw $5 million going to a steam train that ran out of steam and $1 million going to an ethanol plant that has not even produced one litre of ethanol. That is the government’s approach to regional development: pork-barrel when an election comes up rather than be strategic about it. I believe if we get this future fund concept right and widen its scope, it will be another source through which the regions can be helped to realise their potential. That is why I want to see the policy behind this Future Fund really developed fully.

The final point I would make about the Future Fund goes to the question of governance. I have talked already of the rorts and the pork-barrelling that this government has perpetrated around election time. If the provisions of the bill, which I outlined earlier, are to ensure that we get a better rate of return by investing the money than by simply banking it, that has to be subject to independent analysis and recommendation. It has to be an arms-length recommendation so pork-barrelling cannot occur. That is the other deficiency in relation to this Future Fund: independence from government and the ability of the government to direct certain uses of the fund at the last minute. We have seen where it directs funds: to its own political survival. That sort of decision making has to be taken out of it. We cannot allow the Future Fund to become another cache for the National Party pork-barrel or to prop up Liberal members in marginal seats.

That is why, when we argue for the widening of the scope of what the Future Fund can be used for, we also argue for strengthening the governance procedures to stop the pork-barrelling. This has the potential to be a great thing to help us build the nation. I want to make sure that it is available not just for the infrastructure and skills that we have talked about but also to unleash the potential of our regions, because if the regions are helped to grow it does not just benefit them; it benefits the nation as a whole. Here is an opportunity which could get bipartisan support. It is a pity the government has embraced just the name that Labor proposed and not the concept behind it. I urge the government to adopt our amendment.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

Before I discuss the main points around this very important bill, the Future Fund Bill 2005, I would like to touch on some of the technical aspects of it. What is clear is that the Future Fund is anything but what its name suggests. This Future Fund is not about securing the nation’s future; it is more about securing the Treasurer’s future and the government’s future. In principle, though, Labor does support without reservation the concept and principle of a future fund but to build the nation rather than the aspirations of a few individuals within government.

Rather than answering questions, this bill leaves many questions unanswered. What is clear is that the open-ended mandate setting and the board appointment processes leave the Treasurer and the Minister for Finance and Administration ample opportunity to favour their own people and get approval for their pet projects. Ministers will set and change the investment mandate and direct the board as they choose. This is not an arms-length arrangement; it opens up avenues for political interference and rorting—and, as many speakers on this debate have said, including the member for Hotham, we have seen it time and time again, not just at election time but at any time that the government decides.

If you are looking for models where this can be done properly without rorts or interference, you do not have to look much further than New Zealand. The New Zealand model is much tighter and provides for much better governance. In New Zealand, the board of the future fund must invest on a prudent commercial basis. For example, the New Zealand finance minister may give directions to the guardians regarding the government’s expectations as to the fund’s performance but must not give any direction that is inconsistent with the duty to invest the fund on a prudent commercial basis. Later I will discuss why I raise these issues. The performance of the board in New Zealand is also subject to five-yearly reviews. An important point about this relates to Telstra: it is obvious that the government intends to dump the proceeds of Telstra into the Future Fund. The midyear review has set an unrealistic share price of $4.13 and assumes that all sale proceeds—that is, $26.6 billion—would be booked in 2006-07.

Anybody examining this would find it extremely hard to believe. The government needs to set out the process for transferring Telstra proceeds to the fund, if that is its intention—when it is going to do it, how it is going to do it and how many shares will be affected. This is another level of government interference not only in the way Telstra operates but also in the way a Future Fund would operate. In particular, the bill reveals that the government is anxious to control the transfer of financial assets. In respect of ministerial directions on the transfer of financial assets, the explanatory memorandum to the bill states:

Such directions allow the Government to appropriately manage any interaction between such transfers and policy priorities.

The fund will not be able to meet its objective of paying Public Service superannuation for some time. If the principal course of this fund were to do that, it would not be able to achieve that for some time—until the fund equals the superannuation liability. With current settings, even when fund earnings pass superannuation payouts in 2007-08, the budget will get no relief from the Future Fund at that point. Superannuation payments will still have to be met from the budget over the forward estimates—that is, $2.4 billion in 2005-06, rising to $2.6 billion in 2008-09. As we heard from the member for Melbourne on this very issue, it just does not make sense. Why would the government set up a fund to pay for a future liability? As the member for Melbourne explained, it is equivalent to a household investing a massive capital sum in a bank account and using the interest to pay their rates on a yearly basis. Why would it have all that equity sitting in a fund doing nothing and only use the interest for recurring payments such as council rates? It just does not make sense. This fund is poorly designed and too narrowly focused.

Labor believes investment returns would be better applied to critical infrastructure. The point is that if the government were serious about a Future Fund they would start to direct it to the nation’s future and not their own futures. Labor’s Building Australia Fund and Infrastructure Australia Fund can provide for such investment and enhance the fund’s viability in the process. While I today give my support to the second reading amendment moved by the member for Melbourne, I also give in-principle support to the bill and the government’s intention to at least create a savings fund for future generations of Australians. After all, what we are talking about is a Labor Party policy that was proposed some years back. But, as several speakers before me have indicated, we have many reservations about the process on which the government has embarked, the way the fund will be structured and, in particular, the way it will be administered in this vitally important public policy area. And it is these reservations that I want to draw people’s attention to in the time available to me.

