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Wednesday, 2 June 2010
Page: 4954


Mrs MARKUS (12:57 PM) —I rise to speak on the Governance of Australian Government Superannuation Schemes Bill 2010 and associated bills, which seek to amalgamate the management of Australia’s military and civilian superannuation schemes into one new authority, the Commonwealth Superannuation Corporation. At the outset I would like to indicate my and the coalition’s opposition to these bills. I commend the words of the shadow minister for superannuation and the shadow minister for defence personnel, the members for Cowper and Paterson respectively, in this debate so far.

In February this year the Rudd Labor government introduced legislation to merge the management of the boards of six superannuation authorities into one new super authority, the Commonwealth Superannuation Corporation. The CSC is to be managed by a 10-person board comprising five nominees of the minister for finance; three nominees of the President of the Australian Council of Trade Unions, the ACTU; and two nominees of the Chief of the Defence Force. Already the government has announced the preferred choice of the CDF for his nominees on the board as well as the proposed chair of the 10-person board.

One of the characteristics of the way this issue has been handled is the lack of consultation initially between the government and the ex-service community. At the time of the tabling of these bills, not one of the leaders of the major ex-service organisations had spoken to the government about the reforms proposed in these bills. It was only after the coalition applied pressure to the government that an inquiry was held by the Senate Finance and Public Administration Legislation Committee into the measures proposed. During the short Senate inquiry, some 197 submissions were received from ex-service and veteran organisations and individuals, the majority of which strongly opposed the proposed reforms. Most of the submissions highlighted the unique nature of military service. Service in the military is indeed unique and both sides of the House support this concept. It is reflected in the fact that military superannuation has always been separately managed and legislated for.

There are currently two superannuation management boards: the Defence Retirement and Death Benefits Authority and the Military Superannuation and Benefits Board. Together with the Australian Reward Investment Authority, ARIA, which manages civilian public service superannuation, these three boards are scheduled to merge into one new authority. The merging of the military and civilian superannuation boards will forever blur the distinction which exists currently and in the past that defence service is unique service. Military service is unlike any other service in our nation.

The government argues that the consolidation of trustee arrangements is aimed at strengthening governance and providing opportunities for increased efficiency in trustee operations, yet there is no evidence that there will be any improvement provided under the merger proposed by the Rudd Labor government. After tabling the legislation in February, the government began what it called ‘consultations’ with the ex-service community. At an ex-service roundtable, the government warmed—we are told—to the concept of making some amendments which the ex-service community would find agreeable. I am informed that both parties departed reasonably pleased, with the ex-service community of the view that it would receive some concessions from the government at the very least over the way the boards were constituted. This week, however, the government indicated it would make only minor amendments to the bills, simply legislating for consultation in the way nominees are appointed to the board. While the increased level of consultation is a first step, it does not deal with some of the more fundamental issues associated with the bill.

This bill legislates a powerful role for the President of the ACTU in the management of future superannuation liabilities for Australia’s civilian and military superannuants. Under these rules, it will be the President of the ACTU who will have the final say on the appointment of three of the 10 board members on the new board. The three ACTU nominees will be unable to be sacked for poor performance by the Minister for Finance and Deregulation unless the President of the ACTU agrees. It seems the President of the ACTU will have an almost greater say than the minister in how the board is run, especially given at least one of the ACTU nominated board members is required to be in attendance at all times for a quorum to be present. The only guarantee that defence superannuants have in their superannuation being managed with someone with even a sliver of prior knowledge of the unique nature of military superannuation is a requirement that at least one of the two defence nominees is present at any meeting which determines matters about defence superannuants.

There is little protection in reality for defence interests when just one defence representative goes up against three trade unionists. The coalition is determined to be the voice for the veteran and ex-service community on these bills. The sheer number of submissions from the ex-service and veteran community opposing these bills only confirmed our resolve to oppose these bills. With the government indicating that they are not prepared to negotiate and amend these bills in line with the broader wishes of the representatives of the ex-service community they say they consulted with, the coalition will continue to stand firm.

The member for Cowper has already indicated the opposition of ex-service organisations such as the Defence Force Welfare Association and the Australian Veterans and Defence Services Council. The President of the DFWA, David Jamison, said just yesterday:

Reference to the reviews of all ex-service organisations being canvassed at an ESO round table meeting and the purported summary of the outcomes of the discussion is somewhat disingenuous.

Mr Jamison goes on to say:

Unfortunately, despite moving a long way from our original position of total opposition of the amalgamation of the governance structure to try to accommodate the Government’s stated objectives, there has been insufficient recognition of our points in the proposed amendments for us to remove our objections to these Bills as they now stand.

The defence community is understandably very concerned about the erosion of veterans’ and Defence Force personnel entitlements. In their submission to the Senate inquiry, the Defence Force Welfare Association stated:

The special nature of military services makes it necessary for the ADF to design conditions of service that will continue to attract and retain personnel despite the hazards and hardships of military life.

The need to compensate members of the ADF for the unique nature of military service through their superannuation, invalidity and death benefits as with their other conditions of service.

Further, the submission states:

It is important to maintain that relative distinction so that people considering joining the ADF and those already serving can recognise the adequacy of their conditions, given the additional hardships and risks inherent in ADF service. A diminution in the relative value of these benefits could have adverse effects on the ADF’s ability to recruit and retain the personnel it needs to fulfil its functions. This could affect the viability of the ADF workforce as a whole, which would have significant implications for the Government’s ability to maintain its national security policies.

