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Finance and Public Administration Legislation Committee—Investment Funds Legislation Amendment Bill 2021 [Provisions]—Report, dated October 2021


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October 2021

The Senate

Finance and Public Administration Legislation Committee

Investment Funds Legislation Amendment Bill 2021 [Provisions]

© Commonwealth of Australia 2021

ISBN 978-1-76093-299-2

This work is licensed under the Creative Commons Attribution-NonCommercial-NoDerivs 4.0 International License.

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ttps://creativecommons.org/licenses/by-nc-nd/4.0/.

iii

Members

Chair Senator Claire Chandler LP, TAS

Deputy Chair Senator Tim Ayres ALP, NSW

Members Senator Kimberley Kitching ALP, VIC

Senator Matt O'Sullivan LP, WA

Senator James Paterson LP, VIC

Senator Malcolm Roberts PHON, QLD

Participating Members Senator Nick McKim AG, TAS

Senator Rex Patrick IND, SA

Secretariat Sarah Redden, Committee Secretary Kate Campbell, Principal Research Officer Trish Carling, Senior Research Officer Emily Nelson, Graduate Brooke Gay, Research Officer Michaela Keating, Administrative Officer

Website: www.aph.gov.au/senate fpa

PO Box 6100 E-mail: fpa.sen@aph.gov.au

Parliament House Ph: 02 6277 3846

Canberra ACT 2600 Fax: 02 6277 5809

v

Contents

Members ............................................................................................................................................. iii

Abbreviations ................................................................................................................................... vii

List of Recommendations ................................................................................................................. ix

Chapter 1—Introduction and background ..................................................................................... 1

Referral ................................................................................................................................................. 1

Conduct of the inquiry ....................................................................................................................... 1

Report structure ................................................................................................................................... 1

Acknowledgement .............................................................................................................................. 2

Purpose of the bill ............................................................................................................................... 2

Background to the bill ........................................................................................................................ 3

Financial impact statement ................................................................................................................ 8

Statement of compatibility with human rights ............................................................................... 8

Consideration by other committees ................................................................................................. 8

Chapter 2—Schedules ........................................................................................................................ 9

Summary of schedules ........................................................................................................................ 9

Schedule 1—Staff of the Future Fund Management Agency ...................................................... 10

Schedule 2—Freedom of Information ............................................................................................ 12

Schedule 3—Medical Research Future Fund ................................................................................ 13

Schedule 4—Emergency Response Fund ...................................................................................... 19

Chapter 3—Key issues and committee views .............................................................................. 23

Schedule 1—Staff of the Future Fund Management Agency ...................................................... 23

Schedule 2— Freedom of Information ........................................................................................... 25

Schedule 3—Medical Research Future Fund ................................................................................ 30

Schedule 4—Emergency Response Fund ...................................................................................... 38

Committee views .............................................................................................................................. 38

Additional Comments - Australian Labor Party ......................................................................... 43

Additional Comments - Australian Greens ................................................................................ 49

Appendix 1—Submissions and additional information ........................................................... 53

Appendix 2—Public hearing and witnesses ................................................................................ 55

vii

Abbreviations

AAHMS Australian Academy of Health and Medical

Sciences

AAMRI Association of Australian Medical Research

Institutes

ACTU Australian Council of Trade Unions

Agency Future Fund Management Agency

APS Australian Public Service

APRA Australian Prudential Regulation Authority

ASIC Australian Securities and Investment Commission

ASMR Australian Society for Medical Research

Bill Investment Funds Legislation Amendment

Bill 2021

Committee Senate Finance and Public Administration

Legislation Committee

CPSU Community and Public Sector Union

Department Department of Finance

EM Explanatory Memorandum

ERF Emergency Response Fund

ERF Act Emergency Response Fund Act 2013

FOI Act Freedom of Information Act 1982

Future Fund Act Future Fund Act 2006

Future Fund Board Future Fund Board of Guardians ISA Industry Super Australia

MRFF Act Medical Research Future Fund Act 2015

MRFF Medical Research Future Fund

NRRA National Recovery and Resilience Agency

PGPA Act Public Governance, Performance and Accountability

Act 2013

Priorities Australian Medical Research and Innovation

Priorities

Public Service Act Public Service Act 1999

RBA Reserve Bank of Australia

Strategy Australian Medical Research and Innovation

Strategy

ix

List of Recommendations

Recommendation 1

3.85 The committee recommends that the Investment Funds Legislation Amendment Bill 2021 be passed.

1

Chapter 1

Introduction and background

Referral 1.1 On 25 August 2021, the Investment Funds Legislation Amendment Bill 2021 (bill) was introduced to the House of Representatives by the Honourable Stuart Robert MP.1

1.2 On 2 September 2021, pursuant to the 11th report of 2021 of the Senate Standing Committee for the Selection of Bills, the bill was referred to the Senate Finance and Public Administration Legislation Committee (the committee) for inquiry and report by 14 October 2021.2

Conduct of the inquiry 1.3 The committee agreed to open submissions on 2 September 2021 and set 20 September 2021 as the closing date. The committee wrote to a range of key stakeholder groups, organisations and individuals drawing their attention to

the inquiry and inviting them to make a written submission.

1.4 The committee received 13 submissions, which are available on the committee’s webpage and listed at Appendix 1.

1.5 The committee held a public hearing in Canberra and via videoconference on 28 September 2021. The witness list for the hearing can be found at Appendix 2.

1.6 Details of the inquiry, including links to the bill and associated documents, were published on the committee’s website.3

Report structure 1.7 This chapter provides an overview of the Future Fund and the key amendments proposed by the bill. The second chapter goes into details about the bill’s provision, contained within four schedules.

1.8 The third and concluding chapter outlines the key issue put forward in evidence and presents the committee’s views and recommendation.

1 The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family

Business, Investment Funds Legislation Amendment Bill 2021, House of Representatives Hansard, 25 August 2021, pp. 27 - 29.

2 Journals of the Senate, No. 121, 2 September 2021, p. 8. See also, Senate Standing Committee for

the Selection of Bills, Report No. 11 of 2021, September 2021, [p. 3].

3 At www.aph.gov.au/senate_fpa

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Acknowledgement 1.9 The committee thanks all those who contributed to the inquiry by making submissions and speaking before the committee at a public hearing.

Purpose of the bill 1.10 The bill seeks to streamline the operation of the Australian Government’s investment funds by:

 enacting a new employment framework for staff of the Future Fund Management Agency (the Agency);  providing a partial exemption from the Freedom of Information Act 1982 (FOI Act) for certain investment documents;  amending the disbursements framework for the Medical Research Future

Fund (MRFF), and  making a number of administrative amendments to streamline the operation of the Medical Research Future Fund Act 2015 (MRFF Act) and the Emergency Response Fund Act 2019 (ERF Act).4

1.11 To achieve these purposes, the bill seeks to amend the Future Fund Act 2006 (Future Fund Act) to enact a new employment framework for staff of the Agency. The new employment framework would reinforce the independence of the Future Fund Board of Guardians (the Future Fund Board) from the Australian Government and better align the framework to the financial services industry.5

1.12 The bill amends the FOI Act to provide a partial exemption for documents handled by the Future Fund Board and the Agency in respect of the Board’s investment activities.6

1.13 The bill also makes further amendments to the MRFF Act, to streamline the administration of the Medical Research Future Fund, including making state and territory governments eligible to receive funding directly from the Medical Research Future Fund Special Account.7

4 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 7.

5 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

p. 8.

6 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

p. 8.

7 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

p. 8.

3

1.14 The bill amends the ERF Act to transfer the administrative responsibility for the expenditure of the Emergency Response Fund from the Department of Home Affairs, to the National Recovery and Resilience Agency (NRRA).8

Background to the bill

The Future Fund 1.15 The Future Fund was established on 3 April 2006 by the Future Fund Act. The Future Fund is a financial asset fund, set up to strengthen the

Commonwealth’s long-term financial position by making provision for unfunded superannuation liabilities that will become payable during a period when an ageing population is likely to place significant pressure on the Commonwealth’s finances.9

1.16 As Australia’s sovereign wealth fund, the role of the Future Fund is to generate high, risk adjusted returns over the long-term. The Future Fund operates independently from Government and tailors the management of each fund to its unique investment mandate.10

1.17 Under the Future Fund Board, and with the support of the Agency, the Future Fund invests in the assets of six special purpose public asset funds. As at 30 June 2021, the total funds managed across the six funds listed below, stands at $245.8 billion:11

 the Future Fund  the Medical Research Future Fund  the Aboriginal and Torres Strait Islander Land and Sea Future Fund  the Future Drought Fund  the Emergency Response Fund  the DisabilityCare Australia Fund.12

1.18 This bill makes key amendments to only two of the six special purpose public asset funds, the Medical Research Future Fund and the Emergency Response Fund, which are discussed in more detail below.

8 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

p. 8.

9 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

10 Future Fund Board of Guardians, About us, available at: www.futurefund.gov.au/about-us

(accessed 16 September 2021).

11 Future Fund Board of Guardians, Portfolio Update at 30 June 2021, August 2021, p. 1.

12 Future Fund Board of Guardians, About us, available at: www.futurefund.gov.au/about-us

(accessed 16 September 2021).