Labor supports the broad concept of a Future Fund, but we question the need to create a Future Fund to cover the increasing government liability that is accruing in respect of public sector superannuation. It will continue to increase gradually over the next 20 to 30 years and then start to decline. And that is the important part. If you look at the liability and how it is structured, you could make a comparison to a mortgage. When you have a mortgage you run-up a huge debt, but in return you have a massive asset which can carry you well into the future. I think ordinary people can understand that having a mortgage is a good thing, not a bad thing, because it gives you a home. In a sense, the liability we are talking about is similar to that. There is no need for the government to set up a fund to deal exclusively with this liability over the next 20 years.

There are much more pressing needs which the government needs to address. In this regard, the government’s motives surrounding the Future Fund are very questionable indeed. We have been told that the Future Fund is a locked box. We heard that from the Treasurer himself. But I think we all know that the locked box has two sets of keys, one of which will be held by the National Party—although, given current events, maybe the Liberal Party will try to get those keys back. However, the locked-box theory is ridiculous; it is ludicrous. Why would any government want to lock up tens of billions of dollars in a fund and not properly set about using those funds to build Australia’s future?

We have a crisis in our serious shortage of skills and training. We have a crisis in our infrastructure—our roads and port facilities. We have heard a litany of charges against this government, on most of which they are very culpable, on infrastructure. We do need a Future Fund, but we do not need a locked box. We need a Future Fund that is open for investment, open to growing the economy and open to ensuring that future generations of Australians enjoy the same opportunities that this generation has enjoyed through the investments of past generations and through the foresight, the vision and the investments of past Labor governments which saw the need for massive reforms of the financial sector, the banking industry and taxation—the sorts of reforms that are desperately needed today. This is where the government’s energies and a Future Fund should be directed.

There is a discretion within this legislation that would allow the Treasurer and the Minister for Finance and Administration to issue directives for investment on matters of national interest and national importance. Of course, the question everybody would ask is: how do you define ‘national interest’ and ‘national importance’, and who specifically decides that? Simply stated, this is not a locked box. In much harsher language, it is a slush fund—and it will be raided unequivocally and unashamedly by the National Party, who will wear it as a badge of honour. They will walk into this place and tell you they will do it. They will go to their electorates and tell everybody that there is nothing wrong with this because it is going to be money coming directly back to their electorates. This is a slush fund for a handful of elites while ordinary Australians will miss out. Ordinary Australians need a Future Fund for infrastructure and training and to make sure that we invest in the future. This is about National Party interests. It is not about nation building. It should be about nation building; that should be the focus of government. There is a lot of concern about how tensions within the coalition at the moment might spill over into the structure of a Future Fund and the way it will be used. I have grave reservations about that.

I have said many times in this place that Australia needs to invest in the future of our country, not just in our physical assets but in our people. We need to invest in people, and Labor knows that all too well. In fact we are the only political party in this country that is prepared to highlight the problems that presently exist and to outline our intentions to address them in both the short and the long term. Labor believes in investing in the national interest, not in the political interest. Labor will invest in priorities set by the experts and not by party machine men, not by a few elites on the front benches of government.

Labor knows that infrastructure is at the core of this debate. It is a national asset, a national priority, and it must be treated not as a cost but as an investment that will provide returns to this country in spades. Labor believes that dividends from a Future Fund should be invested in infrastructure first and that superannuation liabilities for Commonwealth bureaucrats can be funded in many other ways, and it will do so regardless of this proposed fund. Labor believes that, to grow our economy, this nation must invest in Australia. We must not do that by cutting wages. We will never win the global race with bottom of the barrel wages. We are innovators. Australia has always had to compete on a global platform. Australia invented free and fair trade before they became buzz words, because we have always had to compete and we have always had to punch well above our weight. We will continue to do that but not on lower wages. We will continue to do that with our skills, training, innovation and expertise. That is where our strengths lie.

If we do not have a strategy to invest in skills and infrastructure, then we do not have a strategy at all. We do not have a strategy for the economy and we do not have a strategy for the national interest. In short, Labor will invest in Australia and will do so in a number of ways: through greater skills and education for our workforce and through greater investment and attention given to our crumbling, creaking infrastructure across the nation. We will provide real national leadership on the issues when the country needs it most.

I want to touch quickly on skills. A Beazley Labor government will introduce a skills account, which will remove TAFE fees for apprentices in traditional trades. This is the right investment. This is the way to go. Let us make it easier for young people to train themselves; let us give them the opportunities. Right now our policy is to make an initial contribution of $800 per year for up to four years to an apprentice’s skills account. This would get rid of the up-front TAFE fees for up to 60,000 traditional apprentices who commence their training each year. Labor’s new system of skills accounts will invest in young people and will help them complete their traditional apprenticeships. Under Labor’s plan, an additional 13,000 qualified tradespeople would enter our workforce every year. That is doing something positive today, right now, about the skills crisis. It is not just coming up with an alternative, pseudo, mirror structure called the Australian technical colleges, which is just a different name for another TAFE system and a doubling up of the bureaucracy, from which you will not turn out your first graduate until 2011. That is the wrong way to go.

Labor is determined to build Australia into the future and to build a better future for all our kids. Labor is the only political force in Australia developing new policies to tackle the massive skills shortage in this country. Over 10 long years the Howard government has neglected the training of skilled tradesworkers, and, as a result, the economy and the community are starting to suffer. You do not need to look too far to see the impact this is having. Businesses and industry that are growing at incredible rates cannot get the skilled labour they need. They cannot get the workers, because we simply do not have them. While the government may gloat about low unemployment rates and about how strong the economy is, the reality is that this has happened despite this government. It is the global trends and the economic levers and patterns around the globe that affect what happens in Australia. The old cliche that if the US sneezes Australia catches a cold has never been more true.

