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Finance and Public Administration Legislation Committee

FAWCETT, Ms Rebecca, Director, Legal and Industrial, Community and Public Sector Union [by video link]

MITCHELL, Mr Joseph, Workers' Capital Lead, Australian Council of Trade Unions [by video link]

TULL, Mr Michael, Assistant National Secretary, Community and Public Sector Union [by video link]

CHAIR: I now welcome representatives from the Community and Public Sector Union and from the Australian Council of Trade Unions. Information on parliamentary privilege and the protection of witnesses in giving evidence to Senate committees has been provided to you. I now invite you to make a short opening statement, and at the conclusion of your remarks senators will ask you questions. We'll start with the CPSU.

Mr Tull : Thank you for the opportunity to appear before the committee. The CPSU represents the people working in the Australian Public Service. It is our submission that the removal of the Future Fund Management Agency from the coverage of the Public Service Act should not be supported, and we say that for these reasons.

First, removing the agency from the act has impacts beyond the agency. It reduces the scope of the APS and could reduce the status and standing of the APS. This could make the APS a less attractive employer and runs counter to the APS Workforce Strategy 2025 objective of a 'compelling EVP'—employee value proposition—'that is well positioned to attract top Australian talent to choose a career in the APS.

The second issue is that removing Public Service Act coverage could weaken important Public Service principles such as the merit principle and the employment principle.

Third, a case has not been made for removing Public Service Act coverage. CPSU notes that the explanatory memorandum for the bill addresses the issue in only very general terms, while the Department of Finance submission to this inquiry suggests that having access to individual contracts is the rationale to remove. That argument ignores the fact that the fund already has all of its employees on individual contracts under the Public Service Act. Further, the Australian Public Service Commission is currently undertaking a review of APS classifications, and that review may well result in proposals that could assist the fund.

Fourth, there are issues with pay and conditions in the APS, but these are caused by the government's own workplace bargaining policy, not the Public Service Act itself. It's the bargaining policy that is the barrier to the Future Fund and other agencies offering employment conditions necessary to attract, retain and reward staff. The bargaining policy has delivered real wage cuts, wage freezes, pay rise deferrals and caps to wage growth, all of which have impacted on the capacity to recruit, retain and reward staff. Further, the latest APS wage policy links APS wages to the wage price index, denying APS agencies and employees the ability to negotiate a wage increase and creating deep uncertainty around future wage increases. This is what the CPSU refers to as 'mystery pay deals' in the public sector.

The Commonwealth bargaining policy also creates major issues for workplace conditions. The Public Service used to have a competitive advantage on working conditions, offering innovative and leading working conditions that were a central part of the employment offer of the APS. Those innovative conditions, especially around flexible working conditions, were achieved through enterprise bargaining. Now, however, the no-enhancements rule in the current bargaining policy prevents agencies from continuing to adapt and improve on the non-monetary package available to APS employees. This sees APS working conditions actually stuck in time. We can't improve them. This undermines our competitive advantage on working conditions and limits the ability of the APS to compete with the private sector. The risk here is that the APS will fall behind the private sector employers as they increasingly adopt flexible working arrangements and other innovative working conditions to promote gender balance and attract and retain employees. We draw the committee's attention to the fact that these problems with the bargaining policy have been raised by other agencies that also seek to attract staff that work in the financial services industry—for example, the Australian Prudential Regulation Authority, APRA, and the Australian Securities and Investments Commission.

The fifth reason is that removing the fund from Public Service Act coverage will not solve the bargaining policy problem, as the bargaining policy will continue to apply. The Commonwealth's workplace bargaining policy applies equally to non-APS agencies, not just those covered by the Public Service Act, unless those agencies obtain an exemption. Unless bargaining policy constraints that limit improvements in wages and conditions are removed, the ability to offer salary and conditions that match market conditions will be a challenge. Removing the Public Service Act from coverage will not solve that problem.

Issue 6 is that the Finance submission to the inquiry suggests that the fund could reduce the employment conditions for new employees after the fund is transferred out of APS coverage, a fact that runs counter, of course, to the general proposition that is being advanced here that the change needs to be made to improve conditions.

