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Wednesday, 2 June 2010
Page: 5025

Mr TANNER (Minister for Finance and Deregulation) (6:00 PM) —Let me just quickly run through a number of points. What is the Governance of Australian Government Superannuation Schemes Bill 2010 about? It is about improving the governance and administration of Australian government superannuation with respect to both civilian and military personnel and about providing increased economies of scale to enable better investment returns on the funds that belong to those personnel, military and civilian, to produce better superannuation outcomes for them. What does the legislation not do? It does not change the rules of any superannuation scheme, civilian or military; it does not change anything with respect to the benefits or entitlements that prevail; and there is no change to the existing features that reflect the special nature of military service in the Australian Defence Force—for example, special death and disability arrangements. The schemes for Australian Defence Force members will retain their own legislation, which of course will continue to be the responsibility of the Minister for Defence, not the Minister for Finance and Deregulation. So the legislation that actually determines entitlements and arrangements for members of the Defence Forces will remain the responsibility of the Minister for Defence.

There are quite a number of furphies that are being put forward by the opposition in this debate. I am quite happy to provide the detailed calculations that underpinned the assessment provided to me by the Department of Finance and Deregulation, not Treasury, about the implications of combining the two pools of funds. Those details have previously been provided to the ex-service organisations. The key thing that I point out here is that the whole aim of this exercise is to get the benefits of scale both in administrative efficiencies and in investment outcomes. My department advises that the advice from APRA is that, over a 10-year period, large funds outperform small and medium funds by at least half a percentage point of returns. Their calculations are based on that conservative assumption and up to one percentage point.

The military fund is a small fund, currently with about $3 billion in it. The civilian schemes have $16 billion in them. We did look genuinely at the proposition put forward by the member for Paterson about the prospect of two separate boards with a pool fund and came to the conclusion—this is the advice I have received from my department; this is not some sinister conspiracy by evil government ministers but the advice from the same people who provided advice to the Howard government on these issues when they were in office—that this was impractical and that it would be unduly costly. Think about it for a minute. If you have got two amounts of money that are pooled into a single investment strategy but there are two separate boards answering to two separate constituencies and making decisions, getting some degree of unanimity on every single point when they are answerable to different constituencies and have different responsibilities is a highly unlikely scenario. The only way to ensure that you can get genuine efficiency about individual investment decisions, which is ultimately exactly the same process irrespective of whether the member is a civilian or military person, is to have a single structure. That is the advice we have received from the department of finance and that is the advice on which we are acting.

There are conspiracy theories about the involvement of the ACTU on the trustee board. There are three ACTU representatives and two ADF representatives. Apart from the fact that that is the current level of representation in each case in the existing schemes, what that also reflects is the relative size of the constituencies involved here, and in particular that is evidenced by the amounts of the funds: $3 billion on the one hand versus $16 billion on the other. Because there are special restrictions on decisions that specifically affect military members having to have, as part of them, one of the ADF representatives supporting that decision, that acts as protection for the military members against any of the kinds of conspiratorial possibilities that have been dreamed up by the member for Paterson and other members of the opposition. (Extension of time granted)

I am somewhat bemused that the opposition seem to be so keen for me or future ministers for finance to have the power to arbitrarily sack representatives on the trustee board who are nominated by the ACTU that they are prepared to give me the same power to do that with respect to representatives who are there representing the defence forces. It strikes me, frankly, as bizarre that on the one hand they are suggesting that there is inadequate representation and inadequate separation for people who are involved in unique activity, which we all agree is military service, and on the other hand they are prepared to let the minister for finance have the life or death say over who represents military interests on the board. I find that very strange, given that we have got in place legislation, the Superannuation Industry (Supervision) Act, which governs all people, whether on existing superannuation arrangements or other superannuation arrangements, and which sets requirements that ensure that, where things such as bankruptcy or other things make it inappropriate for people to continue, they therefore do not continue.

We believe it is inappropriate for the minister for finance to have the arbitrary power to dismiss members who are there in a representative capacity. Those representatives, be they representatives of employees of the Commonwealth or representatives of military personnel, have to have comfort in knowing that they cannot be arbitrarily dismissed by me or a successive finance minister because they are standing up for the interests they represent.

I will let you in on a little secret, Madam Deputy Speaker. I am not the most popular person in Canberra amongst civilian personnel in the Australian Public Service. Frankly, if I were the most popular minister in Canberra, I would not be doing my job. If I were an ordinary rank and file public servant, I would not want the minister for finance to have the capacity to arbitrarily sack my representative on my superannuation scheme board, and I do not think members of the Defence Force would want me to have the power to sack their representatives either.

Finally, I turn to something which has no connection with this legislation but was raised by the member for Paterson—that is, the Matthews report into the indexation methods for existing superannuation arrangements, which covered both civilian and military personnel. For many years these pensions have been indexed to the consumer price index. There has been a campaign for quite some time for the indexation to be changed to average weekly earnings. The member for Paterson told a blatant untruth when he claimed that Labor prior to the election promised we would make that change. In fact, what we promised and what we followed through on was to have an independent expert inquiry into this issue.

That expert inquiry by Trevor Matthews, an unimpeachable world ranked expert on these issues, found that the existing arrangements should continue. We have followed that advice. Had he found the opposite, had he said to the government, ‘You should make that change,’ and had we rejected it, there would be more validity in the criticisms being made by the member for Paterson. But our commitment was to an independent expert inquiry. The unimpeachable expert, who is Australian but has extensive experience in these matters internationally as well, found that changes should not be made, and that is the decision we took.

The thing that makes all of this most amusing is that for most of the 11½ years the opposition were in government this was a significant issue and they did nothing to address it. They now come in here and suggest that the fact that the Rudd government, after being in government for 2½ years, have not made this change means we are reprehensible. They had 11½ years to do something. I think the ex-service organisations and the ex-Public Service organisations they talk to know precisely who they are dealing with here and realise that there is not much integrity and not much sincerity in the promises and commitments now being made, because they are being made by people who did not do anything about this issue for 11½ years and now have the hide to criticise this government, which has been in office for 2½ years, for doing nothing.

That concludes my observations. I indicate again the government’s strong support for this bill. We would like to think this is a matter that could be dealt with on a bipartisan basis. We have no political agendas here other than to make the system work better for its members. (Time expired)