Our economy is reliant on our trading partners, on the United States, Japan and China, and we compete with those countries in our ability to provide resources, expertise and skills. These are our strengths. I am very concerned that, once we go down the path that not only the proposed Future Fund will take us down but this government is taking us down—that of a low-skilled, low-wage country—we will have to compete on wages, which is a competition we can never win. It is a race we can never win because we will never be able to do what those other countries do. We will never be able to survive on the wages that people in China survive on. So we need to focus on our strengths and on where we can best invest.

There is no doubt in my mind that a Future Fund is essential. It is essential for the prosperity of this country and for our young people. It is essential that we do it and that we get it right the first time. Forget about what this government says when it talks about locked boxes. All you have to do is turn your mind to the AusLink proposals and the funding for AusLink, which has huge discretionary funds available for the minister to personally intervene in so-called national interest infrastructure. But when we examine where that national interest infrastructure is, why does it invariably happen to be in National Party or Liberal Party seats, or in very marginal Labor seats where maybe the government is starting to focus its attentions?

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

Have a look at the landmass and the areas we cover.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

The member at the table says, ‘Have a look at the landmass and the areas we cover.’ I would say to the member, ‘Have a look at where the national interest needs are. Forget about landmass.’ That is an argument of the 1940s. Move into the 21st century and have a look at where the needs are, at the priorities for the nation, not at priorities based on who has the most land: the ‘my block’s bigger than your block’ theory. It has nothing to do with how big the block is. It is about where the needs are. It is about state and federal government relations and investment in the future. The member is shaking his head; I think he is agreeing with me because that is right: we should not look at the size of the block of land. We should look at where the most important parts of infrastructure are.

Steven Ciobo (Moncrieff, Liberal Party) Share this | Link to this | Hansard source

Mr Ciobo interjecting

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

I think Tumbi Creek was an interesting one, if the member really wants to know.

Opposition Members:

Opposition members interjecting—

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

No, it was under another rorts account. While I do appreciate some of the views and interjections of others, I draw back to some of the important points about why we need a Future Fund. As I said, it is to take out the rorting. It is to start putting priorities in place. Let us have an ‘infrastructure Australia’ type body, a peak body that reports back to COAG, which does these things properly and sets an agenda for this nation—not an agenda for the National Party, not an agenda for the Liberal Party, not an agenda for the Labor Party but an agenda for the nation. There are projects screaming out for this government to fund and they need to be prioritised. But they do not get a look-in because they are just not on the biggest block in town. That is a concern to everybody.

Labor’s initial contribution to the skills account would cost in the vicinity of $170 million per year when fully operational. Everyone, from the Reserve Bank to the OECD, is shouting warnings about our shortage of skilled workers. If the government has not heard the noise and has not heard the calls for this, then it is truly blind and deaf to the issues happening within the community.

Home owners are also feeling the impact as the cost of building and renovating the family home increases. While there was a slowdown in the housing market, we can see it picking up again. I read yesterday that one of the Liberal backbenchers, in trying to get himself on the front page of a paper, decided he would call for a doubling of the First Home Owners Scheme. That sounds great on the surface but it further distorts the housing market and puts more pressure on people trying to enter the market. Rather than being an advantage and a bonus, it actually distorts the market. Housing prices go up on the back of these things. Rather than properly targeting how to best help people into housing, this government uses these crude, blunt instruments. Do you know why they are crude, blunt instruments and why the government prefers to use them? Because they look good. It is like giving everybody a $600 cheque before an election—stuff what it adds up to, what it costs and what it actually delivers; it looks good and feels good to give people a big cash payout just before an election. It will feel good for the government—stuff the economy; stuff that it is going to make public housing and housing generally more difficult to get into. It will just sound good if somebody on the Liberal side advocates more money going into the pockets of first home owners. Yes, let us do something for first home owners. Let us have a Future Fund for them. Let us look at ways to get people into their own homes. But let us not do it by fuelling price rises and growth in the housing market to the point where people can no longer afford them at all, no matter how much first home owners grant is available.

So there are real flaws and chinks in the government’s thinking, in the processes and in the way they apply themselves not only to housing and skills but also, particularly in relation to this bill, to a Future Fund. The reality is we do need a Future Fund, but the reality is we need the right Future Fund, one that invests in Australia, one that will invest in the priorities of this nation’s needs and one that will deliver for a long time into the future for future generations, not a Future Fund that is all about the Treasurer and his making himself look good to his backbench to garner the particular votes that he is seeking. Let us get it right. Let us do it right. Let us invest in Australia’s infrastructure. Let us get some of the pork-barrelling out of funding. Let us not have a discretionary fund for ministers which is just another slush fund of the most obvious kind where the minister directs things to a steam rail that never actually takes place. Let us get it right. It is for Australia’s future. (Time expired)

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

Before I call the member for Charlton, can I say to the member for Oxley I am not sure whether a couple of the ways he expressed himself towards the end of that speech were exactly in accordance with standard parliamentary practice. He might want to reflect on that for the future. The question is that the words proposed to be omitted stand part of the question.

Bernie Ripoll (Oxley, Australian Labor Party, Shadow Parliamentary Secretary for Industry, Infrastructure and Industrial Relations) Share this | Link to this | Hansard source

I will, Mr Deputy Speaker.

Kelly Hoare (Charlton, Australian Labor Party) Share this | Link to 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.

