Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I seek leave to move the amendments standing in my name together.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Is leave granted?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

We did not receive these, Senator Ronaldson, so I would prefer it if we could go through them separately.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I am very surprised if that is the situation because these were circulated some considerable period of time ago.

The TEMPORARY CHAIRMAN: Leave is not granted. Senator Ronaldson, would you like to move your first amendment?

Yes, I would. I will say, prior to doing that, that this is no secret or surprise to the government. This was all flagged well in advance, in fact, during the May session. I move amendment (1) on sheet 7037 revised:

  (1) Title, page 1 (line 2), after “ 1973 ”, insert “ and the Defence Forces Retirement Benefits Act 1948 ”.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I rise to support not just the amendment that Senator Ronaldson is moving but the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010 as a whole, which is being presented by Senator Ronaldson to ensure that Australia attends to one of a number of serious omissions with respect to proper indexation of pensions of those who have served Australia, in a variety of ways, in what might loosely be described as public service.

It has been clear for some time that Australia has experienced a problem with the standard of living provided to those Australians who have been either public servants or members of the Defence Force in that it is not keeping pace with the standard of living provided to other Australians who are the beneficiaries of Australian govern­ment pensions. The pensions of, for example, aged pensioners—as is well known—are adjusted by a combination of factors, the greater of the consumer price index or the male total average weekly earnings. As a result, it is fair to say that pensions overall, such as age pensions, have kept pace quite appropriately with the level of rising prices and in many cases have exceeded those levels. What is also clear, however, is that those with fixed incomes based on other kinds of pensions—Commonwealth super­annu­ation pensions and various Defence retirement pensions—have not had the benefit of that adjustment. It is time that we as a nation took proper steps to respond to the expectation of those Australians that their living standards would be protected by virtue of their having been servants of the Com­monwealth.

This bill deals with the question of the indexation of the pensions of Australians who have served in certain forms of defence. It is appropriate that that indexation be considered—not as the entire and final answer to this issue because, as I indicated, there are other manifestations of this problem which are not addressed this bill but must be tackled in the longer term—in order to ensure that Australians do justice by those people who have served loyally and whose standard of living is not keeping pace with rising prices. I particularly look forward to hearing the contribution of the Australian Greens to this debate. I can recall this issue being one of extreme importance in the ACT context during the last federal election. I can recall that the Australian Greens made a sweeping promise that their support would go to the improvement of indexation arrange­ments for all retirees—all Australian government or defence retirees—at the higher standard of male average weekly earnings or the consumer price index. They solemnly maintained that this was a fair, appropriate and just thing to do. The bill before the Senate today, although it does not entirely achieve that objective, does take that objective an important step forward. I hope and expect that the Greens will be good to their word—particularly as it relates to the Australian Capital Territory electorate, where this was an issue of some considerable importance to a very significant proportion of the population—and that they will ensure that this legislation is passed.

It is important to ensure that the Australian government and the Australian parliament review these arrangements on a continuous basis. That has occurred, in a sense, through a number of inquires in this parliament. The Senate has conducted a number of inquiries into the question of indexation levels of Australian retirement pensions provided by the government. It has looked at this issue on numerous occasions, and on every occasion a Senate committee has addressed this issue it has come to the same view: that the consumer price index is not of itself a satisfactory measure of indexation for people in that position. Sadly, other reviews conducted outside the parliament, by people who have been commissioned to consider this question, have not come to the same conclusion. With all due respect to the minds that were applied to this issue outside the parliament, I think they have got it wrong and that the question of appropriate indexation is better addressed through Senate committees—which were often chaired by Senator Watson in previous parliaments—and other parliamentary committees.

I think it is important that we come to this issue afresh and begin to address the issue. It has remained unfinished business for such a long period of time before the parliament and particularly the Senate, which has focused on the issue very strongly. The amendments that Senator Ronaldson will move today will ensure that the legislation better focuses on that question. They deserve the serious and sympathetic attention of the Senate. We must not let this issue remain unaddressed for much longer. It is clearly a question that many people in our community depend on having answered in order to address what for them is a static or even declining standard of living. We simply cannot tolerate that to be the case. This legislation takes an important step in the direction of addressing that unfinished business, as I have called it, which does need to be tackled as soon as possible.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

by leave—After some discussions with the minister, I also move amendments (2) and (3) on sheet 7037 revised together:

(2)   Clause 2, page 2 (table item 2), omit "Schedule 1", substitute "Schedules 1 and 2".

(3)   Clause 3, page 2 (line 11), after "members", insert "and Defence Forces Retirement Benefits Scheme members".

Amendments (1), (2) and (3) are the enabling provisions for proposed schedule 2, or amendment (5), which is to bring the DFRB scheme into this bill. There was a drafting error and these amendments seek to address that so that the DFRB and the DFRDB will be dealt with by this bill.

Quite rightly, there is a very strong view in the community that this is a fair, just and equitable indexation outcome. There is a very strong view amongst those on this scheme that they are currently being un­reasonably dealt with. They have made it quite clear, and I and the coalition fully support them. How can it be that they are treated differently from age pensioners? How can that be fair or just? Clearly, it is not. I say to the chamber today that there is a huge obligation on us to ensure that people who have served this country are appropriately dealt with. How can it possibly be that this chamber can tolerate differential treatment of people in this situation? Are we now to throw out once and for all the notion of the uniqueness of military service? Effectively, if this bill is not supported today, we are removing something that has underpinned this parliament and this country for decades. On a bipartisan basis we have supported the notion of the uniqueness of military service —and, if this bill is not supported, it will be unique for all the wrong reasons. It will be unique because fair and equitable indexation will not be provided.

When the CPI was first used as the measure of indexation decades ago, it was a reasonable measure, but it is no secret, and nor should it be, that age pension indexation was changed because the CPI no longer reflected what was reasonable indexation. It no longer reflected the maintenance of purchasing power—and that is the very reason that age pensions were altered.

I look back at this debate over the last 12 months and at those who have supported it. Senator Lundy will come in here today and vote against this bill given her previous comments and those of many of her colleagues. I have with me a letter that was written by Senator Lundy and those who supported her. They were the former member for Fraser, Bob McMullan; the member for Canberra, Annette Ellis; the member for Wakefield, Nick Champion; the member for Eden-Monaro, Dr Mike Kelly; and Senator Lundy. They said that, by failing to act, the government had gone back on an election commitment made in 2007.

The letter was written to Lindsay Tanner, the former finance minister, after the release of the now severely tarnished Matthews report, which I do not think anyone supports in any measure at all. I know for sure that the RSL does not support it. I note that Rear Admiral Ken Doolan AO RAN (Rtd) and Les Bienkiewicz, who is from the Defence Force Welfare Association, are here. I do not think any of their members thought for one minute that the Matthews inquiry was a reasonable inquiry; no-one supports it, and nor should they, because it has been completely tarnished. In the letter Senator Lundy and her colleagues said:

Understandably, there is a huge disappointment in both the findings and the government response announced on the same day. It had been widely expected that the recommendations would have supported a change to the method of indexation of these pensions to that of which is high, MTAWE or CPI, consistent with the pension, following the earlier Senate and other inquiries. Significantly, many people genuinely believe that prior to the 2007 election the ALP had committed to determining a fairer method of indexation, and a review would provide the direction. So the immediate acceptance of the recommendation of no change in government response is being seen as a reversal of the pre-election position espoused by the ALP …

So how could Senator Lundy possibly come in here today and oppose this? This is longstanding ALP policy, and quite rightly, because the differential is unfair and unreasonable. How can the government come in here and use as their only method of defence the fact that it is fiscally irres­ponsible? No doubt the finance minister will also do that. It is complete and utter bunkum. How dare this government oppose this equity measure, this fairness measure, on the back of some quaint notion about fiscal irres­ponsibility!

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

'Quaint'!

