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Wednesday, 18 September 1985
Page: 672

Senator SHORT(12.19) —The Superannuation Legislation Amendment Bill 1985 proposes several important changes to the administration and operation of the Commonwealth Superannuation Fund Investment Trust. The Bill has come before the Parliament following extensive consideration and reporting on the Investment Trust by working parties and other groups. Late last year during the election campaign it was also the subject of extensive discussion between the then Minister for Finance, Mr Dawkins, and the Australian Council of Trade Unions. Those discussions resulted in the release on 19 October 1984 of a joint ministerial and ACTU Press statement which detailed the agreements reached between those two parties. The content of those agreements is heavily reflected in the Bill before the Senate.

This Bill was introduced into the Senate on 23 April. On 8 May the Senate agreed to refer the Bill to the Senate Standing Committee on Finance and Government Operations for early consideration and report. That action was taken because the Bill seeks to implement some of the matters which were then being dealt with by the Committee in its inquiry into the Superannuation Fund Investment Trust, an inquiry that had been going on for a couple of years. Indeed, the timing of the introduction of this Bill seems to me to be somewhat strange. The Government must surely have known that the Committee was undertaking this inquiry and that it was nearing completion. Yet it apparently chose to ignore this fact and to press ahead with the introduction of this Bill without waiting to see what the Committee had to say on some of the wider issues. So we now have the situation where honourable senators, in their consideration of the Superannuation Legislation Amendment Bill, can have the benefit of two reports from the Committee-the report dated 15 May, prepared at the request of the Senate in response to several specific aspects of the Bill and the report of June 1985 which was tabled in the Senate at the commencement of this Budget session which deals with a range of important issues involving the Superannuation Fund Investment Trust. I hope that honourable senators in their consideration of this important piece of legislation will take the opportunity to read those two reports.

The changes proposed in this Bill are directed at placing the Trust on a more independent footing with the freedom and flexibility to manage and invest the Superannuation Fund in a commercial manner; enhancing the accountability of the Trust, both to the Parliament and to contributors to the Commonwealth superannuation scheme; defining the role, objective and duties of the Trust in a way that has not been done previously and aimed at increasing the Trust from three to five members. The basic objective of these changes is to maximise the return earned on Commonwealth employees contributions whilst exercising reasonable care and prudence to maintain the integrity of the Fund. The powers of the Trust will be considerably widened by the Bill. For example, clause 18 (a) proposes to insert in section 41 (2) of the principal Act additional paragraphs empowering the Trust to underwrite or sub-underwrite any form of investment and to borrow moneys. The additional powers will increase the Trust's flexibility in managing and investing the Fund and the Opposition, therefore, supports them. But what these changes do mean, however, is that the members of the Trust will have even greater responsibilities than in the past to invest contributors' money efficiently and wisely.

The development of different forms of investment over the past few years has made fund management in Australia a highly technical and expert area. We all know stories of the good operatives in the private sector earning literally small fortunes as a result of their expertise in fund management. So the qualities of the members of the Superannuation Fund Investment Trust are therefore of tremendous importance. They are of importance not only to the contributors on whose behalf and with whose money they operate-there are in excess of 300,000 Commonwealth employees contributors to the scheme-but also in a wider context because the total investment of the Commonwealth Superannuation Fund exceeds $2,500m making it by far the largest superannuation fund in the nation. Something like $1m of new money comes in each day to the Fund for investment. The investment decisions of the Trust can, therefore, have a marked impact on financial markets generally in Australia.

The Bill proposes that the number of members of the Trust be expanded from three up to a figure of five. The Opposition does not oppose this proposal. However, the Opposition does oppose the method of appointment of the five members and the qualifications required. Clause 7 of the Bill proposes that the Trust consist of five members-a full time principal member nominated by the Minister; a full time principal member nominated by the Australian Council of Trade Unions; two part time members nominated by the ACTU and one part time member nominated by the Minister. Of the five members, three would be direct nominees of the ACTU. In addition, the Bill provides that the Minister would be required to consult with the ACTU concerning the nomination of a person for appointment as principal member of the Trust. In effect, the ACTU would have direct control over the appointment of four out of the five members of the Trust. This matter was considered by-

Senator Walsh —That is false. You said `direct control over the appointment of four out of five members'.