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

I have been looking at some interesting figures on profits before income tax. I think income tax in the case of the Future Fund versus a government Telstra should be included in the profits. My reason for saying that is that we in the mining industry have found that, even though the price for metal has doubled and the price for coal has more than doubled, we do not see very much increased tax revenue. This would indicate very effective price transfer mechanisms are operating within all of these companies. The profit margins in the mining companies should have gone up manyfold, because if your cost structure stays the same and the price of your product doubles that does not double your net profit—it quintuples it or even increases it tenfold. With all due respect to the honourable spokesman, I do not think there has been a tenfold increase in the income tax paid by the mining companies.

I do not criticise those people; I criticise the government that allows them to get away with blue murder. If Telstra is put on the market, I do not care what assurances we get from this House—those assurances are not worth a tinker’s damn. A large proportion of the companies that have been privatised are effectively in foreign hands. When I say that, they may be owned by a superannuation company where the majority of shareholding in that company is now held overseas. One of the reasons is that the massive increase—a 100 per cent increase—in income from hard-rock mining and coal has not been reflected in the current account deficit. It has worsened dramatically in that time. That is simply because all of that extra money has been taken and moved overseas. Our seven major mining companies were all Australian owned some eight years ago; now they are all foreign owned.

I want to speak of the late, great John McEwen. We hear people in the media continuously making fools of themselves by saying that the National Party is an effective force or that it is a force at all—in fact, that it actually exists in any way. My first speech in the joint party room referred to John McEwen. Someone yelled out at me, ‘Oh no! McEwen! Back in the dungeons!’ I said, ‘Yes, it would be terrible to go back to that period, wouldn’t it? Two per cent unemployment and a current account surplus.’ I reeled off the figures and a number of people roared with laughter because they realised that what I was saying about these sorts of policies was true.

John McEwen took the profits—and the moneys in certain cases—from the government and put them into the Commonwealth Development Bank and such institutions. He set up the AIDC to buy back the farm, which basically meant the mining companies. He succeeded in doing it very successfully. For example, Mount Isa Mines had been foreign owned until after McEwen had put in place what he wanted to. Indeed, at that time the much-maligned RFX Connor—I thought he was a numbskull at the time but, on reading the history books and finding out in detail what he had done, I realised that it was the media which had portrayed him that way; he most certainly was not a numbskull and appeared to me anyway to be a great and patriotic Australian—was fairly effective but became bull-headed in the end.

What we are saying here in the Future Fund Bill 2005 is that this money can be used for the purpose of owning Australia’s assets—our mining companies. Ten years ago, all of the seven major companies were Australian owned. This government and the preceding government have presided over all of those giant owners of our resources falling into the hands of foreigners. The only people who can be blamed and who must bear the brunt of that are those people who served in government under Mr Hawke and Mr Keating and those people who have served in the current government—and I am ashamed to say I was one of them.

It is proposed that this money would be routed into a fund through an investment agency. If there is one thing in this country that is not needed, it is another investment company. One of the more successful German governments in the days before the Second World War went to the people on the basis of no predatory capital and no speculative capital. I would to heaven that some governments in Australia would say this, but they have done just the opposite: they have moved Australia’s very small savings funds into investment funds that have done nothing but speculate and predate.

Let us talk about predatory behaviour for a moment. The fair trading inquiry conducted by this House—many called it the Bruce Baird inquiry—delineated how Woolworths and Coles, two giant retailers, moved from 51 per cent in 1991 or 1992 up to 68 per cent of the market in about 1998. According to their own figures, they are now on 82 per cent of the market. That is predation. They have taken the nation’s riches and used them to make themselves richer and more powerful. They are so powerful in the economy that they secured the deregulation of the dairy industry, which took 30 per cent of farmers’ incomes. That is a figure that anyone in this House can verify. They then put the price of milk for consumers up by nearly 40 per cent. This delivered to the retailers of Australia over $1 billion a year in extra profit. That is predation. This money is going to be used to fuel that engine of predation.

My chief of staff pointed out to me that the graph from the latest economic publication put out by the Parliamentary Library, which is a graph on house affordability, shows house affordability to have decreased sharply. Is this something for the government to be proud of? They have given $7,000 as a gift to everybody but affordability has gone down. I am no friend of Mr Turnbull’s, but Mr Turnbull and another gentleman, an Oxford don who is an Australian, did a report on housing in Australia. They said that instead of the government encouraging demand—which puts the price up through speculation and inflationary pressure in the housing sector—they should increase supply. That is something that we were in the process of doing in Queensland. We were building high-speed highways. This is the centre of what I am saying will happen if that $18 billion is used in an investment agency for predation and speculation, which have driven the price of housing out of the reach of almost everybody in this country so that they can no longer afford a house. Just pick up the library’s publication if you question me on that, Mr Deputy Speaker McMullan!

When the government fell in Queensland in 1990 we were in the process of creating four major high-speed spoke roads allowing a speed of 120 kilometres per hour right into the centre of the city, along with two ring roads. We were doing that so people could live 60 kilometres from town and arrive within 20 minutes at their place of work. It was very satisfying to me to realise that at least Mr Turnbull and this Oxford don have said the same thing in their report. I might add that they did not say it as well as we said it and that their programs were not as good as the programs we were offering.