For all those reasons, we submit that removing Public Service Act coverage will have negative impacts while not actually addressing the issues canvassed in the bill.

Finally, moving from the employment provisions to the FOI exemption, the CPSU does recognise the issues around FOI in relation to the investment activities and positions of the fund. The ACTU has made that case very well. It's our submission that FOI exemptions should be for those sorts of commercial sensitivity reasons alone and not be more broadly cast. If the committee has any questions, we'll be happy to try and answer them. Thank you very much.

CHAIR: Thank you very much. We'll have an opening statement from the ACTU.

Mr Mitchell : Thanks, Chair, and thank you for inviting us to appear today. The Investment Funds Legislation Amendment Bill has two objectives of concern to the union movement. The first is the proposal to exempt investment activities from the Freedom of Information Act, and the second is the removal of the Future Fund from the Public Service Act, awarding significant power to the chair of the Future Fund over appointments and pay and conditions for Future Fund staff, as just discussed by the CPSU. These two provisions of the bill have serious impacts for the transparency and accountability of the Future Fund as well as the prudence with which it is governed.

We understand that purpose of the Future Fund's seeking an exemption from the Freedom of Information Act is to ensure that it does not compromise its investment activities. Unnecessarily disclosing the value, intentions and holdings as a significant investor can lead to detrimental outcomes for the beneficiaries of the fund. The government makes the case for the exemption of investment activity of the Future Fund from the FOI laws, stating that appropriate disclosure of a highly detailed and prescriptive nature could present 'the risk of negative impacts on investment outcomes, reduce access to investment opportunities and could also prejudice investment managers in their dealings with other market participants'. But the Treasurer, despite signing off on this bill at cabinet, has contradictory draft regulations which would require detailed and highly prescriptive disclosure for superannuation funds. The Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021 would require superannuation funds to disclose internal valuations of unlisted assets and even derivative positions, potentially risking—to paraphrase the explanatory memorandum of this bill—negative impacts on retirement savings of working people and reducing their access to investment opportunities.

While the principle of the FOI exemption is sound, its blanket exemption for all investment activities by the board and the agency may be unnecessarily broad to achieve its objective. The Future Fund is an investment vehicle, so surely everything it does is an investment activity. Any Australian should expect some restraint to ensure its operations are not opaque to public transparency and scrutiny.

While the CPSU has discussed our jointly held concerns with the proposal to remove employment conditions and classifications for workers of the Future Fund from the Public Service Act, the ACTU would like to highlight a particular set. The government has a fondness for placing politically aligned people into high-paying public sector roles without merit and with little oversight. By handing this apparent unilateral ability to appoint people to the Future Fund to the chair, Peter Costello, and removing the regime of procedural fairness from the Future Fund, we are concerned that this could be another publicly funded vehicle for plum posts for former Liberal Party politicians, staffers and ideological allies.

Further, the proposal to align the norms of the Future Fund with those of the financial services sector is chilling. This is a sector not two years out of a royal commission. Its culture was epitomised by charging fees to dead people, opening fake accounts for children, countless breaches of money laundering and terror financing laws, and systemic rorting of working people's retirement savings for profit. It is not a sector whose norms should be emulated, as stated in the explanatory memorandum. We welcome the opportunity to answer any further questions you may have.

CHAIR: Thank you.

Senator AYRES: Thanks, CPSU and ACTU, for your submissions and opening statements. I want to start with the CPSU. On the bargaining policy, or the government's approach to bargaining on wage setting in the Public Service: you said that it is hampering the capacity of agencies to recruit staff. I suppose it's an admission of failure here that the government is trying to move this agency out, but are there other agencies where there is a similar experience?

Mr Tull : The bargaining policy, in particular on wages, is certainly a barrier to agencies settling appropriate working conditions with their employees. It is definitely a barrier to the APS making the most compelling offer it can to prospective employees in a very competitive market, in particular for high-demand jobs and specialist positions.

