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Wednesday, 2 June 2010
Page: 4942

Mr BALDWIN (12:09 PM) —I rise today to speak on the Governance of Australian Government Superannuation Schemes Bill 2010 and cognate bills. Simply put, the bills set out to combine all current Commonwealth civilian and military superannuation trustees, namely the Australian Reward Investment Alliance, the Military Superannuation and Benefits Board and the Defence Force Retirement and Death Benefits Authority, into one body. The new trustee, which is to be named the Commonwealth Superannuation Corporation, or CSC, will be responsible for the administration of the following schemes: the Commonwealth Superannuation Scheme, the Public Sector Superannuation Scheme, the Public Sector Superannuation accumulation plan, the scheme provided for under the Papua New Guinea (Staffing Assistance) Act, the Military Superannuation and Benefits Scheme, or the MSBS, the Defence Force Retirement and Death Benefits Scheme, or the DFRDB, the scheme established under the Superannuation Act 1922 and the Defence Force Retirement Benefits Scheme.

This bill will impact on approximately 650,000 members of the various civilian and military superannuation schemes. Furthermore, the proposed CSC would be responsible for managing approximately $19 billion worth of combined military and civilian funds, which would include approximately $16 billion currently managed by the ARIA board and $3 billion currently managed by the MSBS board. It is therefore critical that this bill and its potential impacts on the members of the various Commonwealth superannuation funds be properly examined.

I note that my colleague, the shadow minister for superannuation, the member for Cowper, has focused on the broader impacts of this bill as it relates to Commonwealth superannuation schemes. During my time today, I will be speaking specifically on the effects that this bill will have on members of the various military superannuation schemes, namely the MSBS, the DFRDB and the DFRB. Fundamentally the government believes that increased returns for members can be generated through streamlining the administration of the schemes and creating a larger singular pool of investment funds, thereby increasing benefits and financial returns to the various scheme members. Importantly, however, whether or not members will receive any benefit remains to be seen, and no guarantees have been made by the Rudd Labor government. All that has been indicated by the Rudd Labor government is that by merging the military and civilian schemes, the additional investment returns would, if based on 2008 figures, be about $10 million in the first year, $15 million in 2018 and $19 million in 2028.

I agree that the funds from the ARIA managed schemes and those schemes managed by the MSBS board should be combined. In fact, if we are to believe the government, which is becoming harder and harder by the day, then most ex-service organisations would agree with that logic. However, this is not the sticking point with regard to this legislation, even though the government has tried to paint it as such. The real sticking points are the governance arrangements and, more importantly, the fact that this bill fails to take into account the unique nature of military service. On the matter of governance arrangements, this bill stipulates the CSC will have a board consisting of 10 directors, plus one chairperson. Three of those directors will be nominated by the president of the ACTU, five will be nominated by the Minister for Finance and Deregulation, but only two will be nominated by the Chief of the Defence Force. It becomes very clear very quickly why the coalition and indeed the ADF community oppose this bill. The coalition cannot support the inclusion of three trade unionists on a board that is responsible for managing military superannuation.

The coalition does not support these arrangements because, by the sheer weight of numbers under the CSC governance structure, the two votes of the CDF nominated directors will be rendered insignificant. I acknowledge the finance minister’s eleventh-hour amendment, which would mandate that all matters relating specifically to the interests of military members must have a quorum of a least one CDF nominated director in attendance. But that simply does not go far enough, and the weight of numbers on the CSC board will significantly disadvantage military members. Just why the Rudd Labor government believes there should be three ACTU appointed directors and only two CDF appointed directors remains unclear, but given that the ALP is at the helm, it is hardly surprising.

The coalition also takes considerable issue with the arrangements that give the President of the ACTU the determining voice in the dismissal of ACTU directors. The effect the regulation contained in subclause 10(4) has on governance arrangements is best illustrated through an example. If an ACTU appointed director who is responsible for making decisions that affect hundreds of thousands of people and who is responsible for managing tens of billions of dollars worth of investment funds was himself to become bankrupt, for example, they should be removed from the CSC board. However, this legislation stipulates that the minister for finance is unable to remove that person. In fact the only person who can remove an ACTU director is the President of the ACTU. I find it quite extraordinary that the minister for finance is subordinate to the President of the ACTU. In fact, it is not extraordinary—it is downright preposterous.

What makes matters worse is that this issue was raised directly with the minister for finance by the coalition and the ex-service community, and yet he has still failed to rectify this glaring legislative problem. The minister for finance has failed to appreciate the implications contained within subclause 10(4) because this minister believes consultation is a one-way street. The minister believes that a single meeting and a follow-up brief a couple of months later—but no earlier than 24 hours before reintroducing the amended legislation—constitutes meaningful dialogue.