Senator SHORT —Yes, that is what I said.

Senator Walsh —That is false.

Senator SHORT —The Minister can take it up in his comments. This matter was considered by the Finance and Government Operations Committee, of which I am a member. Several members of that Committee, including myself, were concerned about the dominance of the ACTU in appointments to the Trust. We were also concerned about the lack of requirement in the Bill that appointees must have particular specialist qualifications or experience in investment management. The Finance and Government Operations Committee made certain recommendations about these matters in an attempt to remove the worst features of the Bill. I understand that the Government is prepared to accept some of these recommendations, but not one of the key recommendations. In any event, the recommendations of the Committee still do not go far enough to meet the Opposition's concern. For that reason, we are proposing more stringent criteria for appointment.

Senator Coates —Can you explain why you changed your mind?

Senator SHORT —I did not change my mind, Senator. Perhaps this is not the occasion to discuss meetings of the Committee.

Senator Coates —It was unanimous.

Senator SHORT —Yes. Honourable senators will recall the concern I expressed in the Committee meetings on the subject.

Senator Walsh —The faceless men who run the Liberal Party have got on to them. That is what has happened. What they were quite happy to accept three months ago, they are not happy to accept now.

Senator SHORT —That simply is not true, Senator Walsh. We are also proposing that the ACTU's dominance in the appointment of Trust members be removed. The Opposition's proposals would give much more responsibility to the Minister for Finance (Senator Walsh) for appointments to the Trust. They would also require the Minister to consult with organisations closely involved in the investment industry before making his or her appointments to the part time positions in the Trust. The Opposition's specific proposals, as Senator Siddons and Senator Messner have mentioned, bear repeating. They are that there be one full-time principal member appointed by the Minister having regard to his or her financial expertise, industrial relations experience and knowledge of superannuation and investment, one part-time member nominated by unions' representative of contributors having regard to the same criteria outlined above and three part-time members appointed by the Minister after consultation with the following organisations: The Securities Institute of Australia, the Life Insurance Federation of Australia, the Australian Bankers Association, the Australian Merchant Bankers Association and the Actuaries Institute of Australia, again having regard to the same criteria for appointment as in the case of the principal and part-time members referred to earlier.

Senator Siddons says that this proposition is outrageous, that it gives to the enemies of the Fund the right to advise the Minister on appointments, and that therefore enemies of the Fund would be appointed to the Trust. I can only reply to Senator Siddons's outrage at that comment by saying what an outrageous distortion of the truth he has put forward. If we look at the organisations proposed for the Minister to consult, organisations in which reside the main body of expertise in Australia not only of people involved in the industry itself, not one is an organisation which itself is directly involved in the investment of funds.

Senator Siddons —What about the Life Insurance Federation of Australia?

Senator SHORT —That is an industry association, it is not an investor in its own right. So none of those organisations is an investor. The point where Senator Siddons is most wrong, with respect, is that those organisations and their member companies are not competitors in the direct sense of wanting to destroy the Commonwealth Superannuation Investment Trust. They are organisations like the Trust that want to see the best run financial markets in this country. That is in the interests of all of them and of the nation as a whole, as well as in the interests of superannuation contributors, be they in the private sector or the public sector who want the best deal and thus the best return on their investment. We will not get the best return on investment if we have one bunch of superannuation funds seeing itself as the enemy of another group. That simply is not possible. So there is a complementary interest between the various funds, not a competitive interest.

Senator Siddons —Wouldn't the Merchant Bankers Association like to get their hands on some of those funds?

Senator SHORT —It would not be getting its hands on some of those funds, and it is an industry association which does not have control of funds anyway. The Australian Merchant Bankers Association is not an investing fund, nor is the Australian Bankers Association, nor is LIFA.

Senator Siddons —What about their members?

