Mr KELVIN THOMSON (10:54 AM) —For a variety of reasons we should not be debating these superannuation legislation bills now. I move:

That all words after "That" be omitted with a view to substituting the following words:

"the House condemns the Howard Government for introducing the Bill which is a clear breach of the Prime Minister's pre-1996 election promise that the Coalition would not cut and destroy public sector superannuation schemes or the entitlements of existing and prospective Commonwealth Government employees".

These bills break yet another of the election promises of the Prime Minister (Mr Howard)—that he would not cut and destroy public servants' superannuation entitlements. Commonwealth public servants will be disadvantaged by this legislation, which the government claims will offer them choice of fund but which actually closes the natural industry fund, preventing it from becoming one of those choices. The general choice of fund legislation has not yet got through the parliament and the government is yet to bless us by announcing the new start date for choice of fund for the general community. Once again, the government's ideological slip is showing.

The amendments that we will move are designed to keep the Prime Minister to his 28 February 1996 promise to all Commonwealth public servants not to `cut and destroy public sector superannuation schemes'. We will do that by opposing the closure of the public sector superannuation scheme. We are also going to provide employees with a real choice of fund from 1 July 2000, including access to the PSS, which is the natural industry fund for Commonwealth public servants, and we will allow the other administrative changes to pass.

The government claims that this package of bills extends its choice of fund policy to Commonwealth public servants, but it is bizarre for the government to claim it is offering public servants more choice when it is closing off one of the choice options for new public servants. Currently, most public servants are required to become members of the public sector superannuation scheme, the PSS, or are existing members of the now closed Commonwealth superannuation scheme, the CSS.

The bills in this package contain the following features: the closure of the PSS to new members from 1 July this year, after which date new employees will have to choose a superannuation fund offered by their employer; it will allow current CSS and PSS members to opt out of that fund and choose an alternative fund offered by their employer from 1 July 2000; it allows CSS members to transfer amounts held in the Australian Government Employees Superannuation Trust, the AGEST, or other funds to the CSS; it allows reversionary benefits to be paid to a CSS pensioner spouse or child from a post-retirement relationship with fewer restrictions than currently apply; it provides for modifications to redundancy entitlement arrangements for CSS members who cease employment as a result of a sale or outsourcing, to reflect the clean break approach as opposed to the phased approach; it provides new preservation arrangements from 1 July 1999 for the employer financed component of the CSS lump sum—these changes are being implemented to the PSS through an amendment of the PSS trust deed; it allows acceptance of late elections for preservation of membership rights; and it has a number of supplementary administrative arrangements.

Offering choice to new and existing employees will force the Commonwealth to fully fund employee superannuation contributions as opposed to the largely notional contributions which currently occur. This is expected to bring forward expenditure that would have been otherwise deferred until the liability falls due, to the tune of $12 million for 1998-99, $40 million for the following year and $290 million for the year after that. The government notes that these costs are a bringing forward of future liabilities and do not represent any additional expense. The shift to accrual accounting, the government claims, will result in a zero budgetary impact.

The changes to post-retirement reversionary benefit arrangements are estimated to increase outlays by $2.2 million per year due to the increased number of reversionary benefits expected to be paid. The Commonwealth Superannuation Board Bill 1997 , one of this package, establishes a new Commonwealth superannuation board to administer the closed Commonwealth superannuation schemes and other schemes where determined. The board is proposed to comprise an equal number of member and employer representatives and an independent chairman, and will recover its administrative costs from the employing agencies.

There are many reasons why we should not be considering or supporting these bills. The first is the Prime Minister's broken promise. We have come to expect some pretty colourful and spectacular backflips from the Prime Minister, who coined the terms `core' and `non-core' promise as a way of wriggling out of hand-on-the-heart commitments which he made to the Australian people both when Leader of the Opposition and in government. The words `core' and `non-core' have now become part of Australian political vernacular, which is a sad indictment of the man who gifted them to us.

Even given our lowered expectations of prime ministerial integrity and honesty and the fact that we do not expect a lot from him, it still comes as a considerable surprise that he would allow this legislation to come forward, given that it represents an almighty breach of his pre-1996 election promise to Commonwealth public servants. On 29 February 1996, in response to an article in the Australian Financial Review about the coalition's views on public sector superannuation funds, the Prime Minister wrote an open letter to all Commonwealth public servants claiming that they had been `subjected to a lot of misinformation' about the coalition's position on public sector superannuation.

What were those views that the Prime Minister claimed were wrong? The Australian Financial Review article of 28 February was headlined `Coalition vows super cuts' and suggested that the coalition would be slashing Commonwealth employer superannuation contributions to bring them into line with general industry payments. The article was based on comments made by the coalition's then spokesman on public administration, John Moore. A further Financial Review article a day later, on 29 February, reported Mr Moore as saying that it was a fair interpretation to assume that there would be cuts to Commonwealth employer contributions in the future.

