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Thursday, 4 December 2008
Page: 8140

Senator MINCHIN (11:52 AM) —I rise on behalf of the coalition to speak on the Nation-building Funds Bill 2008, the Nation-building Funds (Consequential Amendments) Bill 2008 and the COAG Reform Fund Bill 2008. These bills provide the legislative framework for the government’s budget announcement to create the Building Australia Fund, the Health and Hospitals Fund, and the Education Investment Fund. The COAG Reform Fund Bill provides the government with the mechanism for channelling funding to respective state governments.

The BAF, as it is known, is aimed at providing capital investment in transport, communications, energy and water infrastructure. The fund will have an initial capital of $12.6 billion. This figure comprises $7.5 billion from the 2007-08 Howard government surplus; proceeds from the second instalment of the sale of T3, thanks to the then finance minister and courtesy of the Howard government, and of course opposed by Labor at every step of the way; and the balance of the coalition’s Communications Fund, another Howard government initiative.

We need only look at the government’s budget announcement to determine the initial aspirational level of this Building Australia Fund. According to the government’s budget announcement:

The Government will commit funds from the 2007-08 and 2008-09 surpluses, once realised, to the BAF bringing total funding of the BAF to $20.0 billion. A proportion of future surpluses may be allocated to the fund as appropriate.

It seems very clear to us and the general public that this Building Australia Fund, or BAF, will not even have $20 billion, let alone any greater sum. Of the $12.6 billion currently available, no less than $4.7 billion, approaching half of the fund, is already committed to Labor’s mythical national broadband network, leaving only $7.9 billion in the Building Australia Fund, which, frankly, is not going to go very far at all. Indeed, $7.9 billion is the equivalent of 10 days of federal government expenditure. So the reality is that with the disappearance of future surpluses, as revealed by this new government, and indeed the very real prospect of the budget going into deficit under the Rudd government, these funds really will not amount to much at all. Indeed, it appears that the government has now become so desperate that we read in today’s newspapers that it is considering setting up its own nationalised bank to help bail out the Labor state governments, which so criminally wasted the last 12 years of economic prosperity, having absolutely nothing to show for it, and are now coming to the Rudd Labor government to be bailed out.

This contrasts with the fact that the coalition government, just 12 months ago, left Australia with a strong and growing economy. Over our period in office, without any assistance whatsoever from the other side, we repaid Labor’s $96 billion in debt, saving the Commonwealth no less than $8 billion per year in interest payments, and left Australia with a $20 billion budget surplus. We fully provided for the Commonwealth’s $96 billion in unfunded superannuation liabilities by establishing the Future Fund, again ultimately saving the Commonwealth some $4 billion per annum. I am personally very proud to have worked with the then Treasurer and to have had ministerial responsibility for setting up and operating the Future Fund, one of the great achievements of the Howard government. The coalition left government with the strongest economy in Australia’s history and one of the strongest in the world. Labor is only able to deliver the funds it now proposes to establish because of the fiscal prudence of the coalition government.

The bills before us give the Future Fund board responsibility for managing the investments of the three funds. It was the coalition that established that board and appointed the current members to it, so we are, of course, fully supportive of the proposed role for the Future Fund and its board, and we are relieved that Labor’s hands have not yet stretched to raiding the Future Fund.

Prior to the last federal election, and with all of that $96 billion of Labor debt repaid, the coalition were able to invest in Australia’s future not only through the Future Fund but also through the Higher Education Endowment Fund and the announcement of our Health and Medical Infrastructure Fund. We created those funds in government to help build Australia’s future, and they were the dividend from 11½ years of strong economic management, the complete repayment of Labor’s debt and the provision for our unfunded liabilities.

I turn now to the funds proposed to be established by Labor. Apart from the Building Australia Fund, the first is the medical infrastructure fund. As I said, this builds on the announcement by the coalition prior to the last election of the establishment of our Health and Medical Infrastructure Fund. The fund we proposed to establish was to commence with an investment of $2½ billion from the 2007-08 surplus and would have been added to with the sale proceeds from the privatisation of Medibank Private, which was our government’s policy and would have occurred under our government. Now, of course, the new Labor government has denied access to that source of funding by abandoning the proposed sale of Medibank Private Ltd. It apparently believes that we should have money tied up in a private health insurance business rather than made available for a fund of this kind, a remarkably odd set of priorities. The capital of the Howard government’s fund was to be preserved in perpetuity and the earnings made available for new capital and medical facilities such as surgical theatres and high-technology medical equipment. This was a very, very important commitment by the coalition that would have strengthened our investment in health initiatives both now and in perpetuity.

Labor’s Health and Hospitals Fund, mirrored by the coalition’s fund and established under this legislation, is being funded from prospective budget surpluses. Initially anticipated to be $10 billion, $5 billion of the fund will be delivered from the Howard government’s 2007-08 budget surplus, and of course the remaining $5 billion is now highly questionable as it was anticipated that it would flow from the 2009-10 surplus. The important point to note is that this fund is not preserved in perpetuity under Labor’s plan and is entirely dependent on Labor running future budget surpluses for it to continue. Given Labor’s history on this matter and their current willingness to abandon fiscal prudence, fiscal surpluses are very far from certain.