People could live on two or three acres in a very civilised way. They could recycle their water, which was part of the program. You can recycle water if you are on two acres. It is very difficult to do that if you are in a city; health problems and other sorts of problems arise from grey water usage. So we could deliver land at negligible cost. Mr Turnbull and the other gentleman’s report also said that council and government inefficiencies had not only created a huge cost for land but also created a logjam which people could not get through. The provision of infrastructure would bring the price of houses down so that more Australians could buy those houses more cheaply, taking the heat out of the speculative boom. But this approach is doing the very opposite. This will look after the big end of town. The big end of town will have more of our money to play around with, to play their Monopoly games with each other.

This has reached its zenith many times in the last three or four decades when we have moved away from McEwenism in the economy and the sort of approach used not only by Joh Bjelke-Peterson but by Henry Bolte in Victoria, by Thomas Playford, by Charles Court—enormously successful governments—and in my own state of Queensland, of course, the legendary governments of the Labor Party before the war, which were probably the grandest and greatest governments in Australian history. But that was where all of these enormously successful governments saw the public money going. This government is expert in just the opposite field—of putting the money into the field where it will manifest itself in fuelling speculation throughout the entire economy.

There was a wonderful article in the Bulletin magazine by Maxine McKew. The heading read that the Australian economy is in an artificial boom fuelled by property speculation financed by overseas borrowings. I suppose there will not be so much overseas borrowing, but the rest of it will stay in place, and it is a true statement. That bubble will burst. For people that do not know anything about economic history, there was a wonderful statement published recently in the Australian. It said that the American economy and share prices are buoyant but that they have hit a permanently high plateau now and will remain on that plateau indefinitely into the future. Things are good. That was in October 1929. After the crash, share prices went to one-tenth of what they were when Professor Irving Fisher, a leading American economist, made that statement. We have a lot of economists and we have the Treasurer telling us the same things now, but there is not an intelligent commentator in the country who does not realise that we are floating on a speculative boom which will be fuelled by another $18,000 million if the government gets its way.

I represent an area called the Gulf of Carpentaria, known as the Gulf Country. The Gulf Country, the mid-west and the central west of Queensland—if you like, all of outback Queensland—is a huge black soil plain, the richest soil on earth. Except for three or four farmers, a plough has never been put into any part of that magical landscape. I think most people in this place are aware that half of Australia’s agricultural production comes from the Murray-Darling Basin. It comes off a tiny 22 million megalitres of water. We have 126 million megalitres of water flowing over Queensland’s inland plain. It is so flat that you can easily bring the water back to irrigate the whole of that plain. That is just the plain; there is more land available. It is a thousand kilometres long and 600 kilometres wide. On the experience of the Murray-Darling Basin, you can feed a population of 70, 80 or possibly 100 million people. It can grow you ethanol to fuel your motor cars.

We could fill up our motor cars at a price of 70c. The price at the bowser in Brazil for ethanol, as I speak, is between 68c and 72c a litre. They are filling up their cars right now for 70c a litre. I have not got time to go into why, but the Australian government gets more money out of an untaxed ethanol industry than it does out of a taxed petrol industry. By the way, this country is running out of fuel, but our supplies are quite safe: they come from Indonesia and the Middle East. You can get the figures from ABARE or Geoscience Australia, the old BMR, and you will see that over the next four or five years we will drop down to about 30 per cent self-sufficiency—we have to date been on about 95 per cent self-sufficiency. This will be one of the most oil-poor countries on earth, and there is not one single program being undertaken by the federal government to address this looming crisis in Australia. In fact, we are paying $1.20 at the bowsers now, which is almost twice what Brazil is paying, and all we get from people on the government side of the House is a thousand reasons why they cannot mandate ethanol. Don’t they look criminally stupid now!

Last week President Bush said that 75 per cent of America’s fuel will come from ethanol. He also mentioned electricity, but I will not go into the reasons why electric powered motor cars have very limited usage. Seventy-five per cent ethanol is what the President of the United States said. How stupid do these people look! We hear the National Party saying that they are in favour of ethanol. I am in favour of motherhood too. What they do not realise is that such comments just anger the people. They are the government. The reason Mr Beattie is collapsing and has at this stage no hope whatsoever of winning the next election in Queensland is that he keeps saying, ‘I’m going to fix this up.’ We are not interested in him saying, ‘I’ll fix this up.’ All we know is that we have a law that allows us turn our taps on for two hours a day to water our lawns. We have no water. We know that our power is flicking on and off. They cannot deliver electricity, they cannot deliver water and they cannot deliver doctors in hospitals.

With a tiny bit of that money—a thousand million dollars—and some legislative effort by the  state and federal governments we can deliver to you just in the Gulf alone an ethanol supply. But I am sure that the member for New England is going to tell us rightly about how ethanol can be produced in his areas. Whether it is produced in his areas or our areas, it is now absolutely naive to talk about 10 per cent ethanol—we are now talking about 50 or 60 per cent ethanol. The Americans are talking about 75 per cent, and they have a limited resource. They cannot go into the Gulf Country and open up half a million or a million hectares of land to irrigation. They have irrigated everything they can irrigate in the United States.

For those in this place who are of a Greens bent, what are we doing with that huge plain in inland Queensland? All of western Queensland is in a huge black soil plain. I will tell you what we are doing with it. We are growing the prickly acacia tree—a weed. The prickly acacia tree has taken over six million hectares of that plain. It has destroyed all native flora and all native fauna, and of course it has also destroyed any chance we had of making a quid out of that land from cattle or sheep. Those trees stand as a monument of shame and disgrace not to the people of this nation but to the way this nation has been governed.