Senator SHORT —We are not talking about their members but about the industry associations. The Opposition believes that its proposals would ensure that the Trust was made up of properly qualified people who know what they are doing and who can act in the best interests of contributors, whose overriding objective is to have their moneys invested in the most efficient manner. The Opposition makes no apology for the fact that its proposals remove the ACTU from the pivotal role which the Government's Bill gives it in relation to appointments to the Trust. We are proposing these changes for several reasons. Firstly, the ACTU is not the organisation most representative of the interests of Commonwealth Superannuation Fund contributors. The superannuation rights of Commonwealth public servants would at best be a minor issue for the ACTU and one which might well conflict with other ACTU goals. There is no doubt that if the majority of the members of the Trust are nominees of the ACTU they could be or be seen to be subject to a conflict of interest.

I acknowledge that in evidence to the Senate Standing Committee on Finance and Government Operations the ACTU representative, Mr Gradwell, gave an assurance that a conflict of interest would not arise but, without casting any aspersion at all on Mr Gradwell, I wonder how he can give such an assurance. There are, for example, 31 members on the ACTU Federal Executive and, of these, only one-Paul Munro-is a Commonwealth employees representative. I have no doubt whatsoever that if the majority of the ACTU Federal Executive directed the ACTU nominees on the Trust to invest Trust moneys in, say, speculative business ventures of the ACTU and/or its union affiliates-we have heard today evidence of the lack of business expertise clearly demonstrated by those organisations-those nominees would be put in a tremendous conflict of interest situation. They would be under great pressure to do as directed, regardless of the possible consequences for Fund contributors.

There is the further point that the ACTU nominees could take investment decisions in accordance with ACTU policies rather than on purely investment grounds. In the Senate Finance and Government Operations Committee hearings the question of investment in, say, a highly profitable uranium mine was raised. What would be the attitude of the Commonwealth Superannuation Fund Investment Trust to investment in such a project? It might well be in the best interests of the contributors but would it be allowed to invest in that, given the ACTU's attitude towards uranium mining? Again, it is a potential very serious conflict of interests. Another obvious example that comes to mind at the moment is that of a company which may have some involvement in South Africa. Senator Siddons's own company, if it were a listed company, would be a good example of that. Highly profitable major Australian companies operate extremely profitable investment trusts. For example, the Elders-IXL Ltd investment trust gives one of the best returns of any such trust in Australia, yet it has some involvement with South Africa. What would be the attitude of the Investment Trust to that, given the attitude of the ACTU towards South Africa-an attitude which, it is worth pointing out, is different from the Government's attitude, as well as being vastly different from the Opposition's view? The point is that the ACTU has its own policies in a range of areas such as this and the conflict of interest situation which could be imposed by the present proposals of the Government in relation to membership of the Trust is, I think, very great indeed.

The Opposition is not alone in its concern about the ACTU domination of the Trust. Senator Siddons, on behalf of the Australian Democrats, has expressed their concern. Several Public Service associations have expressed similar concern. Their members, of course, are contributors to the Fund, so it is their money we are talking about. The Life Underwriters Association, a body that could not have any earthly competitive interest along the lines that Senator Siddons talked about, has also expressed a similar concern. The President of that Association, Mrs Rigby, in a speech last week said:

By handing the ACTU the welfare of 307,869 Australians--

which is really what we are talking about-

this government is leading all Australians further into bankruptcy instead of into the hands of proven fund management.

They are pretty strong words. Whether they are fully justified or not, the fact is that there is considerable disquiet about the Government's proposals. I believe that the Government must think again about this matter. I urge the Government, and I urge Senator Siddons and his Party, to accept the Opposition's proposals. Only by accepting those proposals can we put beyond any doubt the integrity of the management of these vast sums of money. If the Government does not accept the Opposition's proposals for appointments to the Trust the Government will once again be seen to be merely a puppet in the hands of the ACTU.

The ACTU has been calling the shots for this Hawke Government on all major issues of policy since its election 2 1/2 years ago-on wages, on prices, on taxes, on worker participation, on national superannuation proposals based on non-existent productivity increases-the works. I am, therefore, not at all hopeful that the Government will have the courage or the strength to break clear of the shackles of the ACTU on this occasion. It certainly would be contrary to its actions over the last two and a half years. On behalf of more than 300,000 Public Service contributors to far and away the largest superannuation fund in Australia, I and members of the Opposition can only hope that, for once, the Government will allow common sense and reason to prevail over naked union muscle.