Senator AYRES: It's undermining APS capability here in the Future Fund. I assume the fund is at least admitting, and the government is admitting, it is undermining capability here. What about for other groups of employees across the APS, like ICT and other specialist positions?

Mr Tull : Yes, the government is admitting here that the rules it is applying are a barrier to employers offering appropriate wages and conditions. The problem with this bill is that it does not solve that problem; the bill itself notes—and this is in the explanatory memorandum and the various submissions—that the bargaining policy will continue to apply. It is the bargaining policy that is the problem, not the Public Service Act.

To the second part of your question: yes, we see this problem in other places. We have already seen ASIC and APRA, in capability reviews of those organisations, both say to government that the bargaining policy was a barrier and a problem for them in settling appropriate paying conditions.

The follow-on from that, and the broader point, is that the Future Fund is not alone in this problem. All across the public sector there are occupations—you noted ICT workers; they're a particular category. There will be other specialists as well, but ICT workers are worth noting. There are some tens of thousands of ICT workers in the APS, and the APS does struggle to match employment conditions and to be competitive in those markets, because of the operation of the bargaining policy.

Senator AYRES: That's the challenge for particular agencies and particular specialist positions, but it's true, isn't it, that it's a very new development that public sector wage outcomes are now sitting behind private sector wage outcomes? And this is in an environment where wage growth is at its lowest in recorded history.

Mr Tull : Rebecca Fawcett, do you want to perhaps pick that one up?

Ms Fawcett : We have a problem with low wage growth in this country, which predates the pandemic. This policy, which for the first time caps public sector wages to the annual, seasonally-adjusted Wage Price Index for the private sector, as published at the June quarter each year, effectively locks in that low wage growth across the Australian labour market. It does it for APS employees by pegging it to that very low rate, which is historically low and has been low for a very long time, but it also flows on to the broader labour market because of the macroeconomic effects of public sector wages. So it's a problem for APS workers but also workers everywhere that this policy locks in that low wage growth.

Senator AYRES: So the Morrison government's approach to wages in the public sector is dragging public sector wages backwards, but it's also dragging the wages of all Australians backwards?

Ms Fawcett : That's right. That's a good summary. It's effectively a race to the bottom on wages. We've already seen that the government effectively admits that the policy is unworkable. It was forced to completely abandon the wages cap in Australia Post, recently granting Australia Post an exemption from the Wage Price Index mystery pay cap. You can't manage a workforce by telling them that they won't know what their wage outcomes will be for the next three years. So we say that, yes, it was right to abandon the wages cap in Australia Post but that now the government should be abandoning the wages cap for the entire federal public sector.

Senator AYRES: Is the classification structure itself an impediment to agencies like the Future Fund being able to attract and retain properly skilled staff?

Ms Fawcett : It appears not. The Future Fund Management Agency already adopts a number of workarounds to attract and retain employees, in terms of pay. That said, though, the APS is currently conducting a review of the classification system. We say there are a number of measures that the APS needs to adopt to enable it to attract and retain employees with specialist skills and employees in tight labour markets. The union has made a recommendation about a suite of measures that should be adopted in that regard. One measure that should be adopted in the APS, for example, is work level standards that accurately capture specialist and technical skills. Too often we see that specialists and technical employees are left behind in work level standards, and the career paths that are available to them under the classification structure are limited in some agencies. There are a range of measures that the APS should be adopting to improve the way its classification system provides for career paths for specialist employees.

Senator AYRES: So there is a process coming to recommend some changes to the structure itself but it's essentially the lack of flexibility in the wage-setting arrangements that is driving the problem?

Ms Fawcett : Yes, that's part of the problem. The other key problem with the bargaining policy is with conditions, as Michael outlined in his opening statement. The bargaining policy is incredibly restrictive when it comes to the conditions package that agencies can offer their employees. The public sector can't always compete on pay. It has highly skilled lawyers, scientific specialists and ICT professionals who can, frankly, earn a lot more in the private sector but they come to the public sector because they want to do good work in the Australian Public Service. The conditions package that the APS can offer is critical for attracting and retaining those employees, but unfortunately the bargaining policy places really strict limits on employees innovating on the conditions package with their agency and the [inaudible] rule effectively freezes conditions. It means agencies have their hands tied behind their backs. They may want to negotiate on innovations like working from home and various flexibilities but they are subject to strict veto by the Australian Public Service Commission. So that natural advantage on conditions that the APS had in the past, where it innovated on flexible working arrangements and paid parental leave and attracted great professionals to the APS, has effectively been forgone by this bargaining policy. It really places a strict limit on the ability of the APS to use that great conditions package to attract the skills it needs for the future.