We could build a hundred patrol boats. We are a tiny little country. We are Europeans. We live in an area where people call themselves Asians and they are very reluctant to accept us as Asians. Let us face it: we look different. In the last war we believed that the British would come and save us if we got into trouble, if we got attacked by the Japanese. Their contribution was 12 fighter planes. To put that in perspective, the British were producing 2,000 combat planes a month and they gave us 12 when the Japanese were at Kokoda.

We can build a hundred patrol boats with guided missile capacity, with interception capacity, with helicopters with radar, and we can defend our country, we can defend our island. We can also by so doing deliver to Australia a manufacturing industry, and to hell with free trade agreements—the Americans treat them like dirt. Those boats should be built in this country and create for Australia secondary and tertiary industry, which we also desperately need. That is what that money could and should be doing. We do not want to sell Telstra. The most important thing is that it stays in government and Australian hands. (Time expired)

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

It is great to see the member for Kennedy back in the parliament in full health and firing on all chambers. I am delighted to speak to the Future Fund Bill 2005. I am pleased to see the member for Goldstein at the table. The member for Kennedy made a number of comments in relation to agriculture, alternative energies, the use of land and water resources et cetera. The Parliamentary Secretary to the Minister for Immigration and Multicultural Affairs, the member for Goldstein, should be able to make some positive contribution on those topics drawing on some of his former lives. I congratulate him on his appointment as a parliamentary secretary and wish him well.

There are a number of comments I would like to make on this legislation, particularly on the word ‘future’. The member for Kennedy talked about some alternative uses for the money from the Future Fund to guarantee the future of this nation. A lot of the debate has been predicated on some of the issues that have been raised, not the least of which being the ageing population, raised by the Treasurer, Peter Costello. They are very real issues that policy areas should look at. I congratulate the two previous ministers for ageing, Julie Bishop and Kevin Andrews, for the work that they have done, particularly in recognising some of the regional problems with ageing and health care through the multipurpose service models and other models. I hope the new minister embraces some of the logic they were adopting in relation to our current ageing people. Obviously the debate of the future is how we are going to fund a lot of those things.

It strikes me that the Future Fund may be one of those things that was dreamt up in a bit of a rush when there was a policy vacuum. It is a bit like the alternative TAFE arrangements that have been put in place. It sounded like a good idea at the time and now we are developing the infrastructure and the reasons for having it. I hope that is not the case. If you look at the logic of the Future Fund, the object of the legislation, as I understand it, is to strengthen the Commonwealth’s position in the provision of Public Service superannuation in the future. That sounds well meaning and, in most cases, seems quite prudent; but, if you look behind that, what is it going to cost us? There are estimates of it costing $90 billion over a long period of time. On an annualised basis it is going to cost us something like $4 billion, which is a relatively minor proportion of the overall budget—about two per cent.

The explanatory memorandum contains a lot on the potential to lift this fund above $18 billion. If the sale of Telstra goes through, there is talk about transferring a portion or all of the funds from that sale into the Future Fund. When you look at those two things together, the information that I have been able to glean—and it is no secret to anybody else—is that the annual earnings from Telstra are in the vicinity of $4 billion. The reason behind creating the Future Fund is that our annual pay-out is in the vicinity of $4 billion. I guess the member for Goldstein or someone else will inform me later on that there is an escalating platform there and that it could get out to about $7 billion on an annualised basis. We can all argue about the figures. But it seems to me that we are really debating a reason to park the funds of Telstra. That is what this debate is about. It is dressed up as the Future Fund. I do not condemn the government for wanting to put away money for the future. A lot of what they are talking about is how we develop infrastructure into the future. I would like to spend some time talking about how some of this money should be spent, as the member for Kennedy did.

When you predicate it on the sale of an asset, telecommunications, that is the most important piece of infrastructure in this century, particularly in a country of this geographic size, with the need for regional and rural people to be able to access that telecommunications and with the positive implications that that can have in the education of these people, the delivery of health services to them and the delivery of parity in their being able to compete with our city cousins and internationally, it becomes very important that we do not sell Telstra.

I believe that a political path could be adopted, even at this stage, to reverse the legislation for Telstra’s sale. Many people in the National Party, particularly Senator Nash, have been saying in recent weeks—since the defection of dear Julian—that they are going to reconsider how they vote on coalition issues. It is obvious to me that here is a classic example. If these people are saying that they are representative of regional and rural Australia, that they are their voice, that they represent seven million people and that they are required because one party will not do it—you need the National Party—here is a classic opportunity for that party to stand up for these people. All the surveys done on this issue indicated that over 90 per cent of country people and over 70 per cent of city people were against the sale of Telstra.

If this party has any reason for being, it should introduce and/or support legislation in the Senate to reverse the sale of this piece of infrastructure. If the argument is that we need the money for unfunded liability et cetera, just look at the earnings of this business. Even if you want to forget about the future contribution of this infrastructure to the nation by way of the parity factors that I talked about earlier, you cannot deny that it gives people the one thing that negates distance as a disadvantage when they are living in country Australia.

If this government or any other government believes that a fully privatised operation such as Telstra is going to care about people who are not in the profit band of their business, they are kidding themselves. The government says, ‘We’ve put in place certain guarantees.’ The President of the National Farmers Federation and the next National Party candidate for the seat of Gwydir, Peter Corish, said very strongly that the National Farmers Federation had been given—and the member for Goldstein, who is seated at the table, should have access to some of this material because he would have some very close links with the NFF, given his past with it—an assurance in legislation that on the sale of Telstra there would be parity of access and price with telephone and broadband services for country people.

