Mr ROSS CAMERON (11:24 AM) —I rise to support the superannuation legislation and to oppose the amendment. I have listened with interest but some dismay to the remarks of the member for Wills (Mr Kelvin Thomson), who has indicated by his contribution over the last 20 minutes that he is very much part of the problem rather than part of the solution. This is a laudable bill. Its principal purpose is to provide a measure of choice to Commonwealth public servants in relation to their retirement income arrangements. Choice runs pretty strongly counter to the grain of the Australian Labor Party, which are a party characterised by their devotion to compulsion, particularly in relation to trade union matters but also more broadly.

It is not really my purpose today to enter into a partisan wrangle over the minutia of the bill. This bill is an important step forward. It is a logical and consistent step in the long march back from the brink which this government, the sponsoring minister of this bill, the Minister for Foreign Affairs (Mr Fahey), and the Treasurer (Mr Costello) so spectacularly delivered last night. In delivering the first surplus on the recurrent budget—I understand the best once since the pre-Whitlam days—we have signalled what was described in the Daily Telegraph today by Malcolm Farr as a `generational change' in approach to fiscal responsibility. This bill is a next step, a next increment, in that process.

The question which a bill about choice presupposes is why do we require choice. The answer to that is that we currently have superannuation arrangements for all Australians, not just Commonwealth public servants, which are based on compulsion. That is, we have a compulsory superannuation scheme introduced, to the credit of the former government. It was one of the few positive steps they took to restructure the Australian economy in a sustainable fashion. Recognising this huge deficit not only in the facts of the national savings but more deeply in the culture of this nation, somehow we had to get Australians to save more. We introduced compulsory arrangements, the superannuation guarantee, in 1992.

That measure was flawed in an important respect. While it required all other Australians, employers and employees, to be in fully funded superannuation schemes, the Commonwealth and its public servants were exempted from that requirement. That exemption follows a long history of mismanagement and lack of foresight on the part of governments on both sides of this chamber. It is those long-term, non-partisan issues—many in this chamber have not been the author of these problems—that fall upon us to fix.

I note the spirit of the Treasurer's budget speech last night into which the Minister for Finance and Administration made such an excellent contribution. He said, `This is not a time for complacency. It is not a time to rest on our laurels. It is a time to focus on the second great leg of reform, which is debt reduction.' The corollary of debt reduction is the whole question of the unfunded liability which we are generating for the retirement income of Australians for future generations. That is the issue I particularly want to focus on over the next 15 minutes or so.

I want to take us back in this history of mismanagement, the lack of foresight, to a spectacular failure by us in this country to address a problem which is now global in proportions, to the National Health and Pension Insurance Act 1939. I suggest that, of all of the regrettable and mistaken passages of legislation in this chamber, the National Health and Pension Insurance Act is perhaps the most ignominious. It involved an annulment of three acts which had been passed the previous year: the National Health and Pension Insurance Act 1938, the National Health and Pension Insurance (Employers Contribution) Act 1938 and the National Health and Pension (Employees Contribution) Act 1938.

At that time there was a recognition that we needed to begin to make provision for an ageing population; we needed to begin to make adequate provision for secure income in the retirement phase of the Australian people. So those three bills were enacted to make provision for contributions by both employers and employees to fund their own retirement. Had those three acts been implemented, our circumstances today in terms of retirement income both for Commonwealth public servants and for the population as a whole would be spectacularly different. What we now face is an unfunded liability for future young Australians to meet of over $70,000 million purely in the obligations of Commonwealth public servants and members of the defence forces.

I note present at the table the Minister for Defence Industry, Science and Personnel (Mrs Bishop). That is fortuitous because she, I know, is aware and concerned about the long-term impact of retirement arrangements we have made for the defence forces—and I refer specifically to the Military Superannuation Benefits Scheme and the Defence Force Retirement and Death Benefits Scheme. We are moving to the funding of those schemes. This government has taken those first steps towards a new culture of responsibility which says that each generation must pay its own way. But we should still pause and reflect on the fact that the combined obligations of those defence schemes to future Australians represents a figure of over $30 billion.