I met with the minister for finance regarding this bill in good faith. I did so on behalf of the coalition and on behalf of the veteran community, who raised many of their objections directly with me. Unfortunately, all that resulted from this was a commitment by the government to ensure that the amended legislation contained strengthened provisions for consultation—which is somewhat ironic because consultation is the exact thing that this government failed to do before drafting this legislation. The proposed amendments contained in this bill are as follows: a requirement for the CDF to consult with relevant organisations on the appointment of two military directors; a requirement for the minister for finance to consult with the Minister for Defence on appointing the five employer representatives; a requirement for the minister for finance to consult the Minister for Defence on the appointment of the ComSuper CEO; a requirement for a quorum on matters relating specifically to the interests of military members to include one CDF nominated director; a requirement for decisions made by the board to include one CDF appointed director when issues relate to the interests of military members; and a requirement that the chair of the Defence Force Case Assessment Committee is one of the CDF nominated directors.

Interestingly, there is no mention of the composition of the board—with three ACTU appointed directors and only two CDF appointed directors. There is no mention of how only the President of the ACTU can dismiss ACTU appointed directors. There is also no mention of the coalition’s proposed amendments. Furthermore, there is no mention of the unique nature of military service and how this bill and the amendments are supposed to safeguard the issues of current and former ADF personnel.

Having canvassed the major governance issues that remain in this flawed legislation, I would now like to turn to the matter of the unique nature of military service. The Defence Force Welfare Association, the DFWA, has a long history of representing the interests of current and ex-service personnel and their families on a range of issues. Most notably, the DFWA is vocal on issues such as service conditions, including health care and family support. But they are also vocal, as I am sure Minister Tanner is aware, on matters such as military superannuation reform. It is appropriate, therefore, that I raise one of the core issues the DFWA has identified in this bill, and not simply because I appreciate those concerns but because the DFWA in this instance best encapsulates the sentiment emanating from the service and ex-service communities. The view of the Defence Force Welfare Association and, I might add, the vast majority of those who have written directly to me regarding this bill, is that, by combining the military and civilian schemes, the unique nature of military service will be further eroded. The DFWA has said:

Unique service requires unique solutions, not ones which further blur the distinction between the uniqueness of military service and civilian norms.

Those that know of the DFWA’s views on such matters will be more than familiar with their stance regarding the uniqueness of military service. I do not think there would be any opposition from those in the House when I say that I too believe that serving in the military equates to a very unique type of national service. Of course, I can understand why veterans and those organisations that represent them believe that the unique nature of military service is under threat.

It must be remembered that the Rudd Labor government promised, in the 2007 Labor election policy document, that it would:

… maintain a generous military superannuation system in recognition of the importance of the ADF and the immense responsibility placed on personnel in securing and defending Australia.

Of course, the veteran community now know that the Rudd Labor government took them for a ride. They know that they were used purely for political reasons and that they can no longer trust the Rudd Labor government. It is little wonder, then, that the DFWA believes that this bill will lead to the further erosion of their benefits, even in the face of assurances offered by the minister for finance. After all, this is the same minister who declared that the Rudd Labor government was satisfied that the consumer price index was the most suitable indexation method by which to index veterans’ superannuation pensions.

I want to reiterate my words from only a week ago, when I spoke on a private member’s motion regarding the uniqueness of military service:

I and the coalition have always considered and will always consider service rendered by our military personnel as unique. Although I have not served in the ADF, I have had many opportunities to experience the many facets of service life through, for example, my work as the shadow minister for defence science and personnel, through my participation in the ADF parliamentary program and most recently by spending a week with Australian troops on the ground in Afghanistan with my colleague—

shadow parliament secretary—

Stuart Robert.

But, then again, I would argue that one need not have served in the military to understand the unique nature of that service. Simply ask the spouse of a current serving member and they will, I have no doubt, convey to you the uniqueness of their husband’s or wife’s service.

Serving in the Australian Defence Force is unique not only for what members are asked to give for their country; it is unique for all that they forgo in the name of that service—for example, missing the birth of their son or daughter because they were deployed on operations in the Middle East, or missing out on Christmas with family and friends because they were assisting in a diaster relief effort at home or abroad. Perhaps one of the finest summations of the uniqueness of military service I have read to date comes from David Jamison, President of the DFWA who said:

In volunteering for military service, the individual accepts the surrender of his or her basic rights under Article 3 and places his or her life, liberty and security of person in the hands of the State. This surrender is not unconditional, though in extremis, it is absolute.

Given the unique nature of military service—so eloquently encapsulated in Mr Jamison’s quote—it is not surprising that both current and former ADF members take acute opposition to the proposed composition of the new CSC board and the effect that this legislation will have on further blurring the distinction between military and non-military service. In fact, these issues were raised in almost every submission to the Senate Finance and Public Administration Committee hearing on this bill and have been raised in every piece of correspondence that I have received from concerned members and ex-members of the ADF.