No-one in this parliament—from the Prime Minister down, including the minister responsible for this legislation in the Senate—can give that assurance. Maybe the minister who is replying to this legislation can. Show us where it is in the legislation. Where is the legislative guarantee that future services such as telephone broadband and other services to country people will be guaranteed in a fully privatised telecommunications operation? It is not there. Twice in this parliament I have asked the Prime Minister and other ministers about this. They are ducking and weaving on giving that assurance. I will be pleased to hear that assurance today, because whoever is replying to the bill will have time to do so.

The other issue that comes up about the Future Fund is that it seems that the market will not accept the product of the full sale of Telstra in one hit; it may not even accept it at all. The government’s view has been to create this future fund and have somewhere to park it so that it would look as though they had not rejected their own policy drive for the last decade. The government would argue—I would argue it anyway—that under the current arrangements they and the taxpayer have some leverage through the political process and because of the way in which the board of Telstra is put together. Theoretically that exists as long as the government retain over 15 per cent of the company, but in practice having it parked in a future fund and valued as such will remove part of the political leverage that Australian people would have with various issues that might arise in telecommunications. There is no need to sell Telstra for its proceeds to become part of this fund. There is no need to create a future fund as a parking bay for a piece of infrastructure that the government are just head over heels in wanting to sell.

There are a number of other issues. I want to follow on a comment that the member for Kennedy made about our future and how we fund our future energy needs. The other day the ‘President of Australia’, George Bush, made some very pertinent comments about the energy needs of the United States, those other states. The comments he made—

Bob Katter (Kennedy, Independent) Share this | Link to this | Hansard source

You mean that the bush rules Australia?

Tony Windsor (New England, Independent) Share this | Link to this | Hansard source

That is a pertinent comment from the member for Kennedy. It means that the bush will rule Australia. Politically, it could have a much greater say than it is having under the current auspices of the party that purports to represent seven million Australians. We will not go there at the moment.

President Bush made the comment the other day, from memory, suggesting that, by 2025, the American people would have to wean themselves off their overreliance on imported oil, particularly from the Middle East but not only from the Middle East, and that they would be driving towards 75 per cent self-sufficiency, looking at other energy sources. Ethanol, biodiesel et cetera were some of those energy sources that were mentioned.

The Americans have woken up to our future. The Brazilians have woken up to our future. They are using other sources to develop fuel—the sugar industry. There is no need to wipe out the sugar industry and those communities. The same industry, the same efficient farmers, could be used to generate ethanol and other forms of fuel. Our farming community could be revolutionised rather than dumped as it has been in recent years by all forms of government. I am not just blaming this government. There has been an assumption out there that over time the farming community in Australia will disintegrate and we will get our food from somewhere else. We may get our food from somewhere else, but we may not get our energy.

This government has to recognise that the current policy is not sufficient to guarantee those energy needs in the future. It is almost errant in its legislative arrangements when it says that 0.83 of one per cent of our petrol and diesel needs is to be provided over a 10-year period, from 2001 through to 2010. That is the renewable energy target that this government has put in place. It is less than one per cent of our fuel needs.

The Americans are looking—over a longer period of time, I admit—at 75 per cent over the next 19 or 20 years. Where are we? The Brazilians are increasing their ethanol production at the rate of one Australian sugar industry a year. We are looking at ways and means of subsidising our sugar farms out of existence, and there will be consequences and social implications on those communities. There are enormous opportunities for our future, and Australia should examine what it can do for itself, rather than have this overreliance on these endless free trade negotiations.

You only have to look at what is happening with the Australian Wheat Board. Look at the tragedy of what is occurring there. I am a supporter of the single desk, and I will support Mark Vaile on the maintenance of the single desk arrangements for the export of grain. We should look at the tragedy of what is happening there and ask ourselves: does this need to happen? Australia produces surplus grain. That is a fact. Because our economy is based on 20 per cent of our agricultural production being used at home and 80 per cent offshore, we have to find alternative ways of disposing of that grain. That is a fact. We have to deal on a corrupt world market. That has always been a fact. The Wheat Board has been dealing on a corrupt world market. It is complicated to the extent that it has also been dealing on that market when our government has been signatory to a United Nations sanctions arrangement. That is a fact, so there is a certain complication there. But the underlying problem is that the Wheat Board has had to deal in a marketplace which is in fact corrupt—and the Americans are as corrupt as anybody else in that marketplace—and everybody knows those facts.

How do you get around that? Obviously, you keep being corrupt and deal in a corrupt market and try to get the best deal, albeit the most corrupt, within the market so you can sell the product for the Australian farmer. Or do you look at alternatives for that use—alternative markets, if they are not available because you are not corrupt enough to access them? That is a problem. What else could you do? I wonder whether you could look at alternative uses for that grain. What could you do with that grain? What are other countries doing with that grain, instead of exporting it on the food market? Some of them are converting it into energy.

On average, we export about 16 million tonnes of wheat a year. That is a significant problem and it needs significant marketing. Ten per cent ethanol in our fuel—in theory, at least, because it would not all come from wheat—would take half of that. Fifty per cent of our exports of grain that we have to sell on this corrupt market and then buy on another corrupt market—both of which are controlled offshore—could be used to produce energy for 10 per cent usage in our fuels. Then you get into the biodiesel arguments, issues et cetera and a whole range of other energy arrangements, including wind and water. If we went to 20 per cent, there would be no need to take this grain offshore. There would be no need to ruin the sugar industry.

