Senator MASON (2:13 PM) —My question is to the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of any recent developments in the structure of the government's public sector superannuation schemes? How will these changes improve the long-term affordability of public sector superannuation?

Senator MINCHIN (Minister for Finance and Administration) —I thank Senator Mason for such a good question. Our government have been concerned about the long-term sustainability of Commonwealth government finances. That is why we produced in last year's budget the very important Intergenerational Report—to put a focus on the Commonwealth finances over the next 40 years and on what are unsustainable pressures on those finances. That is why we approached things like the PBS, to ensure their long-term sustainability. We have cut the debt we inherited from Labor by over two-thirds and, if we can sell Telstra, we will eliminate government general debt entirely.

But equally, the government and the nation have to focus on the Commonwealth government's unfunded liabilities—primarily, superannuation—and they are in the tens of billions of dollars. That is why I was very pleased to announce recently that the government proposes to introduce changed superannuation arrangements for all new employees who join the Public Sector Superannuation Scheme from 1 July 2005. It is our proposal to convert the PSS from a defined benefit scheme to a fully funded accumulation scheme from that date. Because these new arrangements will be fully funded they will ensure that superannuation for Australian government employees will be affordable.

The PSS was opened in 1990. The unfunded defined benefits provided under that scheme have already accumulated liabilities of some $9 billion at present and growing, and that is on top of the unfunded liability in the closed CSS of some $50 billion. The PSS liability was forecast to double from $9 billion to $18 billion over the next 14 years if not addressed. That situation clearly was unsustainable. So changing the PSS to an accumulation fund is an absolutely essential move if we are to contain Commonwealth government unfunded liabilities.

I stress that the change will not affect existing Australian government employees or people with any existing interest in the PSS or CSS. I also confirm that, from 1 July 2005, all new PSS members will receive the same level of employer contribution. That will be at a rate of 15.4 per cent of salary, which is the actuarially determined average employer contribution under the existing arrangements. Importantly, these new arrangements will give new government employees portability of superannuation benefits, which is very much in keeping with our goal of giving Australians much greater flexibility and ownership of their superannuation.

I will be talking to the relevant unions and stakeholders over the next few weeks about developing this scheme. Those consultations are under way. I do want to thank everybody involved in this for their constructive approach, particularly the relevant government employee unions. I point out that the PSS board, which comprises equal ACTU and employer representatives, unanimously supports this proposed change, and I do want to thank them for their support. The changes will come into effect through a disallowable instrument, and I look forward very much to all senators supporting this very essential reform of public sector superannuation.