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Wednesday, 7 December 1983
Page: 3415


Mr MOORE —by leave-The statement just read out to the House by the Minister for Finance (Mr Dawkins) certainly brings into focus a number of points when one reads the Auditor-General's report to the Minister on the financial statements of the Superannuation Fund Investment Trust. In that report a number of wide claims are made about the operation of the Fund. In particular, at the end of the report the Auditor-General states:

I have not been satisfied that the management of the very substantial investment portfolio for which the Trust is responsible has been shown to be of an appropriate standard of competence and professionalism. Indeed, there may even be indications of an element of recklessness . . .

Those are very serious charges about such a substantial investment fund in Australia. I regret that the Minister has not provided us with a copy of the letter of the Chairman of the Superannuation Fund Investment Trust because it is quite obvious that in that letter answers are given to the accusations made in the Auditor-General's report. In fairness to the Chairman, it would have been only proper to have tabled the letter at the same time. There are always two sides to every story. I think that not tabling the letter is a weakness in the presentation.

It is worth reflecting on the fact that this report of the Auditor-General makes judgment on only the 1981-82 annual report of the Investment Trust. We are now rapidly coming to the end of calendar year 1983 and most financial institutions ought to have released their financial reports for 1982-83. Recently the Senate Standing Committee on Finance and Government Operations held an inquiry into the reports of the Investment Trust and the Commissioner for Superannuation. I am told the inquiry concerned the 1980-81 reports. The Superannuation Fund appears to be at least a year behind in the presentation of its annual report. If that is the case, the management certainly needs kicking along. I recommend to the Minister that he look at the Senate Committee's recommendation that if the Fund's final report for 1982-83 cannot be produced by the end of the calendar year an interim report ought to be made available.

I will just briefly comment on some specific aspects of the report. There is no doubt that most of the items raised by the Auditor-General have a very heavy tax implication. One has to look at the tax implications of these items and at what they have been set out to achieve. A number of matters have been criticised and I suspect that has been done because people in the Auditor-General's Office are sticking to the rule of law rather than to what is commercial practice. The first item mentioned is the imputation of interest as an item of income in the current year. It is quite clear that if one were running a superannuation fund one would need a notional view of what income would be available because retirements would affect it. In order to run a proper superannuation fund, which would continue for many decades, I think it is appropriate to impute interest as an item of income in the current year.

I am not so impressed with some of the activities on the real estate side, which were mentioned in the report. I find it very difficult to understand exactly what was going on in the case of Chatswood Chase. It is a very unusual way of handling contracts. I think the switching of securities has been misunderstood by the Auditor. If the securities were continued to be held at their face value or book value, as they are required to be held under the 30-20 rule, quite clearly these major institutions would have gone broke during the time of the high swings in interest, because as interest rates go up the value of security goes down. As one is required by law to hold very substantial numbers of government securities, both direct and indirect, to regularly value these at the market price would have brought about a very substantial loss. I recommend that the Auditor-General look at the commercial significance of that rather than represent it in the way he has.

Judgments are passed on the valuation of investments in the German Creek (Coal) Joint Venture. The Auditor-General goes to some pains to point out the goodwill aspect. That might be great in hindsight. I go on further towards the end of the report, where the Auditor-General reflects on the authority of the Chairman to make advances of more than half a million dollars. I conclude by saying that in this area it would be commercial commonsense to grant the Chairman additional authority to approve transactions of over half a million dollars because of the very few transactions in which the authority of the Chairman would be needed to go beyond that amount in making quick decisions.

Sitting suspended from 6.31 to 8 p.m.