Mr Deputy Speaker, I go to the Parliamentary Superannuation Scheme. When I asked whether there was a difference between the unfunded liability of the scheme and the accrued benefits of the scheme, I was instructed they represent exactly the same figure—that being $394 million. So here you see a much smaller figure—in the hundreds of millions rather than billions—but, nonetheless, the same culture which says that we in the Commonwealth somehow exist in a different state of grace to the rest of the Australian population, that we can incur obligations on future generations without making any provision for them, that we can grant rights without recognition that obligations attach to those rights. We seem to believe that somehow we are free from the laws of gravity and physics.

What we are looking at is a combined unfunded liability to future generations of over $70,000 million. Mr Deputy Speaker, I suggest to you that this is the one great remaining blot on the escutcheon of public finance in this country. We have work to do on the current account. We are taking bold steps forward in terms of the national debt. Also, the sale of the remaining two-thirds of Telstra will be a dramatic step forward in reduction of the over $80 billion in Commonwealth debt; we will be able to wipe out, we hope, $31 billion of that debt in one hit.

But this question of the unfunded liability for the cost of Commonwealth employees and Defence Force personnel which will have to be met by future generations is the one weeping sore, if you like, the one area, which has remained in the too hard basket for too long. This is the area to which I am now calling the government's attention, as we take this long-term view, as we head down what the Treasurer described as `the long march back from the brink'. This is the area upon which we now ought to direct our attention.

There may be some who say, `Look, all governments operate this way, all schemes have been funded this way; what is your real problem?' In fact, Treasurer, that is quite incorrect. The great sparkling example of fiscal discipline, of what I would call intergenerational justice and compassion, is found not in my own state of New South Wales but in Queensland. I refer in particular to the Queensland State Public Sector Superannuation Fund, more commonly known as Q Super. From the time of the fund's establishment in early 1911, that fund was fully funded. As the scheme grew in the 1950s and 1960s, the benefits and entitlements grew and, likewise, the allocations from government grew so that at the present date the employer or Queensland government contribution is 14.55 per cent of salary and the employee contribution is five per cent.

But critically, when the Queensland State Actuary reports to government, he or she reports on the contribution necessary to meet the future obligations of the fund. While the government is not bound to implement the recommendations of the actuary, it is a fact that on every occasion the actuary has recommended an increase in recurrent government allowance for the fund that recommendation has been fully implemented.

So, to date, the Queensland government has been assured that all of its future obligations have been covered and that no future Queenslander—no unborn Queenslander—is going to be called upon, through his or her tax dollars, to meet the obligations of Queensland public servants who have long since given their service and retired. This, it seems to me, is an important principle for us to observe and reflect upon. What it says is that it is possible, if we take a long-term view—if we are prepared to forgo the pleasure and the kudos of existing expenditure in recognition of the needs of future generations—to establish and maintain a public sector superannuation scheme which fully meets its future obligations.

Can I suggest that there are many other laudable aspects of the bills currently before the House. There are long overdue administrative arrangements which will make the scheme much more efficient in its operation. There are equity measures in relation to provision of benefits for widows, orphans, spouses and partners. All of those measures should be welcomed and applauded. They are informed, of course, by the recommendations of the Commission of Audit and by the excellent report produced by the Senate Select Committee on Superannuation under the direction of its chairman, Senator John Watson.

But I just want to ask the parliament to pause on an occasion such as this and reflect on these long-term implications. These bills—in particular the Commonwealth Superannua tion Board Bill—now before the House take this first step towards a real change in culture. What it will involve is $12 million of additional expenditure in 1998-99, $40 million in 1999-2000 and $290 million in 2000-01. That expenditure goes to meet the future obligations of new members of the Commonwealth Public Service and of current members who elect, after July 2000, to take advantage of the choice of fund provisions which are contained in the bill. We anticipate that about 25 per cent of current fund members will take advantage of that opportunity. For that 25 per cent, this bill represents a real step forward in quality of life, in choice, in autonomy and in the capacity of individual Commonwealth public servants to take charge of their own financial affairs.