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I will take that interjection from the finance minister. Her government has overseen a level of expenditure and wastage unseen in this country's history. Why should the gentlemen sitting in the gallery today, and the 30,000 people who will be supported by this bill, pay for your fiscal recklessness? Why should they be penalised for the fact that you have absolutely no control over your spending, that your spending has been completely out of control, and that you have taken this country from $40 billion in the black to $110 billion in the red? Why should they pay for that? How can you come in here and plead some case when you know that the government does not even support what you say?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

You can't even get your figures right. It is complete incompetence.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Senator Wong, I would like you to go back to South Australia and explain to the DFRDB men and women why you opposed fair indexation. I hope members from South Aust­ralia were listening to your comment. I am sure that you will be reminded on many occasions of your comment in relation to this matter.

As we have discussed before, Senator Wong's, in my view, cute defence—although 'cute' is too tawdry a word—in relation to costings, with carefully selected quotations from the AGS, is absolutely appalling. You and I know, Minister, that there are savings that were identified by the coalition which—surprise, surprise!— the government took up in the budget. So, having accused us of not having any offsets, you actually stole the offsets that we had identified. 'Oh, no, they're not there!' the minister said. 'Oh, no, they're not there!' other ministers said. Well, they were there, and they were identified. They were identified by the government itself in the budget and you lifted exactly what we were talking about.

I am not suggesting that that was inappropriate, clearly, because we had suggested it ourselves. What I am saying is that you actually have taken the money that we used as offsets and put it somewhere else—not to support these people, these superannuants. You have taken it elsewhere. Why should they cop that? Why should they cop you taking our savings and putting them elsewhere? The fact is there is absolutely no reason why they should cop it at all, and everyone in this chamber knows that.

I am very interested in hearing what the Leader of the Greens will say today, because he and I know that his office has sent out emails to people who will be positively impacted by this change. I will read the email from Senator Brown's office: 'The Australian Greens support the full indexation of pensions for all Commonwealth employees, including defence force personnel.' That was sent by John Dodd, from the office of Senator Brown. So, Senator Brown, I have a challenge for you today. Are you prepared to stick to what you said or will you sell these superannuants down the drain as well? Are you prepared to follow on the back of that email from your office to a superannuant? I have the email. If you do not believe me I will table it, but I think you know full well that that is exactly what you said.

Senator Brown, you and I know that the Australian Greens—along with the govern­ment and the Independents—are obligated to support this bill. You will stand condemned if you go back on your own words in relation to this matter. It is there for all to see. You have made it quite clear. You have an opportunity this morning to put into practice what you have written. I trust that you will do so because, as I said, you will stand utterly condemned if you do not take the opportunity to confirm what you said you believed in this email. I do not know what Senator Xenophon is doing with this bill, but I make this plea to him: take this opportunity to protect the notion of the uniqueness of military service today. He has the oppor­tunity to send out a very clear message that he and this chamber are not prepared to tolerate an intolerable situation, that he is prepared to stand up and say: 'How can someone in their position be treated differently from someone on an aged pension? How can that possibly be?' Senator Xenophon should look again at this matter. As a man who does believe in fairness and equity—I think he has espoused that before—he should ask himself, 'How can I possibly not support this bill?'

As I said earlier, these amendments enable amendment (5), which deals with schedule 2, to include the DFRB. I urge the chamber to ensure that these men and women are treated fairly.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I have gone back to page 1732 of the Hansard of Thursday, 24 March. In the earlier debate on this bill I moved a funding proposal for the new indexation method for Defence Force superannuation pensions, which is at the heart of this bill—that is, to adopt the Treasury recommended mining super profits tax. This would take a tiny amount of the super profits tax made from the massive resources boom currently being experienced by this country—which has disadvantage almost everybody outside that resources boom as we face increased interest rates coming down the line in two months, a high Australian dollar, a squeeze on business and a squeeze on pensioners as food prices go up, amongst other things—and fund this very bill that is now before the Senate.

But there was a division on the bill, and listed for the noes in the Hansard on that funding mechanism for this bill are Senator Humphries and Senator Ronaldson. So the opposition voted down a legitimate funding option for this legislation—and the opposi­tion have not come up with one—because it was against the Abbott mantra of not having any tax placed on anything, including the foreign owned corporations that are ripping billions out of the country at the moment and sending it to rich shareholders overseas. Senator Humphries and Senator Ronaldson, and indeed the whole of the opposition and the government, voted down that clear and Treasury recommended option for funding the legislation.

In proposing this legislation the best that the opposition can do is to bring forward a funding mechanism that would divert moneys not spent by the defence forces into funding this bill. Unfortunately for them, those moneys had been co-opted into the government's own budget for spending on other priorities. So we now have a stoush between the government and the opposition which we did not need to have. If they had supported the Greens option then we would have had this bill moving towards the funding that is required and the recipients getting a fair go.

We have here a lot of sound and fury from the opposition, but a failure to take responsibility, as if they were in government, to take up a proper funding option that is Treasury recommended. Instead they have said no to that because they take the political point of view that tackling the mining companies to pay a fair go is more important than funding the entitlements that are outlined in this bill.

I said in my speech during the second reading debate—and Senator Humphries is correct on this—that we wanted to extend these benefits to the whole of the public sector. The opposition will not do that. Instead, they are supporting a two per cent cut for the people currently in jobs in the public sector—a squeeze on public servants—when it is entirely unnecessary in this age of a resources boom in this country. I submit to the Senate that where private members' legislation has big costs involved we need to be mature, grown up and financially responsible—and the government notes that the liabilities for this legislation will extend to $6 billion in the future. The opposition have to be able to point to how they are going to finance that. In that, they have been a complete failure. The govern­ment opposes the legislation so it does not believe it has to work towards it. The Greens came forward with a Treasury recommended option for funding this legislation, and the opposition voted down their own bill when they voted down that funding option.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

That is a pathetic argument.

Bob Brown (Tasmania, Australian Greens) Share this | Link to this | Hansard source

I hear Senator Humphries saying it is pathetic. I believe it was pathetic. He ought to have voted for that funding option when it was here, but he did not. He voted it down. That shows you how seriously the opposition look at the all-important and critical matter of having the funds available for an important measure like this. They failed, they did not take it seriously, and they have to bear the responsibility for that failure.

Kate Lundy (ACT, Australian Labor Party, Parliamentary Secretary to the Prime Minister) Share this | Link to this | Hansard source

It is no secret that I have continued to seek a way to improve the method of indexation for Defence and other Commonwealth superannuation pensions. Unfortunately, this bill is not the answer. We do acknowledge the unique nature of military service and our debt to our service men and women, and I welcome the acceptance of the motion of support to this effect in the House of Representatives on 2 June and support the expression for fair indexation. I also accept, as I have often argued, that the CPI is no longer an accurate measure of the changes of the cost of living. This has been acknowledged by the Australian Bureau of Statistics and the government, and I have therefore agreed that a better measure of indexation for military and other Commonwealth superannuation pensions should be developed. This was the reason for the Labor government's develop­ment of the PBLCI, the pensioner and beneficiary living cost index, which has already improved the standard of living for pensioners, including those military and civilian superannuants whose Common­wealth pensions fall below the age pension income and asset levels.

That the CPI alone is no longer the best measure of changes in the cost of living was also recognised in the Matthews review of pension indexation arrangements in Australian government civilian and military superannuation schemes. One of its recommendations states:

If a robust index which reflects the price inflation experience of superannuants better than the CPI becomes available in the future, the Australian Government should consider its use for indexing Australian Government civilian and military superannuation pensions.

The government's commitment to fiscal responsibility and to returning the budget to surplus by 2012-13 is and must be of paramount concern. This government is proud of its handling of the global financial crisis and the way we are coping with the costs of this year's natural disasters in Australia—and we are proud of our responses to the disasters and distress of neighbouring countries—but we know that, consequently at this time, all new expen­diture must be offset by savings over the forward estimates. The proposals for this bill do not satisfy this criterion.