Senator AYRES: So your overall view is: fix the bargaining framework rather than exclude problematic agencies from the APS?

Ms Fawcett : That's right. This a problem in these agencies, but it's a problem in all agencies. The policy is unworkable right across the board.

Senator AYRES: There is a set of values and a culture that sit within the APS. What impacts do you predict removing the Future Fund from the APS will have?

Mr Tull : There are a couple of things there. Firstly, we've already seen ASIC and APRA removed from coverage by the Public Service Act and now we are seeing the Future Fund being removed. It's a whittling away or erosion of the scope of the public sector. It's sending a strongly negative message about the status and standing of that very important institution, so we are very concerned about that. As we have said, the proposed solution in this bill won't actually solve the problem that it's purporting to.

To go to the second part of your question, while the bill talks about personal obligations around picking up some of the important principles around merit and so on, there's no way for us to be sure that those things will be the same. The bottom line is that it has been removed from the Public Service Act. It will be removed from not just the rules and regulations, as important as those things are, but all of the cultural norms and those things. The ACTU's made some comments around their concerns, which we share, in particular around the merit principle. We are quite concerned about any reduction in the merit principle across the service, and that's what this bill provides, essentially. Removing the Future Fund from the coverage of the act means that that most fundamental principle that every public sector employment decision is made on merit and that those decisions are available to all citizens will be removed or will be weakened. That should be a concern, I think, for all of us.

Senator AYRES: Mr Mitchell, if the APS code of conduct, APS values and all of those sorts of things are thrown out the window here, what is the regulatory framework that the fund will operate under? Will it just sit like other financial organisations under the APRA framework? How does the bill propose the operation of the fund be governed?

Mr Mitchell : The bill expressly gives the power to the chair to set the values and the code of conduct for the Future Fund. It gives the chair, at least as the bill is written, unilateral scope to set the values in whatever frame that they see fit. When it comes to what regulations this sits under, I think the CPSU would be better placed to answer based on their experience with APRA and ASIC. But, if the stated objective is to better align the Future Fund with the norms of the financial services industry, it's a really problematic objective.

Senator AYRES: I'll come to that point in a moment. I want to understand what is—if you are a superannuation fund or a bank, your regulatory framework is pretty straightforward. Will it just be the same? What's envisaged here?

Mr Mitchell : The Future Fund is an investment vehicle, so it doesn't have any industry codes of conduct or standards of practice that banks or superannuation funds have. Superannuation funds have the governance code. The banks have the ABA's banking guide—I cannot remember the name of it, but they essentially have a standard governance framework they operate under. Investment funds like Macquarie Asset Management don't have an industry-wide code of conduct at all; it's a blank slate, really, to achieve what they would like.

Senator AYRES: So the chair of the agency unilaterally sets the code of conduct. I assume then, Mr Tull or Ms Fawcett, that means appointments are a matter for the chair?

Mr Tull : Yes, that is what the bill provides, that the chair will make appointments and put in place policies to do so.

Senator AYRES: So there is nothing to stop the chair making political appointments or appointments that aren't based on merit?

Mr Tull : As I understand it, the fund and the CEO would still be subject to the PGPA Act, which does set out some detailed requirements around the operation of the organisation, but that is not a substitute for the merit principle as it is in the Public Service Act.

Senator AYRES: Yes, and there are real issues that arise here. Mr Costello holds a number of other board positions. It's likely that, if the government replaces Mr Costello at some point, or a future government replaced Mr Costello at some point, the person who holds that position would be likely to be a person who holds other board positions in other organisations, so at the very least conflict of interest requirements are crucial here. Does the governance framework that's envisaged effectively deal with conflicts?