4

The Medical Research Future Fund 1.19 The Medical Research Future Fund (MRFF) was established on 26 August 2015 by the Medical Research Future Fund Act 2015 (MRFF Act). It provides an ongoing funding stream for medical research and medical innovation into the

future with the credits to the MRFF preserved in perpetuity. The capital of the MRFF is invested, with the earnings used to make grants of financial assistance for medical research and medical innovation over the long term.13

The Emergency Response Fund 1.20 The Emergency Response Fund (ERF) was established on the commencement of the Emergency Response Fund Act 2019 (ERF Act), on 12 December 2019. On establishment, the ERF was credited with the uncommitted balance of the

Education Investment Fund, which has now been closed.14

1.21 The ERF allows the Government to draw up to $200 million in any given year, beyond what is already available to fund emergency response and natural disaster recovery and preparedness, where it determines the existing recovery and resilience-building programs are insufficient to provide an appropriate response to natural disasters.15

The Future Fund Act 1.22 According to section 3 of the Future Fund Act, the main objective of the Fund is to strengthen the Commonwealth’s long term financial position. The Future Fund is intended to make provision for unfunded superannuation liabilities

that will become payable during a period when an ageing population is likely to place significant pressure on the Commonwealth finances.16

1.23 The Future Fund Act is administered by the Department of Finance and designates the Minister for Finance and the Treasurer as the ‘responsible Ministers’. Currently, the responsible Ministers have the joint power to:

 credit cash amounts to the Future Fund through a Special Account and to transfer financial assets to the Fund;  appoint and remove members from the Fund Board; and

13 Department of Finance, Medical Research Future Fund, available at:

www.finance.gov.au/government/australian-government-investment-funds/medical-research-future-fund (accessed 16 September 2021).

14 Department of Finance, Emergency Response Fund, available at: www.finance.gov.au/emergency-response-fund (accessed 16 September 2021).

15 Department of Finance, Emergency Response Fund, available at: www.finance.gov.au/emergency-response-fund (accessed 16 September 2021).

16 Future Fund Act 2006, s.3.

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 issue the Future Fund Investment Mandate.17

1.24 The Future Fund Act gives effect to the following matters concerning the fund.

Establishment of Government bodies 1.25 The Future Fund Act contains provisions for the establishment of the Future Fund Board and the Agency:

 The Future Fund Board is a body corporate, accountable to the Government for the safekeeping and performance of the Australian Government investment funds.

 The Agency is a non-corporate Government entity subject to the Public Governance, Performance and Accountability Act 2014 (PGPA Act), and supports the Future Fund Board by performing operational activities associated with fund’s investments.18

Investment Mandate 1.26 The responsible Ministers are required to issue an Investment Mandate. Investment mandates set out the Government’s broad expectations of how the Future Fund invests the assets of each fund. They set the benchmark rate of

return for each fund and the timeframe in which it should be achieved.19

1.27 The responsible Ministers issued the Future Fund Investment Mandate Direction 2017 to the Future Fund Board on 15 May 2017.20 It requires the Future Fund Board adopt a benchmark average return for the Future Fund of ‘at least the Consumer Price Index (CPI) +4.0 to +5.0 per cent per annum over the long term’.21 In striving for this benchmark return, the Future Fund Board may pursue an acceptable, but not excessive, level of risk. The investment mandate direction is a legislative instrument that is not subject to disallowance. 22

17 Department of Finance, Governance - Investment Funds, Investment Fund Legislation, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds (accessed 16 September 2021).

18 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

19 Department of Finance, Governance - Investment Funds, Investment Fund Legislation, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds (accessed 16 September 2021).

20 Future Fund Investment Mandate Direction 2017, F2017L00597, 1 July 2017, available at:

www.legislation.gov.au/Details/F2017L00597

21 Future Fund Investment Mandate Direction 2017, F2017L00597, 1 July 2017, para. 6, available at:

www.legislation.gov.au/Details/F2017L00597

22 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

6

Crediting amounts to the Future Fund 1.28 The responsible Ministers can make credits to the Future Fund, so long as the additional amounts do not result in the balance of the Fund exceeding the Target Asset Level. Relevantly, the Target Asset Level is the best estimate of

the Future Fund balance that would be required to offset the present value of projected unfunded superannuation liabilities, accrued up to the same point in time.23

Debiting amounts from the Future Fund 1.29 The responsible Ministers can debit (drawdown) from the Future Fund in accordance with the purposes of the Future Fund Act:

 to discharge unfunded Commonwealth superannuation liabilities once the balance of the Future Fund is greater than or equal to the Target Asset Level, or from 1 July 2020, whichever is earlier; or,

 meet expenses associated with the investment function and administration of the Future Fund.24

The Future Fund Board of Guardians 1.30 The Future Fund Board is a body corporate with responsibility for managing the investments of the Australian Government investment funds.25 The Future Fund Act gives investment powers to the Future Fund Board.26

1.31 The Future Fund Board makes its investment decisions (based on its Investment Policies) independent of the Government and holds the funds’ investments in its own name, however, the Commonwealth retains ownership of the funds at all times.27

23 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

24 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

25 Department of Finance, Future Fund Board of Guardians, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-board-guardians (accessed 16 September 2021).

26 Department of Finance, Future Fund, available at: www.finance.gov.au/government/australian-government-investment-funds/future-fund (accessed 16 September 2021).

27 Department of Finance, Future Fund Board of Guardians, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-board-guardians (accessed 16 September 2021).

7

1.32 The Future Fund Board consists of a Chair and six other members, who are appointed by the responsible Ministers on a part-time basis for a maximum term of five years with the possibility of reappointment.28

1.33 Section 38 of the Future Fund Act specifies that Future Fund Board members are to have substantial experience or expertise; and professional credibility and significant standing; in at least one of the following fields:

 investing in financial assets;  the management of investments in financial assets; or  corporate governance.29

Future Fund Management Agency 1.34 The Future Fund Board is supported by the Agency, which is a non-corporate Government entity subject to the PGPA Act, within the Finance Portfolio.30

1.35 The Chair of the Future Fund Board is also the Chief Executive of the Agency. In practice, however, the operations of the Agency are overseen by a separate Chief Executive Officer.31

1.36 While the Future Fund Board defines the investment strategy for the funds under its responsibility, the Agency is responsible for the operational activities associated with the funds’ investments. The Future Fund Board decides how the funds are to be invested, while the Agency, through external investment managers, ensures that the funds are allocated consistent with those decisions. The Agency also has various ancillary responsibilities such as the provision of administrative services to the Future Fund Board. For financial reporting purposes, the Future Fund Board and Agency are treated as if they are a single entity.32

28 Department of Finance, Future Fund Board of Guardians, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-board-guardians (accessed 16 September 2021).

29 Department of Finance, Future Fund Board of Guardians, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-board-guardians (accessed 16 September 2021).

30 Department of Finance, Future Fund Management Agency, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-management-agency (accessed 16 September 2021).

31 Department of Finance, Future Fund Management Agency, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-management-agency (accessed 16 September 2021).

32 Department of Finance, Future Fund Management Agency, available at:

www.finance.gov.au/government/australian-government-investment-funds/governance-investment-funds/future-fund-management-agency (accessed 16 September 2021).

8

Financial impact statement 1.37 As discussed further in Chapter 2, the Explanatory Memorandum (EM) states that the changes to the disbursement framework for the MRFF will specify a fixed maximum annual disbursement of $650 million from 2022-23.

1.38 The EM states that the changes to the Future Fund Act, the FOI Act and the ERF Act, and the administrative changes to the MRFF, are not expected to have any financial impact.33

Statement of compatibility with human rights 1.39 The statement of compatibility of human rights accompanies the bill. It notes that the bill engages with the right of everyone to the enjoyment of the highest attainable standard of physical and mental health, enshrined in Article 12 of

the International Covenant on Economic, Social and Cultural Rights.34

1.40 The statement of compatibility of human rights asserts the bill is compatible with human rights and freedoms.35 The bill will allow for higher investment earnings over the long term, which will be used to fund important medical research and innovation projects, to benefit the health and wellbeing of all Australians.36

Consideration by other committees 1.41 The Senate Standing Committee for the Scrutiny of Bills (Scrutiny Committee) commented on the bill in its Scrutiny Digest 14 of 2021.37

1.42 The Scrutiny of Bills committee requested advice from the (minister/treasurer) in relation to:

 provisions in the bill permitting the Future Fund Chair to make instruments that are not subject to parliamentary disallowance; 38 and  provisions in the bill allowing the MRRF special account to makes grants to states and territories.39

33 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 5 - 6.

34 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 7.

35 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 7.

36 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 8.

37 See Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021,

1 September 2021, pp. 8 - 11.

38 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

pp. 8 - 10.

39 Senate Standing Committee for the Scrutiny of Bills, Scrutiny Digest 14 of 2021, 1 September 2021,

pp. 10 - 11.

9

Chapter 2 Schedules

2.1 This chapter provides detail on the key provisions of all four Schedules of the Investment Funds Legislation Amendment Bill 2021, all of which are aimed at streamlining the ‘operation of the Australian Government’s investment funds’.1

Summary of schedules 2.2 Schedule 1 amends the Future Fund Act 2006 (Future Fund Act) to establish a new employment framework for the Future Fund Management Agency (Agency).2

2.3 Schedule 2 will provide a partial exemption under the Freedom of Information Act 1982 (FOI Act) for the Future Fund Board of Guardians (Future Fund Board) and the Agency, in relation to investment documents.3

2.4 Schedule 3 amends the Medical Research Future Fund Act 2015 (MRFF Act) to expand the avenues available to provide funding to the States and Territories, provide a new disbursements framework and streamline the administration of the Medical Research Future Fund (MRFF) grants program. 4

2.5 Schedule 4 to this bill amends the Emergency Response Fund Act 2019 to transfer responsibility for expenditure from the Emergency Response Fund (ERF) to the newly established National Recovery and Resilience Agency (NRRA), and to streamline administrative arrangements for transfers from the Emergency Response Fund Special Account.5

1 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 4.