In initially providing estimates of the cost of this bill to 2014-15, the Minister for Finance and Deregulation, my colleague Senator Wong, noted that no offsetting savings were proposed. The bill's explana­tory memorandum proposed only that the costs could be met through the accrued funds of the Future Fund, but this assertion has been challenged by the Department of Finance and Deregulation and by the Government Actuary.

This bill is divisive. A major problem is that it unfairly applies to only a section of the Defence superannuants and debars over 7,200 current Military Superannuation Benefits Scheme superannuants, as well as the future beneficiaries of the MSBS—and, of course, all other Commonwealth super­annuants, including those employed in the Department of Defence. This point was made in many of the submissions to the Senate inquiry, even those in support of the bill. The Australian Veterans and Defence Services Council, for example, noted that the bill was 'a start' but would not overcome the financial problems of all veterans. I have had emails and messages from Commonwealth defence and civilian pensioners who have long campaigned for measures such as those outlined in the bill but find that they have been excluded from its provisions. In the context of the bill's title, 'Fair Indexation', is it fair to discriminate in this way?

In March the Senate referred the bill to the Senate Finance and Public Administration Legislation Committee, which considered departmental and public submissions and reported on 10 May. The committee recom­mended that the bill not be passed. Coalition senators presented a dissenting report. The Department of Defence submission to the Senate committee opposed the bill, reasoning that the military superannuation schemes had been designed to reflect the unique nature of military service and did already provide benefits well in excess of the community standard. Any requirement for Defence to fund the changes proposed by the bill would significantly impact on Defence funding for ongoing programs. The Senate Finance and Public Administration Legislation Com­mittee agreed that the unique nature of military service is already reflected in pro­visions and entitlements. It also highlighted that significant factors in its assessment were the impact on the government's fiscal position and the ability of the Department of Defence to deliver ongoing programs. The committee pointed to the gap between the target level of assets required in the Future Fund and the actual level of assets in the fund and stated that 'the game would be exacerbated if the bill is passed'.

I would like to acknowledge the com­mitment and hard work of those who have made submissions to this inquiry despite the difficult time constraints. Some of the individuals who have made extremely useful contributions were constituents of mine. I would like to mention in particular the ongoing and valuable work of Peter Thornton and Bert Hoebee. I remain committed to trying to improve the indexation methods applying to military and civilian Commonwealth pensions and will continue to do so within the fiscal constraints and all of those factors that do apply. I will continue to work with representative organisations such as DFWA, SCOA and ACPSRO, to whom I am indebted for their ongoing advice. I am convinced, as I think we all are, that the CPI no longer provides the kind of indexation that responds to the cost-of-living needs of this group of superannuants and pensioners, and I have sought advice on the development of the new analytical living cost index to reflect more accurately the cost of living of military and civilian superannuants, including those to whom this bill would apply.

I challenge the empty rhetoric and the feigned indignation of Senator Humphries and others opposite with respect to my constituency here in the ACT. You do not need to look too far into the policies of the coalition and their attacks on Canberra and the Australian Public Service—to the tune of 12,000 jobs; that still stands as a coalition policy. It exposes the duplicitous nature of their presentation here to feign concern for the welfare of superannuants while attacking the very jobs for the people who will find themselves on a Commonwealth super­annuation pension at some point in the future. So let us not stand here and feign indignation. This bill is divisive in its character and nature. I understand what you are trying to do—tap into the discontent that prevails right across Commonwealth and military superannuants—but this bill does not achieve it. It is, I think, an attempt to tap into sentiment without providing any solution whatsoever.

Steve Fielding (Victoria, Family First Party) Share this | Link to this | Hansard source

I rise to speak on the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010. I will speak to this amendment and the whole bill. It is a great honour to stand here in support of this bill. Fair indexation for military super­annuation is something that Family First has been campaigning on for some time now. I rose here in the parliament to speak on this issue in November 2009, and I later raised it with the former minister, Alan Griffin, as well. Last year I began a petition on my website calling on the government to fix the unfair indexation of military superannuation. In just a matter of days it attracted thousands of signatures, highlighting how many people feel strongly about this matter. It is an issue that I have followed closely because it is something I care about deeply.

Last year I travelled to Afghanistan to see firsthand our diggers in action and witnessed the tough conditions they are forced to endure on a daily basis. Service in the Australian Defence Force is no ordinary job. It is a unique service which deserves special recognition. It is unique because, when you sign up to the ADF, you give the state or the nation the authority to send you overseas into a role where your life is potentially at risk 24/7. We send our soldiers into dangerous places on orders that will put them in harm's way. We ask our soldiers to follow through with their orders, even when they know that this may mean they will never see their family or loved ones again. It is an incredible situation to put yourself in, and it takes incredible people to do this. Given these circumstances and the uniqueness of this, we as a society have the obligation to give them our full support and respect.

Unfortunately, when it comes to retirement and death benefits, governments, both Liberal and Labor, have not honoured this obligation in the way I think we should. The current arrangements for indexing of these retirement and death benefits are inadequate and put our military pensioners further behind community income standards. This bill seeks to rectify this inequality through a fairer indexation regime. At the moment, the Defence Force and super­annuation pensions are only indexed to CPI, which is not always the best and most appropriate index. Even the Australian Bureau of Statistics has said that 'the CPI is not a purchasing power or cost-of-living measure'.'

The CPI is just a measure of changes in the price of a basket of goods and services and should not be used as the only measure to index the military pensions of our former servicemen and servicewomen. This is an outdated way to index pension payments because, at the moment, the true value of those military pensions is falling compared to the rising incomes of the general popu­lation. Even the government has admitted that the CPI is not an appropriate measure for indexing the pension, and has reformed other government pensions which were previously indexed to CPI. These include the age pension, the wife pension, the disability support pension, the widows pension, the parenting payment, the carer payment, the service pension, the partners service pension, the income support pension and the war widows pension. With all these, the govern­ment has already recognised that CPI is not the best indexation measure.

In the 2008 budget, the government recognised that many seniors were concerned that their cost of living may rise faster than the consumer price index. To address this concern, the government announced:

… the Government will guarantee that the Age Pension will increase in line with the higher of the consumer price index, increases in male total average weekly earnings or the living cost index for age pensioner households. These arrangements will ensure that the Age Pension keeps pace with increases in prices and improvements in community living standards.

I believe that our veterans should have their superannuation treated in a similar way. Their military pension payments must be linked to the average wage so that they do not slip below a certain percentage of any increase in the average wage. This method of indexation makes a lot more sense, and it is ridiculous that the government has not been prepared to budge on this issue. The current indexation arrangements have meant that military superannuation pensions are 35 per cent lower than they would have been if they had been linked to wage based indexation such as male total average weekly earnings 20 years ago. This gap of 35 per cent works out to be an enormous amount of money and would make a real difference to veterans. Not changing it not only seriously erodes the standard of living of people relying on these payments but also sends a terrible message: that this is the way that government treats those people who have given their all for Australia.

This bill is about giving a fair go to those Australians who have put their lives on the line. Here is a key question: why should politicians have their superannuation payments indexed more generously than our veterans? Why should Federal Court judges have their pensions payments indexed to the increases in judicial salaries but military personnel have their payments linked only to the CPI? Why should veterans be worse off compared to others? How does this possibly make any sense?

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I rise to make some remarks on the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Bill 2010. I am grateful for the discussions I have had with the federal member for Fadden, the shadow minister for defence personnel, as well as Senators Johnston and Ronaldson in relation to this bill. Like most Australians, politicians always want to be supporting the troops. This is an admirable desire and, given the nature of the jobs performed by the defence forces, it is completely justified. Let me be clear: there is no question that the men and women who serve or have served in our defence forces are inspirational individuals whose dedication to protecting our country should be recognised. But the brilliance of our Defence Force is not the only factor in play when it comes to this bill.

