Senator FIFIELD (2:20 PM) —My question is to the Minister for Finance and Administration, Senator Minchin. Will the minister inform the Senate of the importance of establishing the Future Fund to meet the government’s future obligations? Is the minister aware of any alternative policies?

Senator MINCHIN (Minister for Finance and Administration) —I thank Senator Fifield for that very good question. As most know, this government has been very successful in reducing net debt from the $96 billion debt that we inherited from Labor to only $12 billion, and we expect to eliminate that debt next year. By virtue of that, we have cut the annual interest bill by $5 billion a year. Our net debt as a percentage of GDP is now down to just 1.3 per cent. The OECD average is 48 per cent. The US has a net debt of 50 per cent of GDP. Europe’s is 58 per cent and Japan’s is 82 per cent. By reducing our net debt to negligible levels, we are in a much better position than those countries to face the demographic challenges that all Western nations face.

Senator Conroy interjecting—

The PRESIDENT —Senator Conroy!

Senator MINCHIN —The net debt is just one of our liabilities. Over 100 years, this nation has built up unfunded superannuation liabilities of some $91 billion today. We expect that to grow to $140 billion. These liabilities must be paid to former public servants. At the moment, that is costing us $4 billion a year off the budget, and that will rise to $7 billion a year every year by 2020. That is the very reason why we have decided to create a future fund—that is, to meet that liability of the unfunded superannuation. It is a very important step in meeting the task of facing our demographic challenge.

The Future Fund will receive the surpluses from the annual budget and the proceeds of asset sales. By doing so, we can meet that unfunded superannuation liability. But the unfunded super liability can only be met if we ensure that the earnings of this fund are reinvested into the fund. That is obviously a function of compound interest, which most people understand. But, unfortunately, the Labor Party do not understand the principle of compound interest. They simply do not understand the obligation we have to meet this unfunded liability and how we should go about doing it. Extraordinarily, last week, the Leader of the Opposition announced that Labor’s policy in relation to our Future Fund is to actually spend all the earnings of the fund. Yes, they will keep a fund, and whatever is in it—

Senator Conroy interjecting—

The PRESIDENT —Senator Conroy!

Senator MINCHIN —if they come to government. But they are then going to spend all the earnings out of that fund on their pet projects—their pork-barrelling to earn them votes. So they are effectively going to replace our Future Fund with what they call ‘the here and now fund’, so they will just take the capital, but no earnings; all the earnings will go out on their pet projects.

Our policy, which is based on reinvesting those earnings, is going to save future governments $7 billion a year by virtue of that fund meeting the superannuation liability, meaning that future governments, under our policy, will have $7 billion extra to meet the health and ageing costs that this nation is going to face. But, of course, under Labor’s policy there is no hope of the Future Fund being able to meet that $140 billion liability that will face this nation. That is absolutely typical of Labor’s approach to fiscal policy. Their approach represents—

Senator Conroy interjecting—

The PRESIDENT —Senator Conroy!

Senator MINCHIN —in fact, a substantial loosening of annual fiscal policy.

Senator Conroy —Rubbish!

Senator Sherry interjecting—

The PRESIDENT —Senator Sherry!

Senator MINCHIN —It will mean more government spending, by virtue of them spending the earnings rather than their being reinvested into the future fund. Of course their policy would cripple Australia’s capacity to meet the challenge of an ageing population. Labor has consistently opposed all our efforts to reduce government debt, having left it to us for the future. And now their policy is to make it impossible for Australia to meet the unfunded super liability. Unlike Labor, the coalition is very focused on this very substantial challenge that we have of an ageing population, and our Future Fund is a vital part of meeting that challenge.