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Wednesday, 12 August 2015
Page: 5066

Senator CORMANN (Western AustraliaMinister for Finance) (11:08): Firstly, I would like to thank all those senators who have contributed to this debate on this very important initiative. I would like to, in particular, thank Senator Richard Di Natale and the Australian Greens for their very constructive engagement with the government in working with us on how this bill could be further improved in a sensible fashion to help the government secure the passage through the Senate of this very important initiative. I will have some more to say later in the debate about some of the further improvements to this legislation that we have agreed with the Greens in order to be able to achieve a successful passage of this legislation. I would also like in particular like to thank Senator Wang and Senator Xenophon, who, for some time now, have expressed to me their very strong support for this particular initiative.

The Medical Research Future Fund bill 2015 establishes the Medical Research Future Fund. This fund will further strengthen Australia's world-class medical research sector and it will significantly increase funding flows to health and medical research and innovation. The establishment of the Medical Research Future Fund meets the government's commitment to substantially increase public investment in medical research and to do it in an affordable and fiscally sustainable way while maintaining national expenditure on health to deliver a more effective health system for all Australians into the future.

The Medical Research Future Fund addresses some of the concerns identified in the Strategic Review of Health and Medical Research published in February 2013—that is, in the period of the previous government. That review, led by Simon McKeon, also known as the McKeon Review, found that Australia needs a more strategic model to get the best health results from its research efforts. The McKeon Review identified a particular need to create greater linkages between healthcare providers and research organisations by fundamentally 'embedding the research within healthcare delivery'. So that is very much a gap in our current system. It is a gap that the National Health and Medical Research Council has not been able to fill, which is also one of the reasons why the government does not intend to support the amendment—I am flagging—that has been circulated by the Labor opposition.

May I say that the government's approach to this legislation has been very much pragmatically focused on securing the passage of this bill. We have been very open minded to taking on board constructive suggestions for improvements to this bill, which is why we have appreciated the way the Greens have approached this particular proposal, both in the community affairs inquiry context and since then in direct conversations with the government. But we do not feel that doing more of the same, which is essentially the approach that the Labor opposition continues to insist on, is not the right way to move forward on this into the future. All Australians stand to benefit from the huge opportunities for research to boost illness prevention and to promote early intervention, to reduce health costs while improving health outcomes and delivering better quality of life. The fund will assist to realise these opportunities.

The McKeon Review made the case for new emphasis on priority driven research to help bridge some of the gaps between this research excellence and the translation of research into applied technologies and practices. This requires a broader response than just the existing focus on investigator nominated work. It requires additional investment in translation projects, commercialisation and partnerships with health practitioners including hospitals and GPs. The Medical Research Future Fund will both boost public investment and broaden the impact of publicly funded research while leveraging private investment, including institutional investment. The Medical Research Future Fund will provide stability and predictability in funding for medical research and innovation into the future with the capital of the fund preserved in perpetuity. This will strengthen Australia's standing as one of the global leaders in the field of medical research.

The fund will receive an initial contribution of about $1 billion from the uncommitted balance of the health and hospital funds and, as previously indicated, all of the 2014-15 budget savings in health portfolio, which have passed or will pass, will go into their Medical Research Future Fund until its balance reaches $20 billion—and that is in direct response to one of the two questions Senator Lambie asked me during her second reading contribution. These are all of the budget 2014-15 budget savings in the health portfolio that have passed or will pass, so what this means is that the parliament is the ultimate arbiter in relation to those budget measures which pass. To the extent that budget measures from 2014-15 in health portfolio are passed, those savings will be transferred into the Medical Research Future Fund until such time as that fund reaches $20 billion in capital. The fund will eventually provide around $1 billion per annum in additional funding for medical research and medical innovation. As I have said, it will do so on a fiscally sustainable basis, because essentially what we will be doing is to invest the net earnings of that fund, which means that we do not have to impose additional burdens on the federal government's underlying cash balance. This means a doubling of the current level of public investment at a federal level into medical research, which of course is a great opportunity.

The bill entrusts the preservation of the capital of the fund to the Future Fund Board of Guardians, who will be required to preserve and invest this capital as a permanent endowment. In doing so, the Future Fund Board of Guardians will be guided by directions setting out the government's expectations, including what return is expected on the government's investment. The Future Fund Board of Guardians will also advise the government on the fund's performance and will determine the amount of net earnings that can be drawn from the fund in a given year without reducing the preserved capital of the fund.

This bill was amended by the government in the House of Representatives to include the government's policy approach for distributing fund earnings in the legislation. Those amendments made clear that the Medical Research Future Fund will have strong governance and expert leadership. Expenditure of earnings from the fund will be consistent with a strategy and priorities that have been independently determined by an expert Australian medical research advisory board. The bill provides robust decision making and strong accountability mechanisms for the disbursement of funds from the Medical Research Future Fund and clarifies the complementary role to be played by the National Health and Medical Research Council in the distribution of funds. The bill provides that the strengths and capabilities of the National Health and Medical Research Council, as the government's main health and medical research body, will be drawn on to assist the disbursement of medical research future fund funding where appropriate.

I foreshadow that the government will be moving amendments during the committee stage of the debate. Senator Di Natale, as you were not in the chamber may I again place on record, on behalf of the government, the very constructive approach taken by you and by the Australian Greens in helping to facilitate what I hope will be the successful passage of this very important initiative through the Senate today.