This bill has been put forward at a time when Australia is still in budget deficit and we need to be fiscally cautious. This bill also needs to be seen in the context of the extraordinary budget Australia spends on defence each year—$26.9 billion in 2010-11. That is an NBN every two years without the need for private equity. And, while we should all be concerned about the potential waste with the creation of the NBN, I wonder if successive Australian governments have been as concerned as they should have been about waste in our defence forces. The opposition says that it has identified money in the budget which could be directed towards funding this measure. The govern­ment has countered that it will slash 1,000 civilian jobs from its procurement budget, although the opposition argues that those are not current jobs but simply jobs that are expected to be created in the future—in other words, the opposition claims they are phantom cuts. The Alliance of Defence Service Organisations supports the oppo­sition's bill and has made a number of criticisms about Treasury estimates on the costs of the coalition's bill. Treasury have responded to those criticisms, standing by their figures. A number of things have been put: that the current rate of Commonwealth contribution is over three times the com­munity standard; that the notional contribution rate for the DFRDB is 33.3 per cent, which is over three times the com­munity standard of nine per cent as required by the superannuation guarantee; and that the proposed changes would increase the notional contribution rate to 40.6 per cent, which is over four times the community standard. Those are some of the arguments that have been put.

You need to look at the general principle of indexation. I think there are compelling arguments in relation to that. It is important to acknowledge that, currently, pensions payable under the DFRDB and DFRB schemes are defined benefits and are essentially risk-free, unlike the retirement savings of most Australians. Many Aust­ralians suffered because of the GFC and were forced to watch and worry as their superannuation shrank. It should be fairly noted that the recipients of these defined benefits fortunately do not have similar worries. That is entirely appropriate.

There are troops who have been injured on active duty and are not receiving the proper care and compensation they deserve. I acknowledge that there is a current review of military compensation for those injured in battle and the widows who are tragically left behind. I would argue that if we were to increase the benefits to anyone, in terms of priorities, surely we should be increasing the benefits to those brave men and women first. That must be our priority. That is not to say that support staff in the Defence Force do not play a critical role, but I reiterate: our first priority should be to those who have faced real danger and have suffered injuries, both physical and psychological. Shouldn't we be pushing the government to target any additional benefits to those individuals first?

I am grateful for the very passionate and articulate representations from Rear Admiral Ken Doolan, National President of the RSL; Colonel David Jamison, National President of the Defence Force Welfare Association; and Les Bienkiewicz, Executive Director of the Defence Force Service Welfare Association. They have all strongly argued the case that the time for change is now.

I am also concerned about how the government approaches what I believe is an unacceptably high level of waste and fraud in the Defence Force—in particular, the issue of waste. It is important that, if we are to have these reforms, they must be sustainable. It is important that there is long-term funding for them, because the fiscal implications in the longer term will be very significant.

I recently spoke to the Minister for Defence, Stephen Smith, about the issue and argued that there were significant savings to be made within Defence which I believe could be used to better compensate both front-line troops and other Defence employees—in other words, the opportunity exists for Defence to save money that could be spent on its people. We do not do nearly enough in this country to stop waste within the Defence budget. In the UK, by comparison, the tasks of investigating waste and fraud are properly resourced and, not surprisingly, waste and fraud rates are demonstrably lower. There is a much more effective mechanism for dealing with waste and fraud.

I have real concerns about Australia's Defence Materiel Organisation, in terms of its size and efficiency. Why does Australia's DMO have a staff of around 7½ thousand people when the equivalent organisation in the UK has a staff of around 2½ thousand people and the UK has a defence budget four times that of our Defence Force? More broadly, how can the Australian Defence Force justify having one public servant, one bureaucrat, for every two soldiers? We need to get serious about this issue in Australia so that money currently wasted or fraudulently appropriated can be better directed to defence personnel. That is why I will be moving to amend the terms of reference to the Senate Foreign Affairs, Defence and Trade References Committee inquiry into procurement procedures for defence capital equipment to include the following: the committee should assess the effectiveness of the Defence Materiel Organisation, including the size and level of its management structure, as compared to a similar organi­sation in the United Kingdom and large Australian industries, and have its costs judged against the timeliness and quality of its output, the service it provides to the Australian Defence Force, the extent to which it value-adds to national defence, and the long-term viability of Australian Defence Force industries.

To complement that inquiry, I am also proposing that the Senate Economics Legislation Committee inquire into defence accounting in the context of ascertaining whether strategic reform program cuts are real or notional, to further examine the whole of the department for real savings in the budget and to look at funding those sorts of pension increases in the longer term. The government says that there is no money and disputes that there is a live dispute about the figures, but I am saying that there are ways of finding that money and that targeting waste in the defence budget is the logical place to start looking. I believe these savings need to be found quickly—say, in the next 12 months. The process of having rigorous, forensic and thorough inquiries by the Senate into this ought to be the way to go. I think that is the long-term, sustainable process to deal with this issue.

I will not be supporting the coalition's bill. I do support the longer term aim and believe that the steps I have outlined are a more prudent way of getting us to where we need to go as a nation. It is one thing to say that you want to support the troops today, but surely the best approach is to rebuild the system, eliminate waste and use those savings so that troops and support staff can rely on improved benefits on a long-term basis. That is my position. I am looking forward to working with the coalition and my colleagues in the Australian Greens to find those savings so that we can have a long-term, sustainable solution to this problem.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I want to respond to the remarks of particularly Senators Bob Brown and Lundy in this debate. Both of those individuals and their parties to some extent have paid lip service to the principles behind this bill. Both of those individuals have gone to very large public meetings and told those public meetings, with their hand on their heart, how sincerely they believe that justice needs to be done for people in defence retirement, with respect to their pensions. Both of those individuals today betray those constituencies and those people by their actions. I will turn first to Senator Lundy. Senator Lundy has shared the platform many times with me in the ACT over several elections where members of the retirement community—self-funded retirees and government superannuants—have come in large numbers to hear what we have to say about this issue. As Senator Lundy herself said in today's remarks, she acknowledges that the CPI is no longer an appropriate measure of indexing pensions. She acknowledges that there have been flaws in previous government inquiries into this matter. I think she was strongly implying, without saying as much, that the Matthews report, the most recent of those reports, had serious flaws in it. She acknowledges that something needs to be done but she found reason today not to do what had to be done and that is to take the first step towards addressing this issue with a vote in favour of this piece of legislation.

Why did she not support it? It was on two grounds. One is that she said that the coalition had not justified its savings to offset the cost of this measure. She misrepresented those savings by saying that we were proposing to raid the Future Fund in order to achieve this. That was either deliberately or accidentally a serious mis­representation of what the coalition has proposed. We did propose, it is true, to put money into the Future Fund which would then be drawn out in the future to pay for the additional superannuation costs which this measure would incur. But to say that we were going to raid the Future Fund without making clear that we were also putting money into the Future Fund to meet those obligations is frankly false. We have made very clear that we propose to achieve those funds being put aside for that purpose by reducing the growth in the APS full-time equivalents in the Department of Defence by one-third. This is a decision that would still see projected staff numbers in the Department of Defence grow by something like 8.3 per cent by financial year 2013-14 compared with a larger projected growth in the previous budget, not in this year's budget.

We are not proposing to cut Com­monwealth employees in the Department of Defence in real terms; we are talking about reducing projected government growth. Even a justification based on wanting to protect Public Service numbers can hardly point to a decision made by the opposition that we would not be allowing growth to occur at such a large scale in the future as somehow justification for not supporting this bill. Public servants that are not yet there are being cut, not ones that are actually there at the moment. It is an extraordinarily stupid—with respect—argument. There is no basis for it whatsoever.

Then there is the argument that we are dividing the community by this—we are picking off some Commonwealth super­annuants and not others. On what basis does the government think that we cannot deal with this issue on a progressive basis? That has not been explained. Senator Lundy fled the chamber as soon as she had made those remarks and will have to come back to the people of this community—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Mr Temporary Chairman, I rise on a point of order. It is inappropriate to make that kind of con­struction that a senator leaving the chamber has 'fled the chamber'. He should withdraw it.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

That is not a point of order. I am making reference to the fact that Senator Lundy is prepared to make promises to the people of this community in Canberra with her hand on heart and then, when it comes to actually exercising her vote to support those measures, she is not around. She is not here to do what she should be doing for the people of Canberra.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

You were going to sack 12,000 public servants. You're a hypocrite.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I am not a hypocrite on this issue, Senator Wong, I am sticking by my word. I told the people of Canberra I wanted to support this measure and I am doing it here today. Senator Lundy is not.