2 The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family

Business, Investment Funds Legislation Amendment Bill 2021, House of Representatives Hansard, 25 August 2021, p. 27.

3 The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family

Business, Investment Funds Legislation Amendment Bill 2021, House of Representatives Hansard, 25 August 2021, p. 28.

4 The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family

Business, Investment Funds Legislation Amendment Bill 2021, House of Representatives Hansard, 25 August 2021, p. 28.

5 The Hon. Stuart Robert MP, Minister for Employment, Workforce, Skills, Small and Family

Business, Investment Funds Legislation Amendment Bill 2021, House of Representatives Hansard, 25 August 2021, p. 29.

10

Schedule 1—Staff of the Future Fund Management Agency 2.6 The Explanatory Memorandum (EM) explains that the bill enacts a new employment framework for the Agency, in order to reinforce ‘the independence of the Future Fund Board from the Australian Government’.

2.7 In transitioning to this framework, the EM makes clear that:

Under the new framework, the Future Fund Chair will, on behalf of the Commonwealth, engage staff and determine the terms and conditions of employment. Existing staff members will have their terms and conditions of employment and accrued entitlements preserved under the new framework and staff will still be classified as Commonwealth employees.6

Part 1 2.8 Part 1 of Schedule 1 to the bill amends the Future Fund Act to establish a new employment framework for the Agency.7 Item 1 at Schedule 1 would insert additional definitions into section 5 of the Future Fund Act, to support the

operation of the bill’s provisions in the Act.8

2.9 Item 2 would repeal section 77 of the Future Fund Act, which currently provides for the engagement of staff of the Agency under the Public Service Act 1999 (Public Service Act) and replace it with a new section 77 which in effect removes staff from the APS framework. Proposed section 77 includes the following provisions:9

 New subsections 77(1) and 77(2) would provide all the necessary rights, duties and powers to the Future Fund Chair to employ and engage, on behalf of the Commonwealth, employees of the Agency, providing such employees are thought of by the Future Fund Chair as necessary in connection with the performance of any of the Agency’s functions.10

 Proposed subsections 77(3) and 77(5) would give power to the Future Fund Chair to determine in writing the terms and conditions of employment. Subsections 77(4) and 77A(1) protect the minimum terms and conditions of employment for Agency employees under Commonwealth law such as the Fair Work Act 2009 (Fair Work Act), including the National Employment Standards and any modern award applicable to Agency employees.11

2.10 Item 4 would repeal section 79 of the Act, which specifies that the Future Fund Board may not direct the Future Fund Chair in relation to performance of the

6 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 4.

7 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 10.

8 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 7.

9 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 10.

10 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 10.

11 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 10 - 11.

11

Future Fund Chair’s functions under the Public Governance, Performance and Accountability Act 2013 (PGPA Act) or the Public Service Act, and allow for the insertion of new sections, as follows: 12

 New sections 79 and 79A would provide mobility opportunities in the APS for employees of the Agency, by allowing Agency staff to be seconded to the APS for a specified period.13

 New sections 79B and 79C would require the Future Fund Chair to determine a Code of Conduct and Values for the Agency, as employees would no longer be bound by the APS Code of Conduct or APS Values established by the Public Service Act.14

 New section 79D would provide that the Future Fund Chair is not subject to directions from the Future Fund Board on certain matters, including in relation to the Future Fund Chair’s functions under the PGPA Act in relation to the Agency.15

 Item 7 would insert new section 83C, which would allow the Future Fund Chair to delegate certain powers to an employee of the agency who is at a level equivalent to a SES employee.16

2.11 Part 1, at items 8 to 13, makes consequential amendments to terminology in the following Commonwealth legislation:

 Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018  DisabilityCare Australia Fund Act 2013  Emergency Response Fund 2019  Future Drought Fund 2019  Medical Research Fund Act 201517

Part 2 2.12 Part 2 of Schedule 1 makes transitional provisions with regard to the terms, conditions and entitlements for staff of the Future Fund Management Agency as they transition from employment under the Public Service Act to the Future

Fund Act. Similar transitional provisions ensure that the Safety, Rehabilitation and Compensation Act 1988 continues to apply to staff moving between the two employment frameworks.

12 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 12.

13 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 12.

14 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 12 - 13.

15 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 14.

16 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 14.

17 Investment Funds Legislation Amendment Bill 2021, Schedule 1, Part 1, Division 2, Items 8 - 13.

12

2.13 Further transitional provisions are made to the following Acts to ensure delegations under each Act are continued following commencement of the bill:

 Aboriginal and Torres Strait Islander Land and Sea Future Fund Act 2018  DisabilityCare Australia Fund Act 2013  Emergency Response Fund 2019  Future Drought Fund 2019  Medical Research Fund Act 201518

Schedule 2—Freedom of Information 2.14 Item 1 would provide a partial exemption from the operation of the FOI Act for the Future Fund Board and the Agency, in relation to documents in respect of the investment activities of the Future Fund Board.19

2.15 The EM argues that the partial exemption from the operation of the FOI Act will reduce the risk of disclosing ‘highly sensitive commercial and proprietary material’, and that the exemption in this item would be consistent with the treatment of other entities that deal regularly with commercial information, such as NBN Co and Export Finance Australia.20 The EM goes on to observe that:

The Future Fund Board and the Agency regularly produce, negotiate and receive documents that include confidential, competitive and commercially sensitive information. The public release, and potential for public release, of such information could compromise the ability of the Future Fund Board and the Agency to implement investment strategies effectively on behalf of the Government.

Given the Future Fund Board’s important role in seeking to strengthen the Commonwealth’s balance sheet, the growing size and complexity of the funds managed by the Future Fund Board, and that competing institutional investors in global markets are generally not subject to these [FOI] requirements, there is significant value and public benefit in enabling the Future Fund Board and the Agency to compete on an even footing in global institutional investment markets.21

2.16 In relation to the operation of the FOI exemption, the EM to the bill explains that:

The exemption is intended to cover documents including (but not limited to) those in relation to the Future Fund Board’s or the Agency’s past, current or proposed investment strategies for the Australian Government’s investment funds, the evaluation of potential or current investments and

18 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 18 - 22.

19 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 23.

20 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 23.

21 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 23.

13

investments managers, investing amounts, managing and realising investments and acquiring and managing derivatives.22

2.17 The FOI Act will continue to apply with respect to documents that do not relate to investment activities and other transparency and accountability mechanisms will continue to apply under the PGPA Act and the Future Fund Act.23

Schedule 3—Medical Research Future Fund 2.18 The EM observes that the amendments made by the bill in relation to the MRFF are aimed at streamlining the Fund’s operations. In addition, the responsible Ministers will be required to review the legislated amount at least

every five years, and will have the ability to update the amount of future years via a disallowable legislative instrument. The EM suggests that these amendments will ‘assist in the orderly planning and administration of medical research grants programs’.24

2.19 The EM goes on to explain that amendments will also:

... isolate the determination of disbursements from financial market fluctuations, while supporting the perpetual funding objective of the MRFF and better aligning the benchmark rate of return for MRFF with the cost of health-related services.25

2.20 Following commencement of the bill, the responsible Ministers intend to issue a new Investment Mandate to the Future Fund Board. According to the EM, the new Mandate will direct the Board to:

… pursue a higher average annual benchmark rate of return for the MRFF over the long term. This will align the MRFF’s investment mandate with other risk-seeking investment funds, creating operational efficiencies for the Future Fund Board, and be consistent with the objective of protecting the capital of the MRFF into the future.26

2.21 The provisions enabling these amendments are detailed in the following section.

22 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 23.

23 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 24.

24 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 4.

25 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 4.

26 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 4.

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Part 1

Expanding the avenues available to provide funding to the States and Territories 2.22 Part 1 to Schedule 3 would add States and Territories and State and Territory authorities to the types of persons or bodies that can receive grants from the MRFF Health Special Account under section 24 of the MRFF Act (item 16).27

2.23 Several items of Part 1 to this schedule make necessary amendments to terminology, consequential to the inclusion of States and Territories in section 24 (at item 16), which are classified as ‘persons’ under the Acts Interpretation Act 1901.28

New disbursements framework 2.24 Item 6 would remove a reference to the current requirement in the MRFF Act for the Future Fund Board, in determining the maximum annual distribution for a financial year, to take into account the principle of preserving the

nominal value of credits to the MRFF over the long term. The EM notes that:

This reference would become redundant as the Bill would remove the requirement for the Future Fund Board to determine the maximum annual distribution.29

2.25 To reflect this approach, items 3, 4, 10 and 33 would repeal the definition of ‘maximum annual distribution’ in the MRFF Act and make updates to the MRFF Act simplified outline, to remove references to the maximum annual distribution and sections in the MRFF that currently set limits on annual debits from the MRFF Special Account.30

2.26 The EM notes that the MRFF ‘has been credited with $20 billion to date and the Government does not have any further credits to the MRFF scheduled’. Further, following commencement of the bill, there would be:

… no requirement to preserve the nominal value of credits ($20 billion) to the MRFF. The MRFF has a value of $21.4 billion as of 31 March 2021, having exceeded its benchmark rate of return since inception. With the MRFF now fully capitalised, the Government intends to issue a new investment mandate for the MRFF with a higher benchmark rate of return. While this would increase the risk of losses in the short term, it would also increase expected earnings and support the perpetual funding objective over the long term.31

27 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 28.

28 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 25 - 29.

29 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 25.

30 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum,

pp. 25, 27 and 31.

31 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 25.