We have worked closely with the Greens in the context of the Senate Community Affairs Legislation Committee inquiry, which has led to a number of the improvements reflected in the amendments today, and I have also had the opportunity to engage in some further conversations with Senator Di Natale to achieve some further improvements. If I can inform the Senate in this context, in relation to some of the issues that Senator Di Natale has raised with me on behalf of the Greens, one of the issues that will not surprise anyone, I suspect—because the Greens have had a longstanding position in relation to this—relates to the proposition that of course the Medical Research Future Fund should not be investing in tobacco related businesses. You would all be aware that since 2013 the Future Fund Board of Guardians has adopted an investment policy to that effect—that the main Future Fund no longer invests in tobacco related businesses. As a result of my conversations with Senator Di Natale I consulted with the chairman of the Future Fund, the Hon. Peter Costello, who gave that undertaking that the existing investment policy in relation to this would be extended to the investments in relation to the Medical Research Future Fund.

We do currently, in proposed section 62 of the bill, have a provision for a review of the MRFF arrangements. Senator Di Natale, on behalf of the Greens, has put to me the proposition that they want some transparency and the capacity to have some scrutiny to ensure that the government does not offset increases in investment in medical research through the MRFF with reductions in investment in medical research through the National Health and Medical Research Council. As such, we are circulating an amendment which would include, in the scope of that review, a review to ensure that the MRFF has complemented and enhanced other financial assistance for medical research provided by the Commonwealth, including and in particular through the National Health and Medical Research Council. This is to provide transparent reassurance that additional investment into medical research through the MRFF is not used to offset federal investment into medical research from other sources. Given our publicly stated intention for the MRFF investment into medical research to boost and enhance the existing federal funding effort into medical research and not to replace it, we of course did not have any problem at all with agreeing to that particular request for a further amendment.

Finally, in relation to my conversation with Senator Di Natale the Greens made a constructive suggestion which we feel does need a bit more time and a bit more thought, and that is: where Medical Research Future Fund investment into medical research leads to highly profitable commercial applications, how can we possibly develop a methodology to ensure where appropriate that the taxpayer receives an appropriate return on the original investment—perhaps back into the MRFF capital fund? The undertaking that we are making here today, that I am making on behalf of the government here today, is that we will work with the Greens—and with any other interested party in the parliament in good faith—to explore how that can best be done. We are aware that there are models around the world which achieve that. I have just recently been to the Fraunhofer Institute in Munich, and indeed the Fraunhofer Institute in Munich does have a very established methodology that would capture what the Greens have been putting to the government.

There are a range of other amendments that senators will have noted that are broadly focused on responding to genuine and legitimate issues raised through the Senate inquiry process relating to consultation, board composition, qualifying activity, expert advice, transparency and decision-making processes, international partnerships and governance review, and a review of the act. I propose to deal with those during the committee stages of the debate.

Directly in response to the questions raised by Senator Lambie: Senator Lambie, you were out of the chamber when I provided the first answer, so in answer to your first question: all 2014-15 budget savings in the Health portfolio which have passed or will pass, as well as the uncommitted balance of the Health and Hospitals Fund, will be reinvested in the Medical Research Future Fund until its balance reaches $20 billion. The important point here is that these are the budget savings from 2014-15 that have passed or will pass, and of course which measures ultimately pass is entirely up to the parliament, including the Senate. So, if the Senate is of a mind not to support a particular budget saving, then obviously that means that there would be less money going to the Medical Research Future Fund and it would take longer to get to the $20 billion. The reason I say that is that that is the ultimate check and balance and the ultimate opportunity for the parliament to pass judgement on whether or not the parliament supports, the Senate supports, the savings opportunities that the government has put forward.

In relation to your second question—whether the government has considered drawing on the Future Fund to increase our investment into medical research—the answer is no. The reason is that the Future Fund was set up for a particular purpose, namely to meet the unfunded public sector superannuation liability, which is running into several hundred billion dollars in the years ahead—and it includes a significant component, as you would appreciate, of military superannuation. The government feels that, consistent with the objectives of the Future Fund as determined in the Future Fund Act back in 2006, we should persist with letting the Future Fund do what it was set up to do, and that is to maximise the long-term return within a particular investment return target range so that we can, as soon as possible, ensure that the outstanding public sector superannuation liability is fully funded.

Senator Xenophon raised some questions in his contribution on the second reading, pointing to the importance of increased funding for cancer research in relation to children. All of us of course have a lot of sympathy for and strongly support increased research into those sorts of very meritorious and very important causes. Let me just make this point, though. The way this fund is set up, the way the corporate governance structure to help manage the disbursements is set up, is to ensure that the decisions are made based on expert advice which draws on consultation with consumer groups and medical research stakeholders and that there is not, dare I say, a political prioritisation in terms of where the investment into additional medical research is made.

Having said that, obviously when you double the level of investment that goes into medical research, with a focus on filling the gaps, you would expect that the Medical Research Future Fund advisory board will look at where there are holes in what is currently being funded and will seek to plug those holes in an appropriately prioritised way. Given the level of significant increase in public investment in medical research through this initiative, I would expect that there would be increased funding for research into the sorts of important health conditions that Senator Xenophon and other senators have mentioned during the debate. But, I hasten to add, we believe it is important to ensure that the framework for setting the priorities within which the government has to operate is independent, that it is based on expert advice and that that expert advice is informed by appropriate consultation with consumer groups and medical research stakeholders. Given that, I obviously cannot give Senator Xenophon the sort of reassurance that perhaps he was looking for about specific funding outcomes down the track.

With those few words, let me again thank all senators who have contributed to this debate. This is a very exciting initiative. It draws on the work that was initiated in the period of the previous government. It will come to fruition as a result of some very constructive engagement across the chamber, and the government is very grateful for the way senators have approached this issue.

Question agreed to.

Bills read a second time.