Steve Hutchins (NSW, Australian Labor Party) Share this | Link to this | Hansard source

Senator Humphries! Come to order! If you want to make any comments you have to make them through the chair.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

A point of order, Mr Temporary Chairman. How can you possibly pick Senator Humphries out from this exchange when the minister was the one that started it? If you are going to ask for some order in the chamber, can you at least please be fair about whom you call to order.

The TEMPORARY CHAIRMAN: I am afraid, Senator Ronaldson, that Senator Humphries was speaking.

Senator Ronaldson interjecting—

The TEMPORARY CHAIRMAN: If you want to interrupt him again, you can go right ahead but it is taking out of his time. Do you want to say any more?

Senator Ronaldson interjecting—

The TEMPORARY CHAIRMAN: I'm playing fair. Senator Humphries.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

Mr Temporary Chairman, I have to say that I think it is disgraceful. I give Senator Lundy credit for the fact that she did come and take part in this debate—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

A little hollow man, seriously.

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I am sorry it has come to name-calling, Senator Wong, but I have to say I have stood by a consistent position on this matter.

Senator Wong interjecting—

I have stood by a consistent position. I certainly have.

Senator Wong interjecting—

The TEMPORARY CHAIRMAN: Minister, allow the senator to speak uninterrupted, please.

I have maintained a very consistent position about this matter. I have always argued that indexation should be improved and today by my vote I am backing that position. I am supporting what I have always said to the people of the ACT is the case. With great respect, Senator Lundy and her former colleagues in the ACT Labor Party, Ms Ellis and Mr McMullan, and Dr Mike Kelly, the member for Eden-Monaro, and a host of other Labor members with significant numbers of Commonwealth retirees in their electorates have made the same sorts of sounds. The difference between them and me is that today I am going to honour the commitment that I have made to the people of my electorate by voting for this bill and they will not. That is the difference and that is consistency. I want to turn to what Senator Bob Brown has had to say in this debate. At the last federal election the Greens in the ACT fought very hard on this issue. They argued very strongly that indexation had to be improved for Defence superannuants and for civilian superannuants. Senator Brown has justified not supporting the bill today on the basis of having on a previous occasion put to the Senate a motion to link support for this legislation to his proposal to increase the mining tax, saying that, because the coalition failed to support his measure to increase the size of the mining tax to pay for this particular expenditure to increase super­annuant pensions, therefore he cannot support the coalition's bill. A few logical observations need to flow from this. First of all, if we had put forward a bill which had no savings in it to address this issue—if we had no savings proposed in our legislation to deal with the extra expenditure which we are asking the Commonwealth to incur—there would be some justification for Senator Brown saying to the Senate, 'We can't support you because you don't tell us how you are going to pay for this piece of legislation'. But, of course, we did not do that. We did come forward with savings to address the cost of this measure. And those savings were valid savings; they were effective savings. How do we know that they were effective? Because the Labor government itself has taken up those savings in the budget of this year. It has cut projected growth in the size of the Defence civilian workforce: that is exactly what it has done. As they say, imitation is the sincerest form of flattery. You are flattering us by saying we were right with those measures; we could achieve those savings. And, with you having achieved those savings with the measures we proposed, I think it is now incumbent on you, the Labor Party, to support the measures in this bill.

But Senator Brown's position is another one altogether. He tied this into his mining tax—a measure that he knows the coalition would not support, does not support and will not support—and had us say, 'We can't support you because we don't believe that we need the mining tax to be increased or that we need the mining tax at all, and we have other alternative measures for making these savings.' We voted against Senator Brown's motion, as he knew would be the case. Having done all of that, Senator Brown now says, 'Well, we don't need to support your legislation, because you did not support our particular proposal for how to pay for it'.

My question to Senator Brown is: will that be a test he applies to every piece of legislation for additional expenditure that comes forward to this Senate in the next 2½ years? And, if not, why not? If you felt that a particular measure had to be paid for by linkage to an increase in the mining tax, will you apply that test to every piece of legislation that the opposition brings forward or, for that matter, that the government brings forward? 'Good idea; we like what you're doing but we won't support you unless you also support our position on a mining tax.' There is no obvious linkage between Commonwealth superannuation, Defence Force retirement benefits and mining, so on what other basis would Senator Brown be making this proposition?

I will tell you what Senator Brown was doing: he wanted to break his promise and he wanted to betray the people to whom this promise had been made. He did not have the guts to say, 'We're not prepared to do that anymore. We're not in election mode and we don't need the votes at this stage.' So he concocted a little scheme where he linked this to something which he knows the coalition does not support, had us defeat his motion and then said, 'Oh well, therefore I can't support your bill.' It makes absolutely no sense; there is no logic in that whatsoever.

This is a measure which the coalition has funded in the package it has put to the Senate. We know it has funded it because you have taken the saving yourselves. It is incumbent on you, therefore, not to use the argument that we have not paid for it. We have paid for it. If you do not believe that the pensions are worth paying and if you do not believe that the people who have served Australia in the Defence Force are worth this increase then say that. Say it in as many words: do not pretend that there is some other fiscally responsible reason why you cannot support the legislation.

I am sorry that Senator Wong needs to resort to name-calling in this exercise, but it is something that I feel very strongly about, and have ever since I entered this Senate. I had been here only a little while when I went to two people: I went to Senator Watson, the former long-serving senator from Tasmania, and asked him, 'What's the argument about this indexation of Commonwealth pensions? What's the argument against indexing it by some higher measure than the CPI?' He said, 'There is no argument.' I also went to my predecessor, Senator Margaret Reid, and asked her a similar question, and she gave a very similar answer. I have stood by that view ever since then, and today I am going to vote consistently with the views that I believe in and which I have expressed to my electorate. It is a great pity that others who have reaped votes from retired public servants in the ACT by saying, 'We sympathise with your point of view, and we will do all we can to support it,' are not taking the same position here today.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I rise not only in relation to this amendment but in relation to the great many contributions which have been made. I want to start by being really clear about what this bill is about and what it is not about.

The first thing I would like to emphasise is that this bill is not about whether people in this chamber, on any side, honour and respect the service that our military personnel engage in. Frankly, I find it a little offensive that that is how some—and particularly the previous speaker—have chosen to play this debate. There is nobody in this chamber who lacks in patriotism. There is nobody—

Gary Humphries (ACT, Liberal Party, Shadow Parliamentary Secretary for Defence Materiel) Share this | Link to this | Hansard source

I didn't accuse you of lacking patriotism.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

There is no-one in this chamber who lacks for patriotism. There is no-one in this chamber who does not honour deeply the work that our serving personnel undertake, and the nature of that service has been most tragically brought home in recent weeks. That is not what this bill is about.

What this bill is about is whether or not the government is able to change the indexation of superannuation payments to some military personnel. I have sat through many debates in the almost nine years I have been here and, I have to say, cynical, sometimes hypocritical, contributions do occasionally make their way into the Senate chamber—but today would probably have to be amongst the top five. I say this to those people who firmly and with great merit advocate for increases in indexation: the position of the opposition should be judged not just by their words—sometimes 'fine'; sometimes feigned indignation—in the chamber today. They should be judged by what they did in government, when they never funded this. Eleven years in govern­ment with revenues being upgraded every year, particularly for much of that last period of government, and they never sought to fund this. They did not properly fund this in their election campaign. Those are not my words. You can look at the way in which their costings were considered by the department of finance and the Treasury. They have not funded it properly in this bill, and I venture that they will not properly fund it in the election costings campaign for the forthcoming election.