15

2.27 Part 1 to Schedule 3 also amends the MRFF Act, to insert new sections 15B and 15B(1) at item 9, to establish a new methodology for the maximum amount that can be disbursed from the MRFF Special Account in each financial year from 2022-23 onwards, in light of the fact that the MRFF is now fully capitalised.32

2.28 New subsection 15B(2), also at item 9 of the Schedule, would allow the responsible Ministers to determine, via disallowable legislative instrument, a maximum amount that can be debited from the MRFF Special Account in a specified financial year (from 2022-23 onwards).33

2.29 The maximum amount for 2022-23 and later financial years would be $650 million, or if another amendment under subsection 15B(2) or 15B(3), that other amount. New subsection 15B(5) would require the responsible Ministers to conduct a review of the proposed limitation on total annual debits from the MRFF Special Account (new paragraphs 15B(1)(c) and (d)), at least once every five years.34

2.30 In light of new proposed section 15B, item 10 of the Schedule repeals section 16 of the MRFF Act, which currently sets the limit on annual debits from the MRFF Special Account.35

Streamlining the administration of the MRFF grants program 2.31 The EM outlines the further minor amendments to the MRFF Act proposed by the bill, which aim to streamline the administration of the MRFF. These changes would:

 make state and territory governments (including state and territory government entities) eligible to receive funding directly from the MRFF Health Special Account, given their significant expertise in certain areas of health and medical research;  extend and align the timing of the Strategy and the Priorities, to reduce

the ongoing consultation burden on the health and medical research sector and reflect the enduring, long-term approach to medical research and medical innovation;  clarify that grants can be paid in instalments (for example, to clarify that milestone payments can be paid to grant recipients);  clarify that the Health Minister can request debits from the MRFF Special Account without having to identify each individual grant to which a debit relates (grant outcomes would continue to be transparently reported on the Department of Health’s website); and

32 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 26 - 27.

33 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 26.

34 Investment Funds Legislation Amendment Bill 2021, Schedule 3, Part 1, Item 9; Investment Funds

Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 26 - 27.

35 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 27.

16

 allow copies of administrative directions to debit the MRFF Special Account (for the purposes of paying grants) to be received by senior departmental officials instead of Ministers, in instances where the Finance Minister has delegated the power to make a transfer in accordance with the MRFF Act.36

2.32 The following provisions in the bill would enact the above administrative amendments to the MRFF.

2.33 Item 7 of the bill would make amendments to paragraph 15A(2)(b) to provide that the Health Minister has the power to seek advice on the merits of making multiple grants, and to clarify that separate expert advice need not be sought on the merits of each individual grant. Item 8 provides that when the Finance Minister debits a specified amount from the MRFF Special Account for the purpose of paying grants, this may relate to one or more grants and need not specify the grant or grants to which it relates.37

Copies of directions and delegations 2.34 The bill, at items 12, 19 and 25 of Schedule 3 provide for new arrangements with respect to the Finance Minister providing copies of directions made under subsection 20(1), 25(1) and 29(1) of the MRFF Act38 to the Health Minister and

Treasurer, if the Finance Minister debits a specified amount from the MRFF Special Account and credits that amount to the COAG Reform Fund,39 the MRFF Health Special Account or a corporate Commonwealth entity.

2.35 These new arrangements would require the Finance Minister to give a copy of a direction under subsection 20(1), 25(1) or 29(1) to the Treasurer and the Health Minister in instances where the Finance Minister personally gives a direction under those subsections.40

2.36 Proposed subsections 20 (5) and (6) at item 12, 25(5) and (6) at item 19 and 29(4) and (5) at item 25 provide that if a delegate of the Finance Minister gives a direction under subsection 20(1), 25(1) or 29(1) of the MRFF Act, the delegate must give a copy of the direction to the Treasurer, the Health Minister, the

36 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 4 - 5.

37 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 26.

38 Subsection 20(1) of the MRFF Act provides that if the Health Minister requires the Finance

Minister to debit a specified amount from the Medical Research Future Fund Special Account under this Subdivision, the Finance Minister must, by writing, direct that, on a specified day, the specified amount is to be: (a) debited from the Special Account; and (b) credited to the COAG Reform Fund. Subsections 25(1) and 29(1) apply similarly to debits from the MRFF Special Account and credits to the MRFF Health Special Account; and debits from the MRFF Special Account and a grant to a corporate Commonwealth entity.

39 Amendments to terminology around COAG are proposed by the COAG Legislation Amendment

Bill 2021.

40 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 27 - 30.

17

Treasury Department and the Health Department. The EM explains that this provision would allow:

… correspondence to occur between officials at a departmental level when the power to give a direction under subsection 20(1) [and 25(1) and 29(1)] has been delegated to an official in the Finance Department.

Delegations under subsection 20(1) [and 25(1) and 29(1)] are limited to the Secretary and SES employees, or acting SES employees, in the Finance Department. This ensures that any delegate has a suitable level of experience and skills to perform the delegated power.

The purpose of [these items] is to reduce administrative burden, given that correspondence usually occurs at a departmental level as a result of delegations. Departments would still be required to keep their Ministers appropriately informed under provisions in the PGPA Act.41

2.37 New sections provided for at items 13, 24 and 26 stipulate that a grant referred to in subsections 20(2), 26(1) or 29(1), being a grant to a State or Territory via the COAG Reform Fund, the MRFF Health Special Account or to a corporate Commonwealth entity, may be made in instalments.42

2.38 Item 16 of Schedule proposes to add States and Territories, and their authorities, to the types of persons or bodies that can receive grants from the MRFF Health Special Account, under section 24 of the MRFF Act. The purpose of this provision is explained by the EM:

This would allow the MRFF Health Special Account to be debited for the purposes of paying grants to any State or Territory, including any body that shares legal personality with a State or Territory. This would allow for grants to be paid to bodies established by States or Territories, including those established through State or Territory law.43

2.39 Items 27, 29 and 30 make updates to the MRFF Act and its simplified outline, changing the duration of the Australian Medical Research and Innovation Strategy from five to six years.44

2.40 Items 28, 31 and 32 make updates to the MRFF Act and its simplified outline, changing the duration of the Australian Medical Research and Innovation Priorities, from two to three years.45

Part 2 2.41 Part 2 of Schedule 3 makes amendments to ensure the effective and efficient application and transition of the provisions of the bill. For example, item 35

41 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 27.

42 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 27 - 29.

43 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 28.

44 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 30.

45 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 30.

18

makes clear that the amendments proposed by items 12, 19 and 25 of Schedule 3 would apply in relation to a direction given after the commencement of item 35.

2.42 Part 2 also provides that, in relation to the Strategy and the Priorities and the amendments to their timeframes as proposed by the bill:

 The change of duration of the Australian Medical Research and Innovation Strategy from five to six years would not apply to the current Strategy that is in place (from 2016 to 2021)

 The change of duration of the Australian Medical Research and Innovation Priorities from two to three years would not apply to the current Priorities that are in place (from 2020 to 2022).46

2.43 However, the duration of both the Strategy and the Priorities depend on the date of commencement of the Schedule. Items 37 and 38 therefore provide transitional provisions for if Schedule 3 commences before the end of 8 November 2021 (item 37), or after the end of 8 November 2021.47

2.44 In addition, item 39 of Schedule 3 clarifies that the MRFF Act would continue to apply in relation to debits in financial years up to and including 2021-22. The EM explains that:

This would ensure that the changes to debiting arrangements from 2022-23 onwards do not affect the debiting arrangement of the MRFF in earlier financial years.48

Financial impact statement 2.45 The EM states that the changes to the disbursement framework for the MRFF will specify a fixed maximum annual disbursement of $650 million from 2022-23. This maintains the Government’s commitment to funding the commitments

outlined in the MRFF 10-year investment plan and isolates the determination of disbursements from financial market fluctuations, while supporting the perpetual funding objective of the MRFF.49

2.46 The EM also states that the legislative amendments to the MRFF will enable the Government to issue a new investment mandate with a higher benchmark rate of return that will increase expected earnings and better align the fund’s benchmark rate of return with the growth in health-related costs.50

46 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 32.

47 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 32 - 33.

48 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 34.

49 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 5.

50 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 6.

19

2.47 The EM notes that this will have a positive impact on the underlying cash and fiscal balances of the MRFF, reflecting higher projected investment earnings (net investment costs). A higher benchmark rate of return will increase the risk of short-term losses, but that will be offset by higher expected earnings over the medium to long term.51

Schedule 4—Emergency Response Fund 2.48 Schedule 4 makes the necessary amendment to the ERF Act, in light of the Government’s decision to establish the NRRA in the Prime Minister and Cabinet portfolio. The administrative responsibility for expenditure was

formerly the responsibility of Emergency Management Australia in the Department of Home Affairs, and transferred to the NRRA on 1 July 2021.52

Part 1

Transferring responsibility for expenditure from the ERF to the NRRA 2.49 Item 1 renames the ‘Home Affairs Emergency Response Fund Special Account’ as the ‘Emergency Response Fund Payments Special Account’.

2.50 Several items of Part 1 to this Schedule then make consequential amendments to terminology in the ERF Act and the simplified outline of the Act, to reflect the transfer of administrative responsibility for expenditure from the Emergency Response Fund (ERF) from the Department of Home Affairs, to the newly established National Recover and Resilience Agency (NRRA) from 1 July 2021.53

2.51 Item 16 would repeal section 27 of the ERF Act, which establishes the Home Affairs Emergency Response Special Account, and replace it with new section 27 for the renamed special account, the Emergency Response Fund Payments Special Account. New subsection 27(1) would effectively rename the existing special account and provide for the special account to continue operating with its new name, while proposed subsection 27(2) would clarify that the ERF Payments Special Account is a special account for the purposes of the PGPA Act.54

Streamlining administrative arrangements for transfers from the Emergency Response Fund Special Account 2.52 Items 20, 24, 32 and 38 provide for new arrangements with respect to providing copies of directions under subsections 28(7), 28A(7), 31(2) and

51 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 6.