The coalition is opposing this legislation because it is flawed in its current form. The legislation is being opposed because it ignores the central tenet that military service is unique and it is being opposed because the Rudd Labor government failed to consult with the very people whom this legislation will affect the most: those men and women who are currently in or were in the Australian Defence Force. It will probably come as no shock that the Rudd Labor government failed to consult with those affected. They did not bother to consult with any of the organisations that represent past and present members of the ADF. Organisations like the Defence Force Welfare Association or the RAAF Association were simply not included in the lead-up to the development of this legislation. That is symptomatic of this Rudd Labor government. It attempts to introduce new legislation without even consulting with those it will affect. The new mining supertax is but another example in a suite of examples. It was only after the coalition flagged concerns with the current legislation and pushed for a Senate committee enquiry that organisations like DFWA and the RAAF Association were given the chance to have their collective voices heard and to express their views. Only then were individuals able to submit their personal views on this flawed legislation—legislation which would directly affect them.

Even as late as yesterday, when the Rudd Labor government thought it was appropriate to inform the coalition of its amendments to this bill, they still had not consulted widely. In fact, the briefing note did not mention who the Rudd Labor government supposedly consulted with within the ex-service community, only that those in the ex-service community generally agreed with their amendments. It will come as no shock, but I take issue with such an assessment, particularly when ex-service organisations and veterans continue to tell me exactly the opposite and that they remain opposed to this legislation. Furthermore, the Defence Force Welfare Association has said that the Rudd Labor government’s reference to the view of all the ex-service organisations at an ESO roundtable were ‘disingenuous’ and that:

Most of what are outlined as the outcomes of the discussion came from ESO leaders comments who had not had the chance to be fully briefed on the issues and were unprepared for substantive discussions on the topic.

In complete contrast with the Rudd Labor government’s approach to this legislation, the coalition has listened to current Australian Defence Force members, veterans, ex-service people and ex-service organisations. The coalition consulted widely, and we had the common decency to listen to those who will be affected by these legislative changes. If the Rudd Labor government had bothered to engage with the veteran community and current serving members before drafting the legislation, they would have quickly realised that merely gaining administrative efficiency is not a sufficient reason for the introduction of this bill.

While this bill may help streamline the administration of Commonwealth superannuation schemes, that alone is not a sufficient justification for the amalgamation of all Commonwealth civilian and military schemes. While the bill may provide some financial benefits to members, the Minister for Finance and Deregulation, Mr Tanner, has not done enough to convince past and present ADF members that financial benefits alone will be worth the diminution of their status on an amalgamated military and civilian board.

The coalition has raised its concerns directly with the minister for finance and has discussed alternatives to the current proposed legislation, including the introduction of separate civilian and military boards. The coalition’s proposal would see the continuation of a single civilian board but would introduce a single military board that would administer all the military schemes, including the DFRDB and MSBS boards. Such a construct would simplify administration arrangements—an aim of the proposed legislation—while also helping to ensure that the unique nature of military service is recognised. The proposal would also provide the potential for additional financial gains for members through the amalgamation of all civilian and military invested funds. Furthermore, whilst it is envisaged that the two boards would have a common chairperson, no director would be able to be appointed to both the civilian and the military boards. Lastly, the coalition proposes a sunset clause in the legislation that would allow for the review of the proposed construct after three to five years in order to ensure that both military and civilian investment funds are being managed appropriately and in the best interests of their members.

Unfortunately, Minister Tanner did not take on board even one suggestion put forward by the coalition. Instead, as I have previously mentioned, he thought it best to simply present the government’s amendments to the coalition at the eleventh hour. Mr Speaker, that is not consultation but merely an illusion designed to give the impression of consultation—and we all know that this government receives top marks for its smoke-and-mirrors campaigns right now.

The Rudd Labor government is being not only obstructionist but also obstinate in its lack of willingness to come to the table and negotiate acceptable outcomes with the coalition. We have said to the minister for finance that we have no problem with combining the investment funds in order to increase financial returns, but we have also said that our first responsibility is to govern in the national interest, which includes defence interests and the interests of current and former defence personnel. The coalition remains committed to ensuring that their interests and assets are protected, and they simply will not be when only two members of a 10-person board represent the interests of military members.

We do not believe that the safeguard measures proposed by the finance minister are enough. Our discussions with ESOs as late as last night have shown that there will be a great amount of concern regarding this legislation. The finance minister should not misrepresent what the ESOs have said and should not claim that they have agreed to his amendments—because, simply put, they have not. The reality is that fundamental deficiencies remain with this legislation, and the coalition will not be supporting these bills in their current form.

The DEPUTY SPEAKER (Mr S Sidebottom)—Thank you for your contribution. I point out to the member for Paterson that, as much as I would be honoured to be elected to be the Speaker of this great chamber, I am in fact only a lowly Deputy Speaker. Thank you!