On this, one is judged not by what political points you make in the chamber but how you find the money to do worthy things. One of the things that finance ministers experience—and I am sure Senator Minchin would agree with this—is that you are generally making decisions between meritor­ious requests for funding. There are some which are not, but by and large what come before the Expenditure Review Committee are things that are worthy of funding. Generally, you do not make decisions, because this would be easy, about funding or not funding things that are not worthy. You often have to make decisions between things which are worthy. I again say: judge the opposition not by the contributions they have made today; judge them by 11 years in government when they had the opportunity and never funded it, by an election campaign when they had the opportunity and did not properly fund it, by today when it is not funded, and by whether or not they fund this in the election campaign in a couple of years—whether they actually make the savings to fund this.

Senator Humphries interjecting—

I will be very interested, Senator Humphries, if you do it.

There are a few points I want to make. The first is in relation to numbers. There have been a few numbers thrown around. The hard edge—and this is probably why the Howard government, in 11 years, never funded this—is that this bill has a fiscal cost of $1.7 billion over four years and an under­lying cash cost of $175 million over four years, and it will increase the Common­wealth unfunded liabilities by $6.2 billion. If it were to be extended to all Commonwealth superannuation schemes, this would have massive costs: an immediate increase in the unfunded superannuation liability of $32.9 billion, a cash impact of $322 million over four years and a fiscal impact of $12 billion over four years. They have gone very quiet over there, Madam Acting Chair.

They say they have savings. Let us examine that carefully, because, when you are judged as a party of government on your policies, you are judged by where the rubber hits the road, which is whether you actually find the money to fund it. Let us look at where the coalition would currently be in terms of the budget were they in government. For all their fine words, the coalition, first, before they did anything, would have entered this parliamentary term with an $11 million black hole.

Senator Humphries interjecting—

Senator Humphries sighs. That is what the Department of Treasury and the Department of Finance and Deregulation found, Senator, if you do not like it—if you do not like what Peter Costello set up as the Charter of Budget Honesty.

The coalition have subsequently blocked savings measures the government has put forward worth $5 billion. Add to that the $11 billion black hole savings measures blocked, which worsen the budget position by over $5 billion. Additional savings measures not supported were $7.7 billion, and in the 2011-12 budget—and we have not seen their final position on this; I notice there is a lot of argument about it—they are also proposing to not support a range of government savings measures. This would again worsen the bottom line. In addition—this is inter­esting—they also double-counted savings. They used savings for their election policy, which they still say they are going to fund, which include a contribution to but not full funding of this policy. They then used some of those savings for the flood package. You cannot go to the same well twice. You cannot use one set of savings for a range of different expenditures; it just does not add up. You cannot say, 'We are saving this amount of money here and we are going to use that money twice, at least, to fund things such as rebuilding Queensland after the floods or funding additional superannuation indexation.'

So what is the total impact of the coalition's set of decisions from the election campaign until now? There are really two propositions that people need to know about. The coalition would be in deficit every year until 2013-14 and potentially beyond. They would not have a deficit in 2012-13. They would have a deficit in 2013-14. They would be some $12 billion worse off than the government's budget position over the four years out to 2014. And then they tell us, 'We found the savings to fund this.' It is laughable. You are prepared to play with the legitimate concerns of a constituency because you know you do not have to actually find the money. The cynicism of that, I think, is shameful. You know you cannot fund this, but you are cynically playing politics with people who would like an increase in their indexation, because you want to make a political point. You should be judged pretty harshly on that.

I want to make a point about the hypocrisy of the coalition. On the one hand they say, 'We want a strong budget position; we want a surplus,' but on the other they proceed to seek to wreck it. Senator Ronaldson used the old line that it is okay because they would not have wasted so much money. Let's be clear about what he is actually saying. What the coalition are actually saying is that they would not have put money into the economy during the global financial crisis. What Treasury tells us about the effect of that stimulus is that some 200,000 Australians would have been on the dole queues were that stimulus not put into the economy. So essentially Senator Ronaldson's position is, 'We would rather have had 200,000 families without a wage earner than have put the stimulus in.' That is not good economic policy and it is not an answer to the fact that you do not have the money to fund this today.

There are some in the coalition who understand this. It is interesting that in this chamber today we do not have any of the hardheads. We do not have Senator Minchin making a contribution to this debate. We do not even have Senator Cormann, who osten­sibly is one of their economic spokespeople in the Senate, explaining how they would fund this. We have Senator Humphries, who is making an ACT political point against Senator Lundy, and Senator Ronaldson, who is playing a bit of politics with a constituent. So we do not actually have the people who will make the decision about the budget.

Senator Minchin made this point. He was reported on by the Australian Financial Review:

Even as he leaves, Minchin, a former finance minister, has been trying to instill in his party some respect for good policy.

He's been banging this drum for some time, going back at least to a meeting of the Coalition economics committee earlier this year that considered a Liberal MP's private member's bill to award a higher rate of indexation to veterans' pensions.

Confronted by arguments that the move would be very "popular", he told his younger colleagues, in part, that such a proposal risked being a "thin edge of the wedge".

If veterans were given a higher rate of indexation on what was already a defined benefit pension, he argued, what was to stop others wanting the same thing?

The Coalition had to protect its credentials as fiscal conservatives, he said …

Senator Minchin's views became more public when he confronted Mr Abbott, as reported in the press in recent times, in the party room about the need to support good policy. I could not have put it any better than Senator Minchin myself. It is interesting that he, as a former finance minister, is not prepared to come in here and argue this, because he knows he did not do this for good reason and that you do not have the savings to do this.

I had a few more issues, which I may need to into in another part of the committee debate. The coalition claimed that they have moved a second reading amendment, which I think is already before the chamber, which simply calls on the government to reassess the growth in civilian bureaucracy, within the DoD, including in the Defence Materiel Organisation. They should be aware that the government took some $1.2 billion worth of savings in this budget. I think Senator Humphries referred to this. He said, 'They must be real because the government took them.' The government did—in addition to the efficiencies the government is also finding through the Strategic Reform Program.

Those savings, Senator Humphries, go to the budget bottom line and to help fund things such as the mental health package; to help fund things such as the extension of family tax benefits to teenagers, which you supported; and to help fund things such as the increase in the childcare rebate, which is obviously an ongoing expenditure of the Commonwealth. These are the hard decisions that you refused to engage in. Are you saying those savings are hypothecated only for this policy, in which case you should be up front with people and say, 'We are, therefore, not going to take those savings which are already taken for the mental health reform package'? You are very quiet. These are the decisions you refuse to be transparent on. You refuse to be transparent on them because you know that those savings are not real and you are not prepared to be up front with the Australian people about how you will reprioritise expenditure in order to increase the indexation of payments in the way this bill proposes.

I might have to do this in a subsequent contribution, but I also want to address the extraordinary comments in the dissenting report that the opposition has made and the response to it by the Australian Government Actuary —'setting the record straight'—which I think the Senate should be referred to. I will do that subsequently.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I want to finish up in relation to some comments that have been made. I am bitterly disappointed that Senator Xenophon has chosen this course of action. He cannot in any way call our savings 'phantom savings'. They most certainly are not. In relation to Senator Lundy, Senator Lundy had a great opportunity today—

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I didn't call your savings that. You got it wrong.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Okay. If you want to take a point of order, that is fine.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

This is not so much a point of order. What I actually said, so that there is no misunderstanding, was that the coalition has said that the government's proposed cuts in personnel were, in fact, phantom savings because they were cuts to proposed increases in staff. I was actually supporting what the coalition was saying in relation to that. I can show you the transcript.