52 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 5.

53 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 35 - 39.

54 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, pp. 36 - 37.

20

32A(1) of the ERF Act55 to transfer an amount from the ERF Special Account to the Emergency Response Fund Payments Special Account. These new arrangements would require the Finance Minister to give a copy of a direction under subsection 28(7), 28A(7), 31(2) or 32A(1) to the Treasurer and the Emergency Management Minister in instances where the Finance Minister personally gives a direction under those subsections.

2.53 Item 33 would amend section 32 of the ERF Act to provide for the channelling of grants of financial assistance to a State or Territory, through the COAG Reform Fund, to fund emergency response and recovery following natural disasters in Australia that have a significant or catastrophic impact. The amendments in item 33 would align the process for channelling grants through the COAG Reform Fund with other comparable provisions.56

2.54 Similar amendments are made at items 35 and 36, in order to facilitate the transfer of an amount to the COAG Reform Fund, as follows:

 from the ERF Special Account for the purposes of paying grants to a State or Territory to fund emergency response and recovery following natural disasters in Australia which have a significant or catastrophic impact; or

 to a State or Territory to build resilience to, prepare for or reduce the risk of future natural disasters.57

2.55 Item 39 would update the Finance Minister’s delegation powers to reflect the Finance Minister’s updated roles in sections 32 and 32A, as amended by the bill. Under the amended sections, the Finance Minister would be required to transfer amounts from the ERF Special Account to the COAG Reform Fund for the purpose of paying grants to a State or Territory.

2.56 Items 40 to 43 make consequential updates to the delegation powers of the Emergency Management Minister, to allow delegation of powers to an SES employee (or acting SES employee) in the NRRA, instead of an SES employee (or acting SES employee) in the Home Affairs Department.

55 Subsection 28(7) of the ERF Act provides that if: (a) during a financial year, the Emergency

Management Minister requests the Finance Minister … to transfer an amount from the Emergency Response Fund Special Account to the Home Affairs Emergency Response Fund Special Account; and (b) the Finance Minister is satisfied that the transfer will not contravene subsection 34(1) (annual limit); the Finance Minister must, in writing, direct that a specified amount (which must equal the requested amount) is to be: (c) debited from the Emergency Response Fund Special Account; and (d) credited to the Home Affairs Emergency Response Fund Special Account; on a specified day during the financial year. The Finance Minister must give a copy of a direction under subsection 28(7) to the Treasurer and the Emergency Management Minister.

56 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 40.

57 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 41.

21

Part 2 2.57 Part 2 of Schedule 4, at item 44, makes application provisions to provide that the amendments at items 20, 24, 32, 35 and 38 of Schedule 4 would apply in relation to a direction given after commencement of item 44.

23

Chapter 3

Key issues and committee views

3.1 This chapter considers the views of submitters and witnesses regarding the provisions of the bill.

3.2 The key issues raised throughout the inquiry in relation to the bill are discussed by schedule in this chapter.

Schedule 1—Staff of the Future Fund Management Agency 3.3 There were mixed views put forward in evidence as to the appropriateness of the proposed changes under Schedule 1 of the bill, which would remove Future Fund Management Agency (the Agency) staff from coverage of the

Public Service Act 1999 (Public Service Act), and establish a new employment framework for the Agency in its place.

3.4 For example, the Community and Public Sector Union (CPSU) and the Australian Council of Trade Unions (ACTU) expressed concerns, with the CPSU asserting that the proposed removal of the Agency from coverage of the Public Service Act would have impacts beyond the Agency itself. It suggested this amendment could reduce the scope, status and standing of the APS, potentially making it a less attractive employer. The CPSU also gave evidence that amendments under this schedule could weaken important APS principles such as the merit principle and the employment principle.1

3.5 The CPSU went on to argue that whilst, along with other Commonwealth agencies, the Future Fund needs the ability to attract and retain skills and expertise in high demand and specialist positions, that it is the

Commonwealth’s workplace bargaining policy (which would still apply under the proposed new employment framework) that is the ‘real problem’ rather than coverage by the Public Service Act.2

3.6 The CPSU noted that concerns with the bargaining policy have also been raised by other Commonwealth agencies including the Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) and concluded that:

Unless the bargaining policy constraints that limit improvements in wages and conditions are removed, the inability to offer competitive salary and conditions that match market conditions shall remain. Removing the Public Service Act coverage will not address labour market issues and will

1 Mr Michael Tull, Assistant National Secretary, Community and Public Sector Union, Proof

Committee Hansard, 28 September 2021, p. 15.

2 Community and Public Sector Union, Submission 12, p. 1.

24

only raise concerns about the impartiality and accountability of employment processes.3

3.7 Concerns expressed by the CPSU were supported and reiterated by the ACTU in its evidence to the inquiry. The ACTU raised additional concerns with other provisions in the bill that would allow the Chair of the Agency to set and change the values of the organisation, its code of conduct, and employment frameworks.4

3.8 The ACTU suggested that ‘unilaterally’ allowing the Chair to set and change the values of the Agency, code of conduct and employment frameworks could be ‘disastrous’ for the employment security of some staff of the Agency. Citing findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the ACTU cautioned that financial services sector norms should not be emulated, an approach suggested by the bill’s explanatory memorandum.5

3.9 Conversely, the Department of Finance (the department) expressed in its submission and at the committees’ public hearing, that establishing a new employment framework for the Agency would better align it with its substantially commercial operating market and with comparable entities, such as ASIC, APRA and the Reserve Bank of Australia (RBA).6

3.10 Further, the department went on to assert that the reforms would allow the Agency to improve its processes in the recruitment and retention of specialised staff, and ultimately facilitate its key objective of maximising investment outcomes. 7

3.11 In its submission, the department also explained that the new employment framework would maintain appropriate organisational controls, risk management practices and safeguards to ensure continued strong governance, noting, for example, the following:

 Agency staff will remain as officials under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).  Agency staff will continue to be employed on the same terms and conditions as those that applied immediately before the transition, and will

retain all of their existing leave entitlements and access to existing superannuation arrangements.

3 Community and Public Sector Union, Submission 12, p. 3.

4 Australian Council of Trade Unions, Submission 13, p. 2.

5 Australian Council of Trade Unions, Submission 13, p. 2; Mr Michael Tull, Assistant National

Secretary, Community and Public Sector Union, Proof Committee Hansard, 28 September 2021, p. 15.

6 Department of Finance, Submission 10, pp. 3 - 4.

7 Department of Finance, Submission 10, pp. 3 - 4.

25

 The remuneration of senior executives and other highly-paid Agency staff will continue to be published in the Future Fund Annual Report in accordance with the PGPA Act.  The Chair will be required to determine and publish a Code of Conduct and

Values for the Agency, that are, as far as practicable, consistent with the APS Code of Conduct and Values, and cannot reduce the benefits of an employee as provided under the minimum standards in the National Employment Standards.  The Agency will remain subject to the applicable Government workplace

relations policies unless otherwise agreed.8

3.12 The Future Fund advised that it had considered the department’s submission in respect to this Schedule, and expressed its support for the department’s position.9

3.13 At the committee’s public hearing, Mr Cameron Price, the Agency’s General Counsel and Chief Risk Officer stated that the new employment framework was intended to allow the Future Fund to be as an attractive employer as possible, in the context of it having to compete for talent globally, in the financial and professional services industries. He further noted that a number of APS policies and processes the Agency is currently subject to under the Public Service Act are not meaningful or useful to the Future Fund.10

3.14 Mr Price pointed out that under the bill’s proposals, the new code of conduct is required to be as consistent as possible with the APS Code of Conduct. Mr Price suggested there could be some minor changes due to the differing nature of the Future Fund’s business in contrast to other APS agencies.11

Schedule 2— Freedom of Information 3.15 A number of submitters and witnesses commented on the proposed partial exemption of the Future Fund Board of Guardians (Future Fund Board) and the Agency from the Freedom of Information Act 1982 (FOI Act), in respect of

investment activities.

Transparency and accountability 3.16 In its evidence to the inquiry, the both the CPSU and ACTU raised concern that the bill’s provisions to partially exempt the Future Fund Board and

8 Department of Finance, Submission 10, pp. 3 - 4.

9 Future Fund, Submission 11, p. 2.

10 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, pp. 42 - 43.

11 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, p. 43.

26

Agency from the FOI Act, in respect of its investment activities would result in serious impacts for transparency and accountability of the Future Fund.12

3.17 Whilst recognising the issues around FOI in relation to the investment activities and positions of the Future Fund, the CPSU considered that FOI exemptions should be for commercial sensitivity reasons alone, and not more broadly cast. This view was shared by the ACTU, who went on to state that as an investment vehicle, it would not be clear what the Agency does that isn’t an investment activity.13

3.18 Similar concerns around the bill’s impact on Government and Agency transparency and accountability, were reflected in Ms Mon Zin’s submission, which highlighted the following:

Recently, Australian Centre for International Justice was able to obtain documents that exposed Future Funds’ investments in [an] Adani company. This Adani company is the very same one that United Nations have criticised for dealing with the Myanmar military Junta who has been abusing and violating human rights in Myanmar for many months since February coup … After implementing this Schedule 2 - FOI, individuals, environmentalists, human rights defenders, and civil society organisations will not be able to monitor whether social responsibilities and safeguards are respected.14

3.19 Throughout the inquiry, the FOI disclosure mentioned above was brought to the committee’s attention, for example by Ms Zin’s submission and her reference to media reporting on this issue.15

3.20 Evidence from the department and the Future Fund countered the arguments against the proposed FOI amendments, making a case for the partial FOI exemptions as proposed by the bill. Both witnesses argued that the partial exemption would be consistent with the treatment of other similar entities that regularly deal with commercial information, including NBN Co, Australia Post and Export Finance Australia.16

12 Community and Public Sector Union, Submission 12, p. 3.

13 Mr Michael Tull, Assistant National Secretary, Community and Public Sector Union, Proof

Committee Hansard, 28 September 2021, p.15; Mr Joseph Mitchell, Workers' Capital Lead, Australian Council of Trade Unions, , Proof Committee Hansard, 28 September 2021, p. 16.

