John Watson (Tasmania, Liberal Party) Share this | Hansard source

They say, ‘Shock, horror!’ It is indeed shock, horror—and I think I have a responsibility during this debate to outline the subterfuge of the Labor Party. While supporting this, they take a hollow log type approach to it. I think that needs to be said.

Another concern has been expressed by some that the money should be spent on tax cuts, infrastructure and any number of other good projects and agendas. The obvious reply here is that it is possible to address the sleeping bear issue of unfunded superannuation liabilities and at the same time implement tax cuts—and I am confident that, in the coming budget in May this year, we will see reforms in this area. In some ways, tax cuts are a bottomless pit and can exacerbate the intergenerational transfer of wealth problem which I mentioned earlier. Putting off to tomorrow what you can do today is never good policy and could well be disastrous as the Commonwealth gathers more and more obligations with fewer taxpayers well into the future because of our ageing population.

On a more positive note, the previous action of eliminating the old defined benefit system plus the increasing value for public servants from the growing accumulation funds will mean that the Commonwealth superannuation obligations will peak and then fall as a percentage of GDP over coming decades. These reforms will further assist in softening the cash flow of future superannuation payouts and the general growth in accumulated funds nationwide will soften the blow of the aged pensions needed for our expanding number of retiring Australians.

The current liability for unfunded superannuation is something of the order of $90 billion. Some have criticised the need for the Future Fund, saying that the discharge of the unfunded superannuation—met on an annual basis by payments from consolidated revenue as the legal payments become due—represents only a small percentage of GDP. While this percentage argument might be true, it does not mean that the Future Fund should not be established. I believe that the challenge for the board will be to keep administrative and operational costs down, achieve their benchmark return rates and efficiently and effectively discharge their obligations to Australian taxpayers.

I believe there could be a number of minor refinements to the bill—and I am sure that the government will take my points on board. With respect to the manner in which the board members are appointed, I would like to see a more formal system put in place—a system which shows a degree of openness and transparent scrutiny of all the candidates to ascertain the merit of their appointment and independence. I believe this is important for two reasons: firstly, to ensure that all board members are eminently qualified and able to carry out their duties—$18 billion of taxpayers’ money deserves capable overseers; and, secondly, to restore and maintain public confidence in the way taxpayers’ money is handled, particularly by people outside the parliament.

I have also looked at the issue of the ownership of Telstra shares and how this transfer should be handled, because this can have ownership implications for Telstra as well as some taxation implications. In fact, I think Telstra is somewhat justified in calling for some notification of when the government intends to transfer Telstra shares to the Future Fund. That said, I believe that the time frame of 60 days requested by Telstra is far too generous. Telstra needs to get its act together. Perhaps a fortnight would be a more appropriate time frame than what Telstra has submitted.

Telstra initially had some concerns regarding the potential tax implications of a transfer of Telstra shares to the Future Fund. Central to Telstra’s concern is the interpretation of section 8AYD of the Telstra Corporation Act 1991. We have been advised by the Department of Finance and Administration that the intention of this section was to remove certain powers that the Commonwealth currently has due to its controlling interest in Telstra. It was not intended, according to the Department of Finance and Administration, to have any application to determining the ownership of the company for taxation purposes. The Department of Finance and Administration then went on to say that the department is working constructively with Telstra on this matter and that currently the department is optimistic that any issues are capable of being resolved administratively and, at the same time, is not convinced of the need for any change to either the Future Fund Bill 2005 or the Telstra act, as suggested by Telstra in its submission and in a number of press releases. The Senate economics report addresses both these issues quite satisfactorily.

To conclude, the Future Fund Bill is a very prudent piece of economic management ensuring that we as a generation meet our obligations, particularly in circumstances of strong and significant budget surpluses. I strongly urge my fellow senators to give their support to the bill without the Labor Party’s atrocious amendment.