Any alleged administrative savings, indicated at $1 million over four years, or increased returns on investments are welcomed and supported by the veteran community. Equally, ex-service leaders saw value in the pooling of funds to create higher returns for members. But some in the ex-service community wanted additional guarantees that the nature of military service would be protected in these reforms. Amending the bills to ensure consultation has not gone far enough. There is no guaranteed military superannuants subcommittee with appropriate military representation to deal with the unique nature of military claims.

The issue of military superannuation is very close to the heart of the veteran community. There are almost 180,000 veterans and current serving personnel upon whom these bills will directly impact. They are not an insignificant number of Australians.

From opposition, the only pledge that Labor made to military superannuants was:

  • To restore the value of compensation and prevent further erosion due to unfair indexation.

Labor scowled at the then Howard government’s refusal to release the findings of the Podger report, the Report of the review into military superannuation arrangements. When Minister Griffin released the report on Christmas Eve, of all days, in December 2007, he said:

The Rudd Government will provide further opportunity for public comment about the review’s findings and recommendations and will consider its attitude to the report after the consultation period, which concludes on 31 March.

The minister did not say which year that 31 March would be—2008, 2009, 2010 or 2011. Incidentally, the last update of the webpage which refers to the review was on 1 April 2008; the last review of the website was 19 June 2009. We are all left wondering: what is the outcome?

The Podger review was an extensive examination of the military superannuation arrangements in this country. The previous coalition government commissioned the review. At the outset, the review’s terms of reference stated:

Two interconnected principles should guide the conduct of the Review of Military Superannuation Arrangements and form the philosophical context within which the Terms of Reference are addressed. These are the ‘unique nature of military service’ and the need to compensate members of the … (ADF) for that uniqueness in their superannuation, invalidity and death benefits, as with other conditions of service, thereby ensuring that joining and staying in the ADF remain attractive propositions.

With this guiding principle in mind, the report made a number of recommendations. Recommendation 9 stands out, particularly in the context of what we are discussing today. Recommendation 9 says, inter alia:

A single governance structure should be put in place for the DFRDB and MSBS … along the following lines:

…            …            …

b.   There should be a seven member board of trustees comprising two employee representatives, two employer representatives and three independent representatives, including the chairperson.

c.   A committee structure is to be determined by the Board to assist with … the Board’s responsibilities for the DFRDB, MSBS …

Podger goes on to say on page 45 of his report:

For military superannuation … the board needs a blend of experience and knowledge to best serve the military environment, including understanding the unique nature of military service. Therefore, a central consideration of the Review Team is to ensure military superannuation trustees collectively have the legislated skills, knowledge and abilities, as well as an appropriate knowledge of members, ex-members and Defence interests. This, combined with increasing training and development requirements, suggests there are advantages and efficiencies to be gained in forming a single board of trustees with responsibilities for all military superannuation schemes.

Further, he states:

… a unique feature of military service is the denial of the right to belong to a union.

To overcome this, Podger recommended that the Chief of the Defence Force appoint two employee trustees. The report says:

The Head of Defence’s Personnel Executive is best placed to nominate trustees with appropriate skills and experience and knowledge of issues impacting Defence—

with the Minister for Defence appointing the two remaining trustees and the chairperson. Podger says nothing about the ACTU being involved with military super. Further, Podger noted that the Uhrig review’s best practice principles noted that board composition should comprise between six and nine members. This board has 10 members plus a chair. Podger’s proposal was seven including the chair.

Here we have a review specifically conducted to consider the unique nature of military superannuation. Andrew Podger’s review is probably the most comprehensive and contemporary analysis we have of the issues confronting serving and former ADF members. It makes more sweeping recommendations, which the Rudd Labor government has not responded to, including the establishment of a new military superannuation scheme which would be independently managed in the manner described earlier. Labor’s response to military superannuation appears to be the Matthews review. The veteran community is deeply concerned about the findings of the Matthews review and the decision of the Rudd Labor government to largely adopt Trevor Matthews’s findings as they relate to military super.

Superannuation is an issue of great importance to all Australians, and particularly to those in the Australian defence forces. Again referring to the Podger review, at least two in five of all serving Defence personnel believe that military superannuation arrangements influence their decision to remain in the ADF at least partially. This is a powerful reason to maintain an appropriate level of Defence Force influence in the management of defence superannuation. If the Rudd Labor government are using this bill as a means of avoiding making other tough decisions for military superannuants, I fear they will face very stiff opposition indeed from the veteran community. The coalition does not support the inclusion of ACTU appointed delegates on a board managing civilian, and particularly military, superannuation. We will oppose these measures in the House of Representatives.

In conclusion, I extend my thanks to the leaders of the ex-service community who strongly encouraged participation by their members in the Senate inquiry—in particular, the leadership of the DFWA in explaining their opposition to the bills and coming before the Senate committee. Our ex-service community is well served by the leaders who represent them. It is disappointing that the Rudd Labor government picks and chooses when to listen to them and take them into its confidence. It seems that, just as with the resource super profits tax, which involves postannouncement consultation and $38 million in after-the-fact taxpayer funded advertising, the Rudd Labor government is unable to appropriately consult with key stakeholders to negotiate a mutually beneficial outcome for all concerned. The amendments proposed by the government to these bills do not go far enough. Had the government’s amendments responded more fully to the concerns of all in the ex-service community, debate today might have taken on a different flavour.

Once again I indicate my opposition to these bills. I call on those members and senators who believe that military service is unique to similarly oppose these bills. The Rudd Labor government has provided no justification for the measures in these bills. They have not consulted widely enough with the ex-service community on these bills other than a bit of shadow-boxing around the edges. After the release of the proposed amendments this week, the coalition asked the ex-service community for their views. They remain concerned about the bills even in their amended format. On this basis and in support of our original view, the coalition will stand up for veterans and oppose these bills.