14 Ms Mon Zin, Submission 9, p. 1.

15 Ms Mon Zin, Submission 9, p. 1. See, for example, Christopher Knaus, ‘”Calculated response”:

Coalition moves to protect Future Fund from FOI laws’, The Guardian, 26 August 2021, www.theguardian.com/australia-news/2021/aug/26/calculated-response-coalition-moves-to-protect-future-fund-from-foi-lawsn (accessed (1 October 2021); Christopher Knaus, ‘Future Fund worth $250bn says FoI requests “administratively burdensome”’, The Guardian, 28 September 2021, www.theguardian.com/australia-news/2021/sep/28/future-fund-worth-250bn-says-foi-requests-administratively-burdensome (accessed 1 October 2021).

16 Department of Finance, Submission 10, p. 5; Future Fund, Submission 11, p. 3.

27

3.21 In its submission, the Future Fund highlighted the necessity of the amendments, noting that its current engagement with the FOI regime both limited its investment opportunities, and required considerable time and resources. The Future Fund explained that:

… a number of potential co-investors, investment managers and other service providers have expressed concern about accepting the organisation as co-investors or clients, because we are subject to the FOI Act and cannot guarantee that we will be able to maintain the confidentiality of commercially sensitive information. Material time and resources are spent at times on extensive discussion and negotiations with investment partners about FOI disclosure issues and, in some instances, there has been a reduction in the amount and types of information that they are willing to provide. This has reduced our level of insight to, and risk management oversight of, the investments.17

3.22 The Future Fund also gave evidence that granting a partial FOI exemption for the Board and Agency would be consistent with state government entities with similar functions, which have exemptions from equivalent state based FOI legislation, for example:

 The Victorian Funds Management Corporation has a full exemption from the Freedom of Information Act 1982 (Vic).  The Queensland Investment Corporation Limited and its subsidiaries have an exemption from the Right to Information Act 2009 (Qld).18

3.23 In its submission, the department confirmed that the purpose of the partial FOI exemption was to provide certainty to the Future Fund Board and Agency, and their relevant investment managers, that commercially sensitive or in-confidence investment information is automatically excluded from release under the FOI Act. The department argued this will help place the Future Fund on more even footing with commercial competitors in the highly competitive global institutional investment market.19

3.24 The department’s evidence clarified that the FOI Act will continue to apply to the Future Fund Board and Agency in respect of documents concerning non-investment activities, such as operational functions. The department’s submission also set out in more detail, documents which the proposed exemption is intended to cover:

 past, current or proposed investment strategies for the Australian Government’s investment funds;  the evaluation of potential or current investments and investment managers;

17 Future Fund, Submission 11, p. 4.

18 Future Fund, Submission 11, p. 3.

19 Department of Finance, Submission 10, pp. 5 - 6.

28

 managing investments or making investment transactions;  the expected financial performance of specific investments or strategies;  advice from investment consultants on investment strategies and risks; and  internal investment-related process and policy documents.20

3.25 The department and the Agency also noted that the Future Fund is subject to a range of existing transparency and accountability arrangements that provide a sufficient level of scrutiny and oversight. These include, for example:

 publication of a Statement of Investment Policies providing investment information for each investment fund including appropriate details on the investment strategy and investment approach;

 publication of a list of all investment managers;  publication of a list of the top 100 holdings in listed equities;  a requirement to produce and table an annual report and audited financial statements in Parliament;

 the requirement to provide reports to the Minister upon request setting out specified information relating to the performance of the Board’s functions under the Act. The Minister may also direct the Board to publish this information;

 scrutiny through Parliamentary questions to the Minister, and attendance at Senate Estimates hearings; and  reporting and disclosure obligations under the PGPA Act framework.21

3.26 The Agency reiterated that robust arrangements remain in place for the scrutiny of the Future Fund’s operational and investment activities, and further remarked that the application of the FOI Act in respect of investment activities, presents a significant risk to the Future Fund’s ability to operate in competitive global financial markets and maximise risk-adjusted returns.22

An industry double standard? 3.27 Industry Super Australia (ISA), a research and advocacy body for Industry SuperFunds gave evidence to the committee regarding the proposed amendments under Schedule 2 of the bill. Noting its support for policy settings

that strike a balance between transparency and ensuring institutional investors can maximise returns for their clients (or in the case of industry super funds, their members), ISA suggested that the amendments to the FOI Act as proposed in this bill, would introduce an uneven playing field where the Future Fund would ‘be able to operate at a competitive advantage to

20 Department of Finance, Submission 10, p. 5.

21 Future Fund, Submission 11, p. 5; Department of Finance, Submission 10, p. 5.

22 Future Fund, Submission 11, p. 5.

29

superannuation funds of millions of Australians potentially diminishing their retirement savings’.23

3.28 In its submission, ISA argued that the proposed amendments to partially exempt the Agency from FOI disclosure of its investment activities, would introduce a ‘regulatory double standard’ and that ‘regulatory disclosures should be reasonably aligned so the interests of taxpayers as well as superannuation fund members are served’. ISA stated:

Industry super funds operate in the same capital markets as the Future Fund. This legislation would undermine the sole purpose of industry funds to maximise the retirement savings of their millions of members if it were implemented alongside the government’s proposed portfolio holdings disclosure (PHD) regime.24

3.29 The ACTU similarly reflected that the proposition to exempt the investment activities of the Future Fund from FOI requests was inconsistent with the Government’s expectations of superannuation funds. The ACTU submitted the following:

This position is inconsistent with the Government’s proposal to require superannuation funds to disclose every position and investment valuation, under the exposure draft of the Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021. Under the proposed regulations, superannuation funds would be required to disclose internal valuations of unlisted assets and values and positions taken in derivatives markets at regular intervals. Doing so could, according to the by the Government’s own admission, risk “negative impacts on investment outcomes” and “reduced access to investment opportunities” for superannuation funds, jeopardising the superannuation savings of millions of working Australians and leaving Australians worse off in retirement.25

3.30 However, the ACTU acknowledged they were supportive of the principle of the partial FOI exemption, stating:

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.26

3.31 Similarly, the ISA acknowledged their support of the FOI exemption.27

23 Industry Super Australia, Submission 5, p. 1.

24 Industry Super Australia, Submission 5, p. 2.

25 Australian Council of Trade Unions, Submission 13, pp. 1 - 2.

26 Mr Joseph Mitchell, Workers' Capital Lead, Australian Council of Trade Unions, Proof Committee

Hansard, 28 September 2021, p. 19.

27 Mr Matthew Linden, Deputy Chief Executive, Industry Super Australia, Proof Committee Hansard,

28 September 2021, p. 28.

30

3.32 On this issue at the committee’s public hearing, Mr Nathan Williamson, Deputy Secretary, Governance and Resource Management, Department of Finance, made the key distinction that the Future Fund is a sovereign wealth fund, not a superannuation fund, whilst acknowledging they compete in the same markets. Mr Williamson went on to clarify that, among other differences, objectives and appetites for risk differ between the Future Fund and superannuation funds.28

3.33 Mr Scott Dilley, First Assistant Secretary, Governance & Resource Management for the Department of Finance, further noted that stakeholders for the Future Fund are the Government and the taxpayer and as such, other unique accountability mechanisms exist for the Future Fund, that don’t apply to individual superannuation funds.29

3.34 The Agency concluded that providing a partial exemption from the FOI Act to the Future Fund will protect and further enhance its ability to pursue the objectives of the Future Fund Act 2006, namely to strengthen the Commonwealth’s long-term financial position.30

Schedule 3—Medical Research Future Fund 3.35 Several submitters gave evidence to the committee regarding the bill’s proposed changes to the Medical Research Future Fund Act 2015 (MRFF Act), as discussed below.

Changes to the disbursements framework 3.36 In relation to the proposed changes to the Medical Research Future Fund (MRFF) disbursements framework, evidence provided to the inquiry was focused around three key areas:

 the proposed adoption of a more aggressive investment mandate for the MRFF; 31  the proposed fixed maximum disbursement amount of $650 million per year from 2022-23; 32 and

28 Mr Nathan Williamson, Deputy Secretary, Governance and Resource Management, Department of

Finance, Proof Committee Hansard, 28 September 2021, p. 35.

29 Mr Scott Dilley, First Assistant Secretary, Governance, Governance & Resource Management of the

Department of Finance, Proof Committee Hansard, 28 September 2021, p. 35.

30 Future Fund, Submission 11, p. 5.

31 See, for example, Research Australia, Submission 3; Association of Australian Medical Research

Institutes Ltd, Submission 4; Australian Society for Medical Research, Submission 8.

32 See, for example, Dr Lesley Russel, Submission 1; Association of Australian Medical Research

Institutes Ltd, Submission 4; Australian Academy of Health and Medical Sciences, Submission 6; The George Institute for Global Health, Submission 7; and Australian Society for Medical Research, Submission 8.