Mr Tull : That is not clear to us.

Senator AYRES: It's up to the chair?

Mr Tull : It is certainly up to the chair. The chair will need to establish some policies, but that is really the extent of it. It is very different from the arrangements that are in place now under the Public Service Act, which are very clear, very well known, and subject to a whole range of institutional norms and practices. The long-term culture of the act gives us all some confidence and safety in the conduct of the organisation.

The other thing I'd note is that the other agencies that have been moved out of the Public Service Act for ostensibly similar sorts of reasons—because they're in the finance industry, like ASIC and APRA—are very different organisations to the one that we are discussing today. In those organisations, you're not coming into one of those jobs while you're also holding board positions or directorships elsewhere and so on.

Senator AYRES: So in terms of conflicts, there is a live issue there. In terms of issues like bonus arrangements, shifting across to a finance industry set of norms is radically different, isn't it? There's the bonus payment structure that Mr Mitchell raised. In Macquarie Investment Management, or any other investment vehicle, there are bonus arrangements, lavish hospitality et cetera. It's a very different culture in the finance sector, isn't it?

Mr Mitchell : It really is. The finance sector is used to a for-profit model, which is that the money of the finance industry, of those investment corporations, is open to spend on staff and on excessive bonuses. The Future Fund is taxpayers money. This is our public sovereign wealth fund, and if we were to replicate the sort of culture that sees extravagant parties and excessive bonuses linked to short-term incentives then it is a problematic precedent to set. As far as we can tell—from very, very far away—when it comes to some of these investment corporations, an increasingly a large proportion of their salary is made up of bonuses for hitting very easy-to-hit targets that they seemingly hit every year.

Senator AYRES: And it's in an environment where the chair and the governing arrangements determine each other's—the only thing that's stopping it is effective management from the chair and public sector oversight. That's the arrangement now. Removing one of those planks will leave that in jeopardy.

I do want to ask a question about the freedom of information issue. Mr Mitchell, I think you were quibbling with the extension of that perhaps too general application of those principles in a way that reduces accountability and transparency. But, I think I heard it from your submission that you support the imperative that's driving the government's decision here, which is to allow the fund to not disclose every position and investment valuation.

Mr Mitchell : Yes. The principle behind the freedom of information exemption is sound in that there are commercial-in-confidence or investment valuations that are held by the fund which probably should not be disclosed to the public, and which, if their disclosure was made public, could potentially risk those investments. It's an argument that the union movement has a concern with, because a similar regulation is being put by government—

Senator AYRES: I understand that point. Let me just slowly lead you there, if that's alright. It's commercially vital, isn't it, in order to protect public money in a commercial environment, that the value of individual assets is not disclosed. You can't protect public money any other way.

Mr Mitchell : There are really problematic disclosures that could be made. Derivative positions are a really good example, where competitor investors can engage in arbitrage over your derivative positions and drive up the cost of your investments. That's a particularly live example. Unlisted asset valuations where the owner holds an informational advantage over the potential buyer means there is more upside as the owner, and that you could potentially vanquish and get rid of if your internal valuations provided potential buyers with an anchoring price. It really could destroy some value for taxpayers if things were unnecessarily disclosed.

Senator AYRES: And these funds are—I think you describe them as equivalent to sovereign wealth funds, but they're a little bit different to that, aren't they? They are directed towards a particular purpose, aren't they?

Mr Mitchell : Yes. The bulk of the Future Fund's assets under management offset the liability from Commonwealth defined benefit schemes, but obviously there are subfunds in there, like the medical research fund, the northern Australia fund—all sorts of funds that satisfy policy commitments of the government. Each of these have direct beneficiaries; they are the ultimate payers of this cost.

Senator AYRES: So, in this environment, the government is acting prudently, because to allow individual assets' value to be disclosed, at least in the two cases that you've outlined, would not just undermine returns but—it's a little bit more fundamental than that, isn't it?—undermine what are effectively taxpayers' public Commonwealth resources. If that is the right position in terms of public resources, why is it that the government, in your view, is taking completely the opposite approach to Australians' funds that are held in superannuation?