But it nonetheless leaves untouched the 75 per cent of Commonwealth public servants who are likely to remain in the PSS. Those 75 per cent are dedicated public servants who are on the job today, perhaps even listening to these remarks. They are nonetheless accruing for future generations an obligation to meet their cost of retirement. Previous governments on both sides of the chamber have taken the view that this is simply par for the course. For example, the reports of the Commonwealth Actuary provide a stark contrast to those provided by, for example, the Queensland Actuary. The Commonwealth Actuary will say, `Yes, we do have a $42.6 thousand million unfunded exposure to future taxpayers, but it is not really any great cause for concern.'

He argues two propositions in that regard. The first is what is described as `clawback'. Clawback represents the amount of money notionally which the Commonwealth would be required to spend to meet retirement income costs, most notably pension payments, if the superannuation exposures were not incurred. With respect, Mr Deputy Speaker, this is a case of smoke and mirrors. I suggest that to you because, as I have previously argued in this chamber, the current funding arrangements for pensions in this country are in a very serious state if we look at the long term. Life expectancy in this country has increased by about 25 years over the course of this century, birth rates over the past 100 years have declined by 100 per cent and we are now in a situation of natural decline in numbers—a reproduction rate of about 1.8 per Australian woman.

The long-term implication of that on a pay-as-you-go pension scheme is that the arrangements are completely unsustainable. That means that the pay-as-you-go pension scheme simply takes from current taxpayers this week their tax contribution and immediately pays it out to Australian pensioners. We have given a legislative guarantee of 25 per cent of average weekly male earnings, and I support and applaud that, but over the long run we have to encourage the shift towards self-funded retirement because the demographics are inexorably working in a completely unsustainable way. To maintain current levels of expenditure on current demographics at current levels of benefit without this cultural shift would involve marginal rates of income tax by the year 2020 of about 70 per cent for men and women on average weekly earnings. I think you will agree that that is a completely untenable position. So the Commonwealth Actuary's argument, on the basis of some notional concept of clawback, that we have nothing to worry about because we would have pension obligations in any case is weak.

Secondly, the Commonwealth Actuary refers to a principle which involves looking at the unfunded liability as a proportion of gross domestic product. The argument here is that because it is not increasing rapidly as a proportion of gross domestic product it is not a problem. To build your financial strategy banking on simply the annual growth in the size of the GDP at the expense of every future Australian simply does not cut the ice. We have to take this shift, this generational change which was referred to today by Malcolm Farr, and apply it in the long run to the administration of Commonwealth superannuation arrangements.

This bill takes those first steps. Because of choice, because of the introduction of private sector schemes, you will see for the first time the full funding of those 25 per cent of Commonwealth public servants who elect to take that choice and you will see full funding of all new entrants to the Commonwealth Public Service. We have to now address our attention to the weeping sore of the 75 per cent who remain completely unfunded. We have to look to the long run and recognise that social justice does not mean simply redistribution of resources within the current generation but encompasses our debt and our obligation to the opportunities of future generations of young Australians.

I suggest two things as practical measures we ought to take. Firstly, on the anniversary of the passage of that ignominious piece of legislation, the National Health and Pensions Insurance Act, which ensured we made no provision for each generation of Australians, we ought to pause in this House for a moment's silence and reflect with shame on a tremendously short-sighted and regrettable piece of legislation passed in this chamber with a second reading speech that goes for no more than a column. If you go to the Parliamentary Library and ask for a copy of who voted on that division, they say that it is almost impossible to find from the records anyone who voted for the bill. I can quite understand that; it is a deeply regrettable piece of legislation, which we are all paying the costs for now. I suggest that as a chamber we ought to stop annually and mourn for a moment and give our apologies to future generations of young Australians.

The second and more controversial proposal that I recommend is that we ought to begin making an annual budget allocation, even if small, as every single government department in the Queensland government does to meet the future costs of the retirement of current Commonwealth employees. Even if it will not meet the total costs of the catch-up we need to make up on that $70 billion debt, it will be an important signal to the Australian people that we are clawing back from the black hole, that we are clawing back on track and that we have future generations of Australians in mind when we make our deliberations in this place.