31

 the removal of legislative protections of the MRFF’s initial $20 billion endowment. 33

A more aggressive investment mandate 3.37 Submitters were largely supportive of the Government’s intention to amend the bill to seek greater returns and generate additional funding for health and medical research innovation.34

3.38 In evidence to the committee, Research Australia highlighted its support for proposed amendments that would enable the MRFF to adopt a more aggressive investment strategy, stating:

Research Australia believes that the proposed legislative changes will allow the MRFF to be invested more aggressively, with the objective of maintaining the capital of the mid- to long-term rather more protecting it against short-term fluctuations.

… We [Research Australia] are confident the Future Fund's Board of Guardians can invest the MRFF's capital in a way that will achieve the dual objectives of a higher return and protecting the capital in the longer term. We also welcome the proposal to determine the amounts to be distributed up to five years in advance. Health and medical research is a long-term prospect, and the degree of certainty this measure provides about the amount of funding available is welcome.35

3.39 The Association of Australian Medical Research Institutes (AAMRI) was similarly supportive of the intention to pursue a higher average annual benchmark rate of return for the MRFF, echoing Research Australia’s sentiments in its submission to the inquiry:

AAMRI supports this policy and believes that the fund is currently too conservatively invested and that greater returns would over the long-term bring about enhanced investment in medical research. This will deliver increased health and economic benefits for the nation. It is recognised that investing the MRFF in assets that will deliver higher returns does entail taking on increased risk, and there will be greater volatility in returns between years. However, over the long-term it is anticipated that returns will be higher and that this increase in volatility can be managed between years.36

33 See, for example, Association of Australian Medical Research Institutes Ltd, Submission 4;

Australian Academy of Health and Medical Sciences, Submission 6; The George Institute for Global Health, Submission 7; Australian Society for Medical Research, Submission 8.

34 See, for example, Research Australia, Submission 3; Association of Australian Medical Research

Institutes Ltd, Submission 4; Australian Academy of Health and Medical Sciences, Submission 6.

35 Mr Greg Mullins, Head of Policy, Research Australia, Proof Committee Hansard, 28 September 2021,

p. 2.

36 Association of Australian Medical Research Institutes Ltd, Submission 4, p. 2.

32

3.40 The Australian Society for Medical Research (ASMR) took a slightly different view on this matter and raised the following concerns around investment risk:

… the proposed short-term return on investment losses may negatively impact the disbursements available in a given year due to reduced returns with no requirement for the Government to maintain credit balances (Item 6 of the Bill), as it did in 2020 in response to lower returns due to COVID-19. In the long-term it is presumed that investment certainty and revenue will be greater despite higher risk investments, a lack of evidence to support an investment approach, and no certainty these presumptions will bear out.37

3.41 In response to these views, the department stated that the amendments will allow approximately three per cent of the MRFF’s balance to be disbursed in a given year from 2022-23, and assured the committee that this would ‘reflect an appropriate balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective over the long term’.38

3.42 The department added the following:

Under the current framework, the Future Fund Board’s determination of the maximum disbursement amount relates to a single year, which limits certainty about future commitments. A fixed maximum disbursement will provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, as the level of disbursements will be independent from short term market fluctuations.39

3.43 In its submission, the department also noted that the responsible Ministers would be required to review the maximum disbursement amount at least every five years, and would have the ability to update the amount for future years via a disallowable legislative instrument. The department pointed out this would allow the responsible Ministers to increase the maximum disbursement amount if the MRFF is able to support higher disbursements in the future, whilst ensuring appropriate parliamentary scrutiny and oversight via the disallowance process, in line with standard parliamentary procedures.40

A limitation on annual disbursements from the MRFF Special Account 3.44 Many submitters expressed concerns in relation to the proposed amendments to cap the annual disbursements from the MRFF Special Account for medical research at $650 million per year, from 2022-23.41

37 Australian Society for Medical Research, Submission 8, pp. 3 - 4.

38 Department of Finance, Submission 10, p. 8.

39 Department of Finance, Submission 10, p. 8

40 Department of Finance, Submission 10, p. 8

41 See, for example, Dr Lesley Russell, Submission 1; Association of Australian Medical Research

Institutes Ltd, Submission 4; Australian Academy of Health and Medical Sciences, Submission 6; The

33

3.45 Submitters including the George Institute for Global Health, the Australian Academy of Health and Medical Sciences (AAHMS), AAMRI and ASMR shared the view that the bill should specify a fixed minimum annual disbursement amount of $650 million per annum, and that disbursed funds should be subject to indexation.42

3.46 At the public hearing of the committee, Professor Steve Wesselingh, Vice President of the AAHMS expressed the organisation’s support for a fixed amount of research funding being made available from the MRFF each year, but suggested that the $650 million per annum should be a minimum, subject to annual indexation. Professor Wesselingh continued that:

We understand that the intention underlying the bill is to provide better stability and security for strategic investments in research, leading to better outcomes. However, our recommendation is that the best way to deliver this stability is to set a minimum amount of research funding each year and ensure that this amount is indexed. If the performance of the fund exceeds expectations, there should be an allowance to increase the amount of research funding in a year, and particularly as a mechanism to respond to emerging areas of national need.43

3.47 In its submission to the inquiry, AAMRI similarly contended that:

The Bill should also include a minimum amount of funding to be provided for medical research. There is currently no legal requirement for investment returns to be spent each year on medical research, and as the Act is being amended the opportunity should be taken to change this. Having a minimum amount available would provide greater certainty and confidence that the MRFF will be investing in medical research at a set level irrespective of the cyclical nature of the MRFF investment returns. This minimum amount should be set at least $650 million per annum to ensure existing commitments in the forward estimates are met.44

3.48 Dr Ryan Davis, President of the ASMR indicated ASMR’s similar view that instead of an upper cap on annual disbursements, a guaranteed minimum annual disbursement should be established. Dr Davis also argued that proposed amendments to cap annual disbursements did not make sense

George Institute for Global Health, Submission 7; and Australian Society for Medical Research, Submission 8.

42 Association of Australian Medical Research Institutes Ltd, Submission 4; Australian Academy of

Health and Medical Sciences, Submission 6; The George Institute for Global Health, Submission 7 and Australian Society for Medical Research, Submission 8.

43 Professor Steve Wesselingh, Vice President, Australian Academy of Health and Medical Sciences,

Proof Committee Hansard, 28 September 2021, p. 9.

44 Association of Australian Medical Research Institutes Ltd, Submission 4, p. 2.

34

alongside other provisions that seek to establish a more aggressive investment mandate to return more funds, if these funds would not then be disbursed.45

3.49 Citing an independent Deloitte Access Economics report commissioned by ASMR in 2014,46 Dr Davis explained the findings that for every dollar invested in the MRFF, there was a $3.40 return in future heath and productivity gains.47 Dr Davis elaborated that capping annual disbursements at $650 million was therefore a ‘missed opportunity’ in this regard, adding that every opportunity should be taken to disburse as much as possible back into the research sector.48

3.50 In his submission to the inquiry, Dr Lesley Russell also cited the aforementioned findings of the 2014 report prepared by Deloitte for the ASMR, highlighting that the bill’s proposed maximum disbursement cap of $650 million per annum was ‘considerably short’ of the Government’s original commitment to disburse $1 billion from the fund per year when the MRFF was established. Dr Russell was of the view that the Government was fulfilling only 65 per cent of its original commitment in this regard.49

3.51 In presenting the rationale for the proposed fixed maximum disbursement amount, the department advised that under the current framework, the Future Fund Board’s determination of the maximum disbursement amount relates to a single year, which limits certainty about future commitments. The department explained that a fixed maximum disbursement would provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, as the level of disbursements would be independent from short term financial market fluctuations.50

3.52 The department went on to highlight that the responsible Minsters would be required to review the maximum disbursement amount at least every five years, and that under the proposed provisions, they would have the ability to update the amount for future years, via a disallowable legislative instrument.51

45 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, p. 4.

46 Deloitte Access Economics for the Australian Society for Medical Research, Extrapolated returns

from investment in medical research future fund (MRFF), 17 October 2014.

47 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, p. 4; Deloitte Access Economics for the Australian Society for Medical Research, Extrapolated returns from investment in medical research future fund (MRFF), 17 October 2014, p. 11.

48 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, pp. 4, 6.

49 Dr Lesley Russell, Submission 1, p. 6.

50 Department of Finance, Submission 10, p. 8.

51 Department of Finance, Submission 10, p. 8.

35

3.53 The department noted that the bill would appropriately allow the responsible Ministers to increase the maximum amount if the MRFF were able to support higher disbursements in the future, whilst ensuring necessary parliamentary scrutiny and oversight via the disallowance process, in line with standard parliamentary procedures.52

Changes to legislative protections of the MRFF’s initial $20 billion endowment 3.54 As noted in Chapter 2, the Explanatory Memorandum (EM) to the bill explains that the MRFF ‘has been credited with $20 billion to date and the Government does not have any further credits to the MRFF scheduled’. Further, following

commencement of the bill, there would be ‘no requirement to preserve the nominal value of credits ($20 billion) to the MRFF…With the MRFF now fully capitalised, the Government intends to issue a new investment mandate for the MRFF with a higher benchmark rate of return’.53

3.55 Several submitters shared the view that the MRFF’s initial $20 billion endowment should remain protected, and that current legislation protecting the nominal credits in perpetuity should not be removed.54 For example, Professor Steve Wesselingh, Vice President of the AAHMS stated that:

… the Academy recommends retaining the legal protection that stops the $20 billion MRFF capital from being spent down. Amendments that lift this protection should be removed from the bill. The MRFF is now an essential part of the funding landscape for health and medical research in Australia, and as a stable and secure funding source it provides an unprecedented opportunity to benefit national health and wellbeing. This should be continued and protected by the legislation.55

3.56 Professor Peter Schofield, Board Director, AAMRI, similarly expressed at the committee’s public hearing that it would be important to see current legislation which protects the initial $20 billion investment in the fund remain. Professor Schofield contended ‘in this way, the fund will always be a source of investment in perpetuity, protected from any future financial difficulties’.56

3.57 Research Australia noted that the bill would give responsibility for determining the amounts available for disbursement from the MRFF to the Minister for Finance and the Treasurer (the responsible Ministers). Research

52 Department of Finance, Submission 10, p. 8.

53 Investment Funds Legislation Amendment Bill 2021, Explanatory Memorandum, p. 25.

54 See, for example, Association of Australian Medical Research Institutes Ltd, Submission 4;

Australian Academy of Health and Medical Sciences, Submission 6; The George Institute for Global Health, Submission 7; Australian Society for Medical Research, Submission 8.