Mr Mitchell : It's really baffling. It's a completely incoherent position that, on the one hand, the Future Fund and the government's policy priorities get treatment which is relatively sensible, and, on the other hand, workers' retirement savings are put at risk with these similar, nearly identical, unnecessary disclosures which could be put. If it's good for the Future Fund, it's good for workers' retirement savings, and that should be the principle that the government takes. They haven't made the case as to why all of this commercially sensitive information that workers' retirement savings are contingent upon is necessary to disclose, compared to the commercially sensitive information that the Future Fund is reliant upon. So we expect some coherence with government policy here.

Senator AYRES: Well, that was my last question. It's obvious that the government's approach in this area is different from the government's approach in its proposed approach to industry superannuation because the government is determined to damage industry superannuation.

Mr Mitchell : I agree with you, but—

Senator AYRES: That sort of hyper-ideological approach to that area of policy does have another consequence, doesn't it? If the government's approach to financial regulation is inchoate, it has confidence impacts on the rest of the sector, doesn't it?

Mr Mitchell : Definitely. People should be expecting an apolitical approach to governance here. But the corporations regulation amendment doesn't just apply to some parts of the sector; it applies to every worker's superannuation fund, apart from SMSFs, and it could lower the opportunities for people who are invested with any sort of large superannuation fund. But they do have an—often stated by members of this government—ideological objective to destroy superannuation and to hamper the ability for workers to retire well. It's something that we've come to expect, but—

Senator AYRES: And it'll mean reduced returns for self-funded retirees if asset classes are required to be disclosed?

Mr Mitchell : Reduced returns and reduced opportunities to get into new investments. So one of the key points that the explanatory memorandum makes is that unnecessary disclosure limits the ability of the Future Fund to participate in some investment opportunities. That would be true if the corporations regulation amendment were to be put; it could limit the ability of workers to get higher returns, and that would mean that not just self-funded retirees but anyone with a superannuation balance will retire poorer.

Senator AYRES: It will be interesting to hear more about this point from other witnesses as well, about how far the FOI exemptions go, but, on this point, it is the right position that the government has adopted here. It's consistent with the currently existing approach in superannuation. It's just that your argument is that they should be consistent because it's in the interest of continuing to generate decent returns. I don't have any further questions. Thanks very much, everybody.

CHAIR: I have a couple of questions to finish up with the witnesses in this session. I've got quite an interesting speech here that the Hon. Lindsay Tanner gave, when he was finance minister, at the Press Club in November 2009, in which he said that the then Labor government would be working with the Future Fund to examine options for an alternative employment framework which could allow Future Fund employees to be removed from the coverage of the Public Service Act. He goes on to say that this would aim to reinforce the independence of the board and still provide the relevant values and standards for the agency. Were you aware that this was an objective of the former Labor government?

Mr Tull : Yes. I discovered that in some recent research.

CHAIR: Do you agree that, in effect, what Mr Tanner was saying about the importance of the Future Fund's independence, particularly if we do remove the coverage of employees under the Public Service Act, would effectively be achieved by the changes that are set out in schedule 1 of this bill?

Mr Tull : I don't agree for two reasons. One, I've only seen a short reference to something that the former finance minister said in a speech, and I'm not aware of any further work that was done on that. I'm not saying it didn't occur, but I'm not aware of it. Second—

Senator AYRES: Can I just ask what year that was, Chair?

CHAIR: The date I have on the speech in front of me is 25 November 2009.

Senator AYRES: I was in my 30s then. That's fantastic!

CHAIR: Thank you for sharing that with the committee.

Senator AYRES: That was a long time ago—early 30s, probably.

Mr Tull : The second point I'd make, Chair, is that, as we said in our submission, there's nothing in the bill, the explanatory memorandum, the submission from the agency itself or the submission from the Department of Finance that makes a case in any way for the need to remove these people from the coverage of the Public Service Act. The term 'independence'—independence in what? They already have pay and conditions that are quite different to many other parts of the public sector. Again, I'd draw your attention to the fact that the Department of Finance submission to this inquiry gives the need to use individual contracts as it's central rationale for removing people from the Public Service Act. We'd make the obvious point that all of the staff of the Future Fund are already on individual contracts. The case is just not made.