If I had been a public servant at the time and had read those articles and had heard those comments from the shadow minister, I would have been pretty concerned and fairly worried that my superannuation entitlements were going to be hacked into by a coalition government. Obviously fearing a backlash from public servants, the Prime Minister decided to take defensive action. He wrote an open letter to all Commonwealth public servants which was published in the form of full-page advertisements in the Canberra Times and other newspapers. The Prime Minister, honourable members may recall, was at that stage into hosing down and reassuring everybody and promising to do absolutely nothing in what turned out to be a successful bid to sneak and sleaze his way into government. The letter said:

I give you my rock-solid guarantee that the Coalition will not cut and destroy public sector superannuation schemes or the entitlements of existing and prospective Commonwealth Government employees.

I emphasise the words `existing and prospective' because it is those words which highlight the Prime Minister's broken promise.

Closing the PSS to prospective Commonwealth employees is a cut in entitlements and destroys their access to the public sector industry fund. Mr Howard attached to the letter a section of the coalition's public service superannuation policy, which stated:

A Coalition Government will guarantee all accrued superannuation entitlements and retain separate arrangements for public sector superannuation.

After reading that letter, if I had been a Commonwealth public servant, I would have thought that the coalition government would have continued the superannuation arrangements which I currently enjoyed. I would have also thought that new employees were going to be given the same entitlements which I had. After all, honest John Howard had given his rock-solid guarantee, and that is something which thousands of Australians thought meant something. As we have subsequently discovered so many times and in so many ways, the Prime Minister's promises are worth neither the paper they are written on nor the breath with which they are uttered.

This bill is a flagrant and direct breach of Prime Minister Howard's promise, and the government and the Prime Minister ought to be condemned for introducing it. But it is far from the first time that the Prime Minister has broken a promise to public servants. Promises to public servants are in fact non-core promises. They are disposable promises. The House would be aware of the Prime Minister's firm commitment before the last election to cut the public sector by 2,500 by natural attrition with no forced redundancies. That firm commitment has become rather floppy and the 2,500 number awfully rubbery. In the 1997-98 budget papers, the Howard government conceded that 27,700 Public Service jobs would be cut by 30 June this year. Indeed, according to Australian Bureau of Statistics figures for wage and salary earners for the December quarter 1997, the number of Australians in broader Commonwealth public sector employment decreased by 77,400 or 21.9 per cent from February 1996 to Novem ber 1997. In much the same way, the Prime Minister also gave a firm commitment to all Commonwealth public servants that a coalition government would be committed to a strong, independent and apolitical Public Service. But this government's attempts to rewrite the Public Service Act will undermine its professionalism and its independence. So Commonwealth public servants are becoming used to promises being given by this Prime Minister which he is happy to turn around and break.

Secondly, Commonwealth public servants, both new and existing, are going to be substantially disadvantaged by this legislation. Let me go through some 11 ways in which this is to occur.

Mr Lee —How many?

Mr KELVIN THOMSON —Eleven. First, the closure of the PSS to new employees. Current CSS and PSS members will lose their present right of re-entry to these funds from 1 July this year unless they have previously preserved contributions. Secondly, employees will be offered a number of options by the employing agency for the payment of their employer contribution but, unlike other employers, the Commonwealth will not be required to provide the industry scheme as one of the options. This puts Commonwealth employees in a position of less choice than other employees.

Thirdly, the government says it will guarantee only an employer contribution of superannuation guarantee—the community legal minimum. On 1 July this year, the superannuation guarantee minimum becomes seven per cent, moving to nine per cent by 1 July 2002. The current employer notional contributions are 13.1 per cent for PSS members and 21.9 per cent for CSS members. Three per cent of this is the productivity amount which was provided to public servants in lieu of a pay rise some years ago. The government now says it will fund departments and agencies to the same level for CSS and PSS members, but it has refused to state that it will guarantee individual staff the level of entitlement that they currently enjoy under the legislation. So, in effect, new staff lose the certainty of the amount of the employer payment. A new employee has to bargain with the employing agency to get any superannuation contributions above the superannuation guarantee level.

Fourthly, the closure of the PSS will be a major financial loss to new starters as currently PSS members can obtain an employer benefit above 13 per cent if they pay higher personal contributions. I understand that over 80 per cent of PSS members in fact contribute above the minimum level, so those new starters will lose out financially immediately the PSS closes.

