Michael Keenan (Stirling, Liberal Party) Share this | Link to this | Hansard source

My question is addressed to the Treasurer. Would the Treasurer inform the House of the long-term effects of the ageing of the population on Australia’s economy? What strategies does the government have to address this challenge? Are there any threats to these strategies?

Peter Costello (Higgins, Liberal Party, Treasurer) Share this | Link to this | Hansard source

I thank the honourable member for Stirling for his question. The long-term effect of the ageing of the population is that we are going to have a smaller proportion of people of working age supporting a larger proportion of people of retirement age, basically from now right out until 2040 and possibly beyond. Our first Intergenerational report showed that a gap would open up between spending requirements and tax of around five per cent of GDP—around $40 billion per year—as a consequence of that, meaning that either you would have to run a budget deficit of about $40 billion in 2003 dollars per annum or you would have to find another $40 billion per annum of tax revenue in order to cope with the ageing of the population.

One of the things that this government announced in response to that was a scheme to start curtailing some of those payments which we know are coming down the track. That is why we established the Future Fund—so that we could begin provisioning now for one element of payment which will start hitting the Commonwealth account in 2020 and onwards. The Future Fund invests money that the government deposits into it, which is managed by guardians, and the capital and the earnings on that Future Fund begin to accumulate so that it can pay future liabilities at 2020 or earlier if we have properly provisioned for those liabilities. Let me make this clear: the more money you take out of the Future Fund, the weaker you will make it, because you lose not only the capital but also the earnings. The first raid on the Future Fund is always the easy one. The second is quite simple after you have done that the first time, and by the third you are really in business.

The Labor Party used to complain that the Future Fund was not enough of a locked box and that it could be raided. The member for Lilley used to run around the country saying:

We need a Future Fund which is a locked box, where the proceeds of asset sales are placed so they can’t be raided by the National Party.

That is what he said on 26 August 2005. We now know that the assets of the Future Fund are not going to be raided by the National Party but going to be raided by the Labor Party. Having announced the first raid of $2.7 billion, the Labor Party is now working up successive raids. When the member for Lilley was asked about this on 22 March, which I think was last Thursday, he said:

Journalist: … you and others say that you could use the Future Fund for ‘productive purposes’? What does that mean?

Swan: Basically hard infrastructure …

He was asked the quite reasonable question today, ‘What is hard infrastructure?’ and his answer was this: ‘I am not buying into that at the moment.’ Let us think of things that are hard infrastructure. Roads are hard infrastructure. Rail is hard infrastructure. Ports are hard infrastructure. The environment is hard infrastructure for sure—irrigation canals. Building a hospital would be hard infrastructure. Hornets are hard infrastructure. Air warfare destroyers are hard infrastructure. If the principle is that anything that is hard infrastructure can be the subject of a raid on the Future Fund, basically you can raid the whole thing; you can take the whole income. And while you are at it, what is the principle that says you can raid the Future Fund for hard infrastructure but not human infrastructure? Human infrastructure may well be more important than hard infrastructure in the future.

What we have seen here from the Leader of the Opposition—a proposal to raid the Future Fund and superannuation entitlements—is a policy that has not been taken by any state government or opposition. All the state governments, to one degree or another, are now funding superannuation liabilities. But not one single one of them has ever said that they would raid those liabilities for their election promises. The Leader of the Opposition ought to know this. He was a public servant in Queensland; Queensland has a fully funded superannuation system. They have fully funded their liabilities, and nobody—not Goss, not Borbidge, not Beattie, not Seeney, not Flegg—has ever said that they would raid that fund for their election promises. There is only one political party in Australia that is as irresponsible as that. It is the federal Labor Party, under this Leader of the Opposition. This is economic irresponsibility on a grand scale.