CHAIR: If you're looking for a place where the case is made, I'd suggest you have a look at Mr Tanner's Press Club speech that I'm referencing here. The second reading speech of the bill does identify that the new employment framework will provide more operational flexibility to the Future Fund by being outside the Public Service Act. It references that that would be similar to the way that other Commonwealth agencies, such as ASIC, APRA and the RBA, operate. Let's look at those three examples. Would you think that ASIC, APRA and the RBA should all have their employment frameworks within the Public Service Act as well?

Mr Tull : Yes, we think that would be preferable. In saying that, we note that there are problems for those agencies, and in fact many others across the public service, and those problems are caused by the application of the bargaining policy, not the act. Both ASIC and APRA themselves made that point very clearly in their submissions and their evidence in the capability reviews for both of those organisations. They both said very clearly that it was the bargaining policy that was the problem. Again, we'd make the point that removing this fund from recovery to the Public Service Act doesn't solve that problem, because the bargaining policy will still apply. We talk about being independent. We seem to put some value on being independent of other things in setting their employment conditions. The bargaining policy will still apply, and a key feature of that bargaining policy at the moment is that there is no negotiation on wage rises. Those wage rises are pegged to the private sector part of the Wage Price Index, which is currently at historic lows. It's an index so it changes year to year.

In my opening statement I referred to mystery pay deals and what's happening across the public sector right now where employees and agencies are going into enterprise bargaining at the moment and they cannot tell employees what the pay outcome will be for the second and third years of their agreements. They just don't know. It's a mystery. It depends on an index that you have no control over, that is unrelated to the operation of your organisation and that has no linkage to the productivity of the organisation that's making the agreement. I don't imagine that's the independence that anybody was thinking about. I can't see how that fits. Again, a fundamental problem here is around the bargaining policy.

The other point I would make is that with these arrangements that we need to put in place, we've been focusing, as we should be, on the capacity of public service sector agencies to make an attractive and compelling employment offer so that they can retain and attract highly skilled staff, and that's very important. The other thing though, of course, is it is the public sector. We also have very high expectations from the public about our transparency and accountability. One of the things that concerns us here is that removing this fund from the coverage of the act will see a reduction in those things—that is to the detriment of the fund itself and to the good standing of the public sector more broadly.

CHAIR: Thank you for that. I do want to go on very briefly—I'm wary we are going a little bit over time—to the FOI exemption. Again, it might be of interest to witnesses that in his Press Club speech from November 2009 Mr Tanner referenced and specified that a partial FOI exemption for the Future Fund was—he proposed it as a potential policy. So I'm very sure, do you agree that a partial FOI exemption will provide the right balance for the Future Fund, in terms of enabling it to maximise its returns on one hand and ensuring it has appropriate transparency and accountability as a government investment fund on the other? I'd like both the ACTU and the CPSU on that one, please.

Mr Mitchell : A partial FOI exemption relating to commercially sensitive valuations, potential deals, is a sensible move. It's something which shouldn't just be applied to the Future Fund but should be applied to workers' superannuation funds as well. Exemptions from disclosure in those cases will make sure that there are better returns for members. The exemption as stated, however, is all investment activity of the fund and of the board. As an investment vehicle it's not clear what they do that isn't an investment activity. There probably could be some [inaudible] in the exemption applied to the Future Fund.

CHAIR: Thanks, Mr Mitchell. CPSU?

Mr Tull : We take that same view.

CHAIR: Very good. Thank you very much for that. We've been joined by a couple of other senators on the line. Do any other senators wish to ask questions of the unions, noting we are over time at this point?

Senator O'SULLIVAN: All good, Chair. Thank you.

CHAIR: I thank very much representatives from the ACTU and CPSU for coming along today and answering our questions. The committee has set Friday 1 October as the due date for answers to questions taken on notice.