55 Professor Steve Wesselingh, Vice President, Australian Academy of Health and Medical Sciences,

Proof Committee Hansard, 28 September 2021, pp. 8 - 9.

56 Professor Peter Schofield, Board Director, Association of Australian Medical Research Institutes

Ltd, Proof Committee Hansard, 28 September 2021, p. 8.

36

Australia asserted that this amendment would not require the responsible Ministers to give consideration to maintaining the capital of the MRFF, stating that ‘in theory at least, they [the responsible Ministers] could determine to draw down the full capital of the MRFF’.57

3.58 The department recognised that under the new disbursements framework, the requirement to consider the principle of preserving the nominal credits to the MRFF over the long term would no longer exist. However, the department considered that this approach would allow the Government to issue a new investment mandate for the MRFF with a higher benchmark rate of return, suggesting this would in fact increase expected earnings and support the perpetual funding objective of the Future Fund.58

3.59 The department’s submission stated that:

The Bill will simplify the disbursements framework and provide increased certainty by specifying a fixed maximum disbursement amount of $650 million per year from 2022-23. This is expected to avoid the need for unplanned supplementation and provide confidence that the Government will meet its spending commitments in the MRFF 10-year Investment Plan. It will allow approximately 3 per cent of the MRFF’s balance to be disbursed in a given year from 2022-23, which reflects an appropriate balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective over the long term.59

Administrative amendments to the MRFF grants programs

Australian Medical Research and Innovation Strategy and Priorities 3.60 Submitters to the inquiry were widely supportive of the proposed amendments to lengthen and align the Australian Medical Research and Innovation Strategy (Strategy) from five to six years, and the Australian

Medical Research and Innovation Priorities (Priorities) from two to three years.60 For example, AAMRI stated that:

… the proposed changes to the length of the Strategy and Priorities, to 6-years and 3-years respectively, should be supported.61

57 Research Australia, Submission 3, p. 3.

58 Department of Finance, Submission 10, p. 8.

59 Department of Finance, Submission 10, p. 8.

60 See, for example, Association of Australian Medical Research Institutes, Submission 4; Australian

Academy of Health and Medical Sciences, Submission 6; The George Institute for Global Health, Submission 7; Australian Society for Medical Research, Submission 8.

61 Association of Australian Medical Research Institutes Ltd, Submission 4, p. 1

37

3.61 Similarly, AAHMS noted that it:

…supports the proposed changes to lengthen the Australian Medical Research and Innovation Strategy and Priorities to 6-years and 3-years respectively.62

3.62 The department affirmed that these amendments would better reflect the long term nature of medical research innovation, and that aligning the timing of future updates of the Strategy and Priorities would reduce the consultation burden on the medical research and innovation sector.63

Expanding avenues to state and territory governments to access MRFF funding 3.63 There were diverse views among submitters about the proposal to include states and territories as eligible entities to apply for MRFF grant programs. For example, the following arguments were put forward in support of the

proposal:

 The George Institute for Global Health supported the proposed expansion of avenues to provide MRFF funding to the states and territories, noting this would enable greater integration and cooperation of medical research within the overall Australian health system.64  The AAHMS also supported this amendment, noting it would importantly

enable funding of research conducted in health settings that are controlled by state and territory governments and their agencies. However the AAHMS also recommended that agreements relating to funding state and territory governments from the MRFF should specify use for medical research activities and projects only.65  AAMRI stated that mechanisms should be put in place to ensure that

funding provided to state and territory governments through the MRFF are directed to specific medical research projects and not used for other purposes.66

3.64 Conversely, ASMR took the opposite view and submitted that state and territory governments and their departments should not be able to access MRFF funding. ASMR argued that introducing eligibility for state and territory governments to be grant applicants or recipients would reduce the availability of funds to researchers and increase competition for highly sought after research funding in a limited pool.67

62 Australian Academy of Health and Medical Sciences, Submission 6, p. 1.

63 Department of Finance, Submission 10, p. 9.

64 The George Institute for Global Health, Submission 7, p. 2.

65 Australian Academy of Health and Medical Sciences, Submission 6, p. 3.

66 Association of Australian Medical Research Institutes Ltd, Submission 4, p. 1.

67 Australian Society for Medical Research, Submission 8, p. 4.

38

3.65 In its evidence, the department pointed out that allowing states and territories to apply for competitive MRFF grants rounds would be consistent with funding avenues for other entities such as medical research institutes, universities and corporations. The department considered that these amendments would promote competition for MRFF grants, and would result in grants being awarded directly to the entity best placed to deliver the intended policy outcome.68

Schedule 4—Emergency Response Fund 3.66 In relation to the bill’s proposed changes to the Emergency Response Fund Act 2019 (ERF Act), the department submitted that the transfer of responsibility of expenditure of the Emergency Response Fund (ERF) from the Department of

Home Affairs to the newly established National Recovery and Resilience Agency (NRRA) reflects Machinery of Government changes, and supports recommendation 3.5 of the Royal Commission into National Natural Disaster Arrangements.69

3.67 The department went on to indicate that these changes would facilitate the streamlining of administrative activities for the ERF, to further support the valuable funding stream it will provide into the future.70

Committee views 3.68 As Australia’s sovereign wealth fund, the Future Fund needs to operate efficiently and effectively to grow and manage its investments, for the benefit of future generations of Australians. Currently managing over $245 billion in

funds on behalf of Australian taxpayers, the committee also recognises the Future Fund must operate with forethought, strong governance and under an appropriate level of scrutiny and oversight to ensure transparency and accountability.

3.69 The committee understands the significance of the Future Fund to the Australian people, and notes that any legislative changes affecting the Fund should only be made following comprehensive policy consideration.

Staffing of the Agency 3.70 The committee notes concerns raised by the CPSU and ACTU regarding the bill’s proposal to remove the Future Fund Management Agency from coverage of the Public Service Act and establish a new employment framework for

Agency staff. However, in considering all evidence to this inquiry, the committee is of the view that these amendments would benefit the Agency by allowing it to align more closely to the unique and highly commercialised

68 Department of Finance, Submission 10, p. 8.

69 Department of Finance, Submission 10, p. 11.

70 Department of Finance, Submission 10, p. 11.

39

environment it operates in. The committee believes a new employment framework would also allow the Agency to improve its processes to recruit and retain the specialist staff it needs to achieve its key objective of maximising investment returns.

3.71 The committee is also satisfied that under the new employment framework, the appropriate safeguards would remain in place to protect the rights and entitlements of Agency staff and ensure continued strong governance.

Partial exemption from FOI 3.72 The committee acknowledges the concerns expressed by some submitters, suggesting that the bill’s amendments to partially exempt the Future Fund from the FOI Act would reduce transparency and accountability of the

Government, and the Future Fund Board and Agency.

3.73 However, on balance, the committee is persuaded that the Future Fund would remain subject to a sufficient level of scrutiny and oversight through a number of other robust transparency and accountability arrangements, as detailed in the evidence provided by the department and the Agency. The committee also considers that the partial FOI exemption would be consistent with the treatment of other comparable government entities that regularly deal with commercial information, both at a Commonwealth and jurisdictional level.

3.74 The committee also considered evidence from ISA and the ACTU that suggested the proposed FOI Act amendments would introduce an ‘industry double standard’ between the Future Fund and other institutional investment funds, such as superannuation funds, operating in similar markets. The committee reiterates the department’s point that the Future Fund is a sovereign wealth fund, with a number of differences (such as different objectives and appetite for risk) when compared to superannuation funds.

3.75 Overall, the committee is of the view that the partial FOI exemption is needed to provide certainty to the Future Fund Board and Agency, and its investment managers, that commercially sensitive information relating to the fund’s investment activities would not be at risk of FOI disclosure. The committee believes these amendments are necessary to ensure the Future Fund is on even footing alongside its commercial competitors in the highly competitive global institutional investment market.

Medical Research Future Fund 3.76 The committee joins those submitters and witnesses supportive of amendments in the bill that would enable the MRFF to adopt a more aggressive investment mandate, to seek higher returns and generate additional

funding for health and medical research innovation.

3.77 The committee notes the concerns expressed by some submitters in regard to the bill’s proposal to cap the annual disbursements from the MRFF Special

40

Account for medical research at $650 million per year (from 2022-23), to retain legislative protections of the MRFF’s initial $20 billion endowment, and to specify a fixed minimum annual disbursement amount of $650 million per annum.

3.78 The committee acknowledges these views, but was persuaded by the department’s evidence and agrees with its assertions that a fixed maximum disbursement would provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, including by working to protect the perpetual nature of the MRFF.

3.79 The committee is also satisfied with provisions in the bill that would appropriately allow the responsible Ministers (via a disallowable legislative instrument) to increase the maximum disbursement amount if the MRFF were able to support higher disbursements in the future. The committee is comfortable that the bill would ensure necessary parliamentary scrutiny and oversight, including