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Senator Xenophon, if you wish to explain further, I will give you the call after Senator Ronaldson.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

I just wanted to clarify that. I was actually with Senator Ronaldson on that particular point.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I do not think that comment has been made, but let us not get bogged down on that. Senator Lundy said that we are tapping into sentiment. The only reason that we took this policy to the last election was because of the anger coming from the military superannuants in relation to their unfair treatment. That is the only reason that that was in our policy at the last election. We saw a situation that needed to be addressed having been approached by those who were being treated unfairly. That is why it is in our policy, so do not talk to me about coming at the 11th hour in relation to this matter. We have been absolutely and utterly consistent about this. Not only did we respond when we were approached in relation to this matter but we put in our election policy and we have the bill before the chamber today. Senator Lundy said that we have tapped into sentiment but have no solution. We have a solution all right, and I have a solution for Senator Lundy—vote for it. That is the solution for Senator Lundy.

Senator Bob Brown's comments were in typical style for him, but I will not reflect on that. The interesting part is that this 'fake amendment', as I would call it, was moved by Senator Brown on 24 March. Guess the date of the email from the senator's staff member to one of the superannuants confirming their commitment—28 March. Senator Brown, I think you should be very careful when you come in here and start bandying around that political twaddle when you actually fell at the first hurdle by your going back completely on commitments that you made.

I congratulate Senator Humphries and turn to a motion moved by my good friend and colleague the shadow minister who has responsibility for this, the member for Fadden, Mr Stuart Robert. I congratulate him on a motion that went through the House last week, moved by Mr Robert, which was supported on the voices. The motion was:

That this House:

…   …   …

(2) calls on all Members to support the:

…   …   …

(b) Coalition's policy to index the military pensions to members of the DRRDB and DFRB schemes who are aged 55 and over, to the higher movements in the CPI, Male Total Average Weekly Earnings or the Pensioner Beneficiary Living Cost Index.

Did the government oppose this in the other place? Did they oppose it downstairs? No, they did not. Why did they not? Because they were concerned that if they went for a vote they would lose it and they would be obligated when it came back here to support it. What a deceitful action on behalf of these 30,000 people who deserve this indexation. What a deceitful government you are, Minister Wong. You had the opportunity downstairs to stake your claim about your view, and you know why you did not do it downstairs? You were concerned that the motion would go through on the voices, you would see where the Independents were and, when it came back up here, you thought you had a commitment from one of the Independents that he was going to vote this legislation down. What a dishonourable approach to take in relation to this matter. The government has been caught absolutely red-handed in its duplicitous behaviour in relation to this bill.

It is not good enough to talk to me about making sure we limit speakers and then attack the coalition for not having Senator Minchin and Senator Cormann in here. Please do not play politics when you have already made a request in relation to how many speakers there are going to be. I want to make it absolutely clear that if you think the indignation of these 30,000 super­annuants is feigned then you stand utterly condemned for that comment. Their indignation in relation to this is real.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Madam Temporary Chairman, on a point of order: that is a misrepresentation. That is not what I said. The indignation that is feigned is yours, Senator Ronaldson, because you have never funded this and you are not doing so now.

The TEMPORARY CHAIRMAN: There is no point of order.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

This is false or feigned indignation when we took it to the last election, when we fully costed it at the last election and we have brought it in in a bill?

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

You did not!

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Is that feigned indignation? Well, deary me, look at that, that is feigned indignation! You go through and put in your policy—

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Madam Temporary Chairman, on a point of order: Senator Ronaldson is misleading the Senate. The coalition did not fully fund it at the last election. He should correct the record. He is misleading the Senate.

The TEMPORARY CHAIRMAN: I call Senator Ronaldson.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

Senator Wong, I am not surprised you are embarrassed about your behaviour today and I am not surprised you are embarrassed about what you are doing to these 30,000 men and women. You should be embarrassed when you take silly points of order which just show how extensive your embarrassment is. You have an obligation to do the right thing today. If you choose to talk about everything bar the bill, as you did—let the record show how much discussion there was about this bill in your 15-minute contribution, Minister—if that is the way you want to approach it, that is fine, but your problem is the Hansard is forever and 30,000 people now know how utterly duplicitous your government is. Thirty thousand people now know that you had the opportunity in the House on 2 June to test the water in relation to this. You did not do so.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

It's a coalition con job; that's what it is.

The TEMPORARY CHAIRMAN: Order, Senator Cameron!

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

You're a very strange man, Dougie, you really are. You are the one who comes in here and bangs on about fairness and equity day after day, week after week, year after year. You have the opportunity now to do something about an utterly unfair situation and of course you will just sit there.

Doug Cameron (NSW, Australian Labor Party) Share this | Link to this | Hansard source

A coalition con job.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

You are the zombie, Senator Cameron. You have had the opportunity, and you are the zombie who will sit there and vote with the government. You are the king of the zombies, my friend.

Senator Cameron interjecting—

You are the king of the zombies. I will say it again—

Senator Cameron interjecting—

Judith Troeth (Victoria, Liberal Party) Share this | Link to this | Hansard source

Order! Senator Ronaldson has the floor.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

I will say again before I sit down: there is an opportunity for this chamber to do the right thing. There is the opportunity for this chamber to treat 30,000 people, in an indexation sense, no differently from those on the age pension. What is this argument about? When you are confronted with that situation, what is this argument about? Is it petty jealousy on the part of the government because you have not done this—and, because we have done it, you are not going to support it? Is that one of the reasons? Because there is no reason for you not to do the right thing in relation to this matter. None of the arguments that you have put up support in any way your refusal to vote for this bill.

Minister Wong, you have selectively quoted from the Australian Government Actuary's report, but you know what the Australian Government Actuary said about this—exactly what was said. I am not going to go through that today but I invite hon­ourable senators and anyone listening to this, or reading the transcript later, to go and have a look at what the Australian Govern­ment Actuary said. It shows how fallacious this government's arguments are. Thank you.

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

Madam Chair, if I may briefly clarify this so there is no misunderstanding, I said in my contribution earlier that the government has counted that it will slash 1,000 civilian jobs from its procurement budget, although the opposition argues those 1,000 jobs are not current jobs, simply jobs that are expected to be created in the future—in other words, the opposition claims they are phantom cuts. So I think I was fairly representing what the opposition's public position was in relation to those job cuts. I hope that clarifies any misunder­standing on Senator Ronaldson's part. I was not having a go; I was simply recounting what I understand to be the public comments of the opposition, saying that what the government says are job cuts are phantom cuts because they are not jobs that actually exist. Hopefully, there was no misunder­standing in relation to that.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

There were two other matters I wanted to make sure I got on the record. The first is that Senator Xenophon flagged in his contribution his intention to move for an inquiry into defence procurement matters—

Nick Xenophon (SA, Independent) Share this | Link to this | Hansard source

It is an additional term of reference on the DMO.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

Yes. So there are a range of terms of reference he is seeking in relation to defence procurement. Obviously, we are willing to work through those constructively with Senator Xenophon. He has raised that and we will have that discussion with him, and I just wanted to make sure I put that on the record.

The second point is in relation to the Australian Government Actuary. On 24 May there was a letter from the Australian Government Actuary which sets out the response to the coalition's dissenting report on this bill, which I think is important reading because it demonstrates the falsity of some of the assertions that Senator Ronaldson is making today and that were made in the dissenting coalition senators report. There were three aspects of the coalition's report that the Australian Government Actuary disagreed with. The first was, and I quote:

The dissenting report claimed that the departments of Defence and Finance and Deregulation reached different conclusions based on AGA advice. I can confirm that the statements made by both departments are correct and that they are not inconsistent.

Second, on the use of fiscal balance figures—and I am quoting from the Aust­ralian Government Actuary here:

The dissenting report misrepresented our advice in relation to the use of fiscal balance and cash expenditure figures by selectively quoting text out of context. We specifically stated that in the context of the current costings the short-term fiscal balance costs probably are not unreasonable when used in a decision-making context.

Third, and I quote again:

The dissenting report suggested that the AGA's position was that cash expenditure figures are the most appropriate basis on which to cost this bill. This is diametrically opposed—

diametrically opposed—

to the Australian Government Actuary's actual advice, which made it clear that we believed the best measure of the underlying costs to the Commonwealth was the increase in the unfunded liability together with the increase in the notional employer contribution rate.