Fifthly, it will be possible for agencies to pay the superannuation guarantee and then retain some of the 13.1 per cent paid to the agency. There is nothing to prevent an agency paying some or even all the remainder as a `pay rise' as part of pay bargaining.

Sixthly, we will also see administration costs being transferred from the employer to the employee. CSS and PSS are administered by ComSuper, which is paid for by the employer. New starters and staff who elect to move to a choice scheme will have to pay the administration costs. It is also likely that the employing agency will now deduct the in-agency administration costs from the 13.1 per cent for each new staff member.

Seventhly, staff will also lose the excellent death and disability insurance benefit provided under CSS-PSS and they will have to pay the additional costs of purchasing the death and disability cover. Eighthly, the new arrangements mean that the employer is transferring all liability for final provision of a benefit to employees because of the difference between defined benefit and accumulation schemes. Ninthly, the outcomes for a pension retirement benefit as opposed to a lump sum will be worse. It is difficult to calculate, but the cost difference between purchase of a non-indexed pension and an indexed pension provides some guide, and that is in the region of $100,000.

Tenthly, there is a factor applied to the calculation of the non-contributory period effectively to exclude it for choice purposes. That means that when two people with identical contributions, identical length of service, et cetera leave the scheme, one through choice but the other through resignation, the person who resigns will get a bigger employer financed benefit than the one who leaves under the choice of fund arrangements. Eleventhly, people who choose to leave the CSS after minimum retiring age will also get a lesser benefit if they opt for a postponed pension than a person in similar circumstances who did not choose to go to another scheme. So on all those counts Commonwealth public servants will be disadvantaged by this legislation.

The third reason we do not think this bill should be here is that the general choice of fund legislation has not been passed; it is yet to go before the Senate. If the government had any sense of decency towards Commonwealth public servants, any sense of responsibility towards parliamentary processes, it would withdraw these bills at least until the general choice of funds legislation is debated in the Senate. It borders on contempt of the parliament and is certainly contemptuous of these public servants to debate these bills at this time because, although we have a start date here, we have no start date for choice of funds generally. The government has not done us the courtesy of revealing that.

This reveals the government's true agenda in introducing these bills. It is not about offering choice of funds to public servants at all; it is all about closing off the public sector superannuation scheme for ideological reasons. The government is trying to market this package of bills as providing choice of fund to public sector employees in the same way that it is giving choice of fund to the general community, but the rest of the community does not know when it will get choice of fund because the government is now playing hide-and-seek with the start date.

Choice of fund was supposed to start on 1 July this year for new employees and on 1 July 2000 for existing employees. But at about five minutes to midnight when we were debating the choice of superannuation fund legislation in this House at the end of the last sitting period just before Easter the government decided it was going to postpone the introduction of choice of fund. But, while the government says it is moving choice of fund into line between the public sector and the general community, it still requires choice of fund to take place for new public servants from 1 July this year—1998. The House should not debate these bills until the general choice of fund legislation has been finalised. What is the point, where is the value, in having two separate choice of fund start-up dates?

It has been confirmed by the office of the Minister for Finance and Administration that closure of the PSS is still being proceeded with. When a Labor staff member rang the minister's office to ask if the government would be announcing a delay in the start of choice of fund for public servants in the light of its announcement that choice of fund in general would be delayed, the answer that we got back from the minister's office was that the closure of the PSS from 1 July 1998 was still being proceeded with. That has really let the cat out of the bag. The real agenda has always been to close the PSS to aspiring public servants and get rid of as many existing public servants as it can.

I now turn to where this advice came from. Where would such an idea come from? It has in fact come from the government's National Commission of Audit. Recommendation 5.6 of its politically motivated document says:

The Government should initiate further work to examine the replacement of its current defined benefit superannuation schemes with accumulation schemes.

Unfortunately for Commonwealth public servants, the Minister for Finance and Administration (Mr Fahey) has followed the National Commission of Audit's advice and has indeed decided to replace the current defined benefit scheme with accumulation schemes. But how accurate and appropriate was the National Commission of Audit's advice? First, the Commission of Audit has taken the view that defined benefit schemes are somehow inferior to accumulation schemes. That is a view which I am sure would alarm thousands of Australian workers. The Insurance and Superannuation Commission's December bulletin of 1997 states that defined benefit funds represent a significant part of the superannuation industry. As at June 1997, the proportion of superannuation fund assets managed by defined benefit funds was around 45 per cent and defined benefit funds represent about 30 per cent of all larger superannuation funds.

Many large corporate superannuation funds—those which the National Commission of Audit and the government might regard as coming within the category of general community funds—offer terrific benefits to their members. They consider superannuation to be an important part of their employees' remuneration and offer generous superannuation fund arrangements, including above superannuation guarantee contribution levels. Why would the government believe that having the PSS available to Commonwealth public servants is out of step with wider community superannuation?