These are government policy decisions that can be made at home about our future, about how we are going to fund the lifestyles of all Australians, particularly regional Australians. We seem so preoccupied with having to produce something, take it out into the world market, take what they give us and then say ‘thank you’. Australia should be looking further than that, in my view. Country Australia can lead the charge on those issues. We have some very pathetic people who argue in the Senate, as they do, that 0.83 of one per cent as a renewable energy target over 10 years is acceptable and in their words ‘will generate an industry’.  They are dreaming. I think that the castle is one of the great Australian dreams. If they believe that 0.83 of one per cent is a renewable energy target that they should be proud of, they are absolutely dreaming.

One other issue is taxation. It is very important to our future. Sustainability of water resources is very important to our future. What is happening with the Namoi ground water issue at the moment? The member for Goldstein will be well aware of this. To their credit, the Commonwealth government, the state government and the water users of that ground water area that has been overallocated are moving to a sustainable arrangement. An adjustment fund was put in place. It was funded three ways: Commonwealth, $50 million; the state, $50 million; and the industry, $50 million. It is a very worthy project with laudable future objectives of sustainability and compensating those who are impacted by the change in the short term.

The Commonwealth government and the Prime Minister have written to me recently and have said that the Commonwealth will be taxing the state contribution, the Commonwealth contribution and any contribution made by the growers that can be assessed in relation to that issue. It will be assessed as income. Compensation to bring an environmental oversight from the past into a sustainable future is going to be taxed. I think that is a disgraceful thing that this government has done. (Time expired)

Chris Pearce (Aston, Liberal Party, Parliamentary Secretary to the Treasurer) Share this | Link to this | Hansard source

It is my pleasure to sum up the debate on the Future Fund Bill 2005. It may be worth while reminding the House, given some of the subject areas that we have just heard about, that this bill is actually about the Future Fund. I think it is standing order No. 76 that goes to relevance of debate in the chamber, and that is focusing on the bill before the chamber.

The government’s Future Fund policy is a fundamental part of the government’s sound economic and budget management. We have been able to take a decision to create an asset fund which will alleviate part of the burden on future generations. This has come about because we have done the hard yards getting the budget into surplus and paying down the massive debt that we inherited from Labor. It is easy to be complacent about this achievement, but it is worth bearing in mind that the reduction in public debt has freed up over $5 billion per year in interest payments, which we have been able to redirect to higher priority areas such as health, national security and education.

In much the same vein, the creation of a Future Fund is a further strengthening of the government’s balance sheet. By building an asset and allowing it to grow over time, we will be able to better meet the challenges of an ageing population without putting the budget into deficit. There is no lessening of budget flexibility, since contributions to the fund will be made from realised surpluses. All the Australian states, as well as a number of other national governments, have taken steps to fund their unfunded superannuation liabilities. It is therefore quite interesting to hear opposition members claim that we should not be worried about funding our liability. Having reduced debt, it is entirely logical to focus our attention on the largest liability on the government’s balance sheet.

The proposed amendment from the member for Melbourne seeks to take the proposed governance arrangements for the Future Fund but have the earnings of the fund used to fund infrastructure. This proposal ignores the fact that the governance arrangements for the Future Fund have been particularly designed with the purpose of the Future Fund in mind. The bill creates an independent board who will be fully responsible for investing the fund to maximise long-term financial returns. It will do this without intervention from government about its investment decisions. By contrast, under the proposed amendment, the board will be hit up for money on an ad hoc basis to fund as yet unnamed projects. How could it be expected to run a sensible investment strategy under such a scenario? Who would want to be on such a board? The proposed amendment attempts to have a bob each way with ill-conceived governance arrangements and will still leave us with an unfunded superannuation liability of $140 billion in 2020.

The bill contains sound governance arrangements which have been modelled on those in other pieces of legislation, such as the Corporations Law. The Future Fund Board of Guardians will be statutorily responsible for one thing only: to maximise long-term returns consistent with international best practice for institutional investment. They will be guided by an investment mandate from the responsible ministers, which addresses the key issues of risk and return. Beyond this high-level guidance, which is a hallmark of any investment arrangement, there is no intervention by the government.

The board will be fully accountable for the investment arrangements and the performance of the fund. The accountability arrangements for the board will be of the highest order. They will be subject to full parliamentary scrutiny and be open to inquiry by the Australian National Audit Office and there are provisions in the bill which go further. For instance, under section 24 of the bill, the board will be required to formulate a range of policies which they will have to make public. They will provide up-front assurance about how the board will operate.

Unlike in the proposed amendment from the member for Melbourne, which would see the fund open to intervention, the Future Fund will be a locked box. The bill makes it very clear that the fund can be used only for a particular purpose and only once an independent actuary has verified that funds can be withdrawn. The fund will be safeguarded, since the bill says that no money can be drawn from the fund until 2020 or when the liability has been fully funded. This safeguarding means that a future government cannot get its hands on the fund without abolishing the legislation. This is the same arrangement that has been adopted in other countries, such as New Zealand and Ireland.

In conclusion, the Future Fund represents a sensible approach to dealing with future fiscal pressures. The proposed arrangements are soundly based and will withstand the test of time. I thank honourable members for their contribution to the debate, and I commend the bill to the House.

Harry Quick (Franklin, Independent) Share this | Link to this | Hansard source

The original question was that this bill be now read a second time. To this the honourable member for Melbourne has moved as an amendment that all words after ‘That’ be omitted with a view to substituting other words. The immediate question is that the words proposed to be omitted stand part of the question.

Question agreed to.

Original question agreed to.

Bill read a second time.

Message from the Governor-General recommending appropriation announced.