So, leaving all of the technicalities aside, essentially the Australian Government Actuary are refuting three propositions that were made in the dissenting report by coalition senators. They are also saying that the government should be looking at fiscal balance and unfunded liabilities. I again remind the Senate that the fiscal cost of the bill is $1.7 billion over four years and the unfunded liability increase is $6.2 billion.

The fact that the coalition does not have a funding stream for this is demonstrated by the amendment we have not got to, which is amendment (4). That is the amendment seeking to get around the issue of this not being allowed to be a money bill, which requires the parliament to appropriate money for this purpose. You do not have savings for this. You did not do it in government, and nothing Senator Humphries or Senator Ronaldson have said today explains that to the 30,000 people you keep speaking about. You had 11 years in government, with far higher increases in revenue than this government is experiencing, and you never, ever chose to put in place this change. You did not properly fund it in the election campaign and you are not properly funding it now. That really goes to the heart of the reality of your position in this debate. You have not done what would be required, were you serious about funding this bill. Again I say I look forward to seeing whether your election policy actually funds this, because it would be contrary to all of your form to date. Maybe, when you stand up in this place and talk about this, people will have regard to your form, not to what you say you are going to do. I would also make this point, because there was some discussion about Defence expenditure. I am not sure if it is being pressed but this is in response to some assertion that we do not have sufficient regard to the importance of military service and to those serving. I would remind those opposite that, in addition to the obvious ongoing costs of operations, in the 2010-11 budget this government funded in excess of $1 billion for additional force protection measures and, in the 2011-12 budget, an additional $252 million for the C17 Globemaster and $177 million for the Bay Class vessel to extend our amphibious capability. We spend over $20 billion per annum.

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

You are filibust­ering now.

Penny Wong (SA, Australian Labor Party, Minister for Finance and Deregulation) Share this | Link to this | Hansard source

I am being accused of filibustering when I am outlining the $20 billion plus—

Senator Humphries interjecting—

Actually Senator Ronaldson did, Senator Humphries. At least he has done the right thing and recognised that. I am outlining the substantial amount of money that we rightly put towards our serving men and women. Really, amend­ments (1) to (3) are simply to fix up a mistake that the opposition made in the drafting of their bill when they forgot this particular scheme. Given the government's position, which is that these are not affordable changes, the government is not supporting these amendments. To try and expedite the debate, I will flag that the government is also opposing amendment (4), which really goes to the heart of this fiscal issue because it is saying essentially, 'Government, go and find the money.'

Michael Ronaldson (Victoria, Liberal Party, Shadow Minister for Veterans' Affairs) Share this | Link to this | Hansard source

We stand by the dissenting report. The 30,000 are those people who will immediately benefit but there are 57,000 who will ultimately benefit.

Question put:

That the amendments (Senator Ronaldson's) be agreed to.

The committee divided. [11:14]

(The Chairman—Senator Ferguson)

Question negatived.

I move amendment (4), standing in my name:

Schedule 1, page 6 (after line 15), at the end of the Schedule, add:

7 Subsection 125(3)

Omit “All”, substitute “Subject to subsection (4), all”.

8 At the end of section 125

Add:

(4) Payments for the purposes of the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Act 2011 are to be made out of money appropriated by the Parliament for the purpose.

This amendment will avoid any dispute with the House of Representatives about right of the Senate to initiate bills which increase expenditure under the appropriation, by expressly providing this bill does not appropriate funds of itself.

Question put.

The committee divided. [11:19]

(The Chairman—Senator Ferguson)

Question negatived.

I move opposition amendment (5) on sheet 7027 revised:

(5) Page 6 (after line 15), at the end of the bill, add:

Schedule 2—Amendment of the Defence Forces Retirement Benefits Act 1948

1 Section 15D

Before 'Any ', insert '(1) '.

2 Section 15D

Omit 'Any ', substitute 'Subject to subsection (2), any '.

3 At the end of section 15D

Add: (2) Payments for the purposes of the Defence Force Retirement and Death Benefits Amendment (Fair Indexation) Act 2011 are to be made out of money appropriated by the Parliament for the purpose.

4 Subsection 83(1)

Insert:

LCI means Pensioner and Beneficiary Living Cost Index.

5 Subsection 83(1)

Insert:

LCI number, in relation to a quarter, means the All Groups Pensioner and Beneficiary Living Cost Index number that is the weighted average of the 8 capital cities and is published by the Statistician in respect of that quarter.

6 Subsection 83(1)

Insert:

VEA means Veterans' Entitlements Act 1986.

7 Subsection 84(1)

After 'in this section ', insert 'and section 84AA '.

8 Subsection 84(2)

Omit 'The ', substitute 'Subject to section 84AA, the '.

9 After section 84

Insert:

84AA Additional increase in certain pensions

(1) This section applies in relation to a pensioner who is 55 or older.

(2) In relation to a pensioner to whom this section applies, the prescribed percentage for a prescribed half-year, ascertained in accordance with subsection 84(3), is taken to be increased in accordance with this section.

(3) If the prescribed percentage for a prescribed half-year is less than the percentage for the prescribed half-year worked out using the pension MBR method in section 84AB, the prescribed percentage is taken to be the percentage worked out using the pension MBR method.

(4) If, after applying subsection (3), the prescribed percentage for the prescribed half-year is less than the percentage for the prescribed half-year worked out using the LCI method in section 84AC, the prescribed percentage is taken to be the percentage worked out using the LCI method.

84AB Percentage increase using the pension MBR method

The percentage worked out in relation to a prescribed half-year using the pension MBR method is the percentage that represents A—B expressed as a percentage of B,

where:

A is the single pension rate MBR amount (see item 1A of the table in section 59A of the VEA) applicable on the adjustment day prior to the first day of the prescribed half year; and

B is the single pension rate MBR amount (see item 1A of the table in section 59A of the VEA) applicable on the day before that adjustment day

worked out to 3 decimal places.

Note: Changes in the single pension rate MBR amount reflect changes in Male Total Average Weekly Earnings (MTAWE).

Rounding

(2) If a percentage worked out under subsection (1) would, if it were worked out to 4 decimal places, end in a number that is greater than 4, that percentage is to be increased by 0.001.

Publication of substituted amounts

(3) If at any time (whether before or after the commencement of this section), the Australian Statistician publishes an amount in substitution for a particular amount previously published by the Australian Statistician, the publication of the later amount is to be disregarded for the purposes of this section.

Interpretation(4) In this section:

adjustment day means:

(a) 20 March; or

(b) 20 September.

84AC Percentage increase using the LCI method

(1) The percentage worked out in relation to a prescribed half-year using the LCI method is the percentage that represents A—B expressed as a percentage of B,

where:

A is the LCI number in respect of the first quarter of the most recent half-year; and

B is the highest LCI number in respect of the first quarter of any half-year earlier than the most recent half-year

worked out to 3 decimal places.

Rounding

(2) If a percentage worked out under subsection (1) would, if it were worked out to 4 decimal places, end in a number that is greater than 4, that percentage is to be increased by 0.001.

Publication of substituted living cost index numbers

(3) Subject to subsection (4), if at any time (whether before or after the commencement of this section) the Australian Statistician publishes a living cost index number for a quarter in substitution for a living cost index number previously published by the Australian Statistician for that quarter, the publication of the later living cost index number is to be disregarded for the purposes of this section.

Change to reference base

(4) If at any time (whether before or after the commencement of this section) the Australian Statistician changes the reference base for the Pensioner and Beneficiary Living Cost Index, regard is to be had, for the purposes of applying this section after the change takes place, only to living cost index numbers published in terms of the new reference base.

Interpretation

(5) In this section:

most recent half - year means the half-year immediately preceding the prescribed half-year.

[also amend Defence Forces Retirement Benefits Act 1948]

Question put:

That the amendment (Senator Ronaldson's) be agreed to.

The committee divided. [11:23]

(The Chairman—Senator Ferguson)

Question negatived.

Bill agreed to.

Bill reported without amendment; report adopted.