Secondly, the National Commission of Audit was critical of the cost of the PSS and the CSS, but even the Commission of Audit noted that the Australian Government Actuary's projections of the unfunded liabilities for the Commonwealth superannuation schemes as a proportion of GDP show a steadily declining trend over the long term. This indicates that there is absolutely no reason—other than the ideological reason—to close the PSS. Its cost is actually declining.

These bills prove that yet again we have a government which wants to treat public servants as second-class citizens; a group that the government, particularly the Prime Minister, is happy to make commitments and promises to and then break them.

We will be moving amendments which keep the Prime Minister to his 28 February promise that he would not cut and destroy public sector superannuation schemes. We will oppose the closure of the public sector superannuation scheme. We will provide employees with a true choice of funds from 1 July 2000 and we will allow the other administrative changes to pass, and thereby hold the Prime Minister to his promises as best we can.

This legislation damages superannuation for Commonwealth public servants and that comes against a background of a government which has been prepared to do great damage to superannuation generally. We have had a history or pattern of this. When the government came into office, it promised that it was going to provide a government co-contribution to the superannuation guarantee contributions made by employers and the contributions to be made by employees. It said as an election promise that it would provide in full the funds earmarked in the 1995-96 budget to match compulsory employee contributions according to the proposed schedule.

The proposed schedule would have brought the nine per cent superannuation for workers—which is set to come in at the year 2002—up to 15 per cent. With the government reneging on that, we are back to nine per cent. However, at only nine per cent of contributions it is estimated that average Australians will have their total retirement income reduced by $100,000 compared with the level they would have achieved at the 15 per cent contributions level. Unfortunately, nine per cent in contributions will not produce an adequate income for the majority of Australians to enjoy a comfortable lifestyle in retirement.

Mr Ross Cameron —Why didn't you do something about it?

Mr KELVIN THOMSON —If the honourable member had been listening, I pointed out that the government had promised that it would proceed with the Labor government's co-contribution which would have lifted superannuation from nine per cent to 15 per cent.

This is supported by research done by AMP published in Super Trends released in July of last year and by ASFA's own retirement income blueprint, which shows that nine per cent by way of superannuation guarantee contributions alone will result in a replacement rate of around 28 per cent after 30 years—that is 28 per cent of retirement income—which is far below the expectations of most Australian workers of a figure of around 70 per cent.

This problem was also indicated in the budget papers released last night which show that gross private saving is declining. The government has been making much of the increase in gross public saving via the budget surplus, but it has very little to say about the decline which is occurring in gross private saving and the threat that that poses to national savings overall.

That concern is accentuated by a recent study from Perpetual Funds Management which carry out a survey every year which they call Savings Pulse. Their conclusions after this survey is that Australians are a long way away from what is needed in terms of decent retirement incomes. They note that:

More than half of those surveyed say that having adequate income in retirement is a major concern. This compares with 29% two years ago.

In other words, just in the last two years there has been a big jump in the number of Australians concerned about whether they will have an adequate income in retirement: little wonder after the government abandoned government co-contributions on superannuation and the damage that that has done to superannuation; little wonder with the change made through the 15 per cent superannuation surcharge; little wonder with the changes that the government is proposing for opting out in superannuation; and little wonder after the government included superannuation in the assets test for over-55s so that, if you are out of work for a period, you have to hoe into your superannuation because you are no longer eligible for any other income support.

With all these changes being made to superannuation and all the damage which this government has done to superannuation through those changes, it is scarcely surprising that more than half the people being surveyed by Perpetual Funds Management now say that having adequate income in retirement is a major concern for them.

This bill is simply one more in the package where choice of fund legislation and the closure of the public sector superannuation scheme will lead to diminished funds in retirement. This is a government which says it is concerned about the future, about national savings, about retirement incomes, but all the steps it is taking will disadvantage that. We intend to keep the government honest on these matters. We intend to hold it to the election promise that the PSS would remain there for new entrants as well as existing employees.

We intend to apply our choice of fund model, which is a superior choice of fund model to that which the government has come up with. It amounts to genuine choice of fund for employees, not forced choice of fund on employers, and we will be pursuing that in the Senate as well as here. We believe that on those counts we can come up with a much better superannuation arrangement, a much better retirement incomes arrangement than that which the government has been putting forward. Unfortunately, this is a government which is not committed to superannuation and which has been ringbarking the superannuation tree which Labor planted.

Mr DEPUTY SPEAKER (Mr Nehl) —Is the amendment seconded?

Mr Lee —It is, Mr Deputy Speaker. I second the amendment.