Of course, this same issue applies with the government’s proposed education investment fund. Again, this is built on a coalition initiative. I remind the Senate that in the 2007 budget the coalition announced the establishment of the Higher Education Endowment Fund. That fund was a $6 billion investment by the coalition. Again, the capital of that fund was designed to be preserved in perpetuity and its earnings available to build first-class facilities for universities and the education system in perpetuity. As I mentioned, the HEEF, as it is called, is a perpetual fund with the capital to be retained and the earnings spent for capital works and research facilities in our higher-learning institutions. It was warmly welcomed by the higher education sector. It was an ongoing investment by our government in the future of education. It is important to stress that the capital of that fund was to be preserved, not spent, to provide a permanent source of ongoing funding from its earnings—again, in perpetuity.

We see no ongoing commitment from the new government to retain the capital balance in their education fund. Any ongoing benefit from the fund relies on what are increasingly looking like mythical future surpluses. In the government’s budget papers this year, the government said that, on top of the $6 billion in the HEEF, the government will commit a further $5 billion from the 2007-08 and 2008-09 surpluses, once realised, to the EIF, bringing total funding to over $11 billion. A proportion of future surpluses may be allocated to the fund as appropriate. Again, we will have to await the next budget to determine whether there is any funding available for this fund.

Before touching on the raid on the Howard government’s Communications Fund that is also proposed in these bills, I want to touch on our concern about how state Labor governments are going to see these funds. The Parliament Library Bills Digest for the Nation-building Funds Bill states, I think most appropriately:

The states and territories are likely to welcome the three Funds, first because it will be the Commonwealth—and not the states—funding projects and secondly, because the states will see scope to shift costs on the Commonwealth. In other words, expenditure from the Funds may, to some extent, substitute for state and territory investment rather than add to overall investment.

The coalition is extremely concerned about these funds resulting in cost-shifting by the states, particularly in debt-ridden Labor states like New South Wales. If that occurs and there is no mechanism to prevent it, it will result in no net new investment whatsoever. All we will have is the Commonwealth substituting for the broken-down state Labor governments shifting their costs to the Commonwealth.

This legislation, as I mentioned, also closes the Howard government’s Communications Fund. The coalition remains totally opposed to that proposal. The coalition established the Communications Fund in 2005 so that the future of rural and regional telecommunications would be secure. The legislation that established the fund was considered by the Senate at the time of the 2005 Telstra sale legislation. The fund is, again, a fund in perpetuity, with the capital maintained and the ongoing income—expected to be $100 million a year—invested in rural and regional telecommunications.

The Communications Fund was established to fund the government’s response to the recommendations of the Regional Telecommunications Independent Review Committee. The committee was required to commence its first review before the end of 2008, and that occurred under the chairmanship of the highly regarded Dr Bill Glasson. Last September, under the former government, the parliament passed legislation to ensure that the principal of the Communications Fund would not fall below the $2 billion figure and to protect the fund from misuse—as, frankly, was clearly threatened, and is now delivered by the Labor government in these bills.

Earlier this year, the minister introduced legislation to raid the Communications Fund. The bill was referred to a Senate committee for examination but was subsequently withdrawn when the government announced its last-minute budget night plans for this trio of funds. The Rudd government’s proposed amendments to the bill, consistent with the bill from earlier this year, will remove the safeguards that we sought to have in place and constitutes a raid on the Communications Fund. In its submission to the Senate inquiry into the initial legislation to abolish the Communications Fund, the New South Wales Farmers Association appropriately stated:

… any withdrawal, dilution or diversion of the fund and any future interest earned, could have devastating consequences for farm businesses, farm families and rural communities. The fund must be continued, with firm commitments set in place to ensure that current and future telecommunications technologies are available to all Australians in an affordable and timely fashion.

Coalition senators recommended back in April, when the initial legislation was considered, that the bill not be passed and that all moves to strip the Communications Fund be opposed. That remains the coalition’s position. The fund was established by our government and we will oppose Labor’s abolition of the fund as it clearly puts at risk future and in perpetuity investment in telecommunications in our rural and regional areas.

Overall, we are not going to oppose these bills, nor are we going to oppose the fast-tracking of infrastructure spending, which the government has indicated a willingness and enthusiasm for. But we do propose a number of very important amendments: to establish a parliamentary joint committee on nation building; to ensure transparency by ministers in relation to these funds; to preserve the Communications Fund; and to involve the Productivity Commission in assessing the productivity benefits of spending from these funds and the potential for cost-shifting by the states in relation to expenditure from these funds—a risk we see as very high. We also will move amendments dealing with the issue of whole-of-life costs associated with expenditure from these funds. These amendments address significant gaps in these bills, and we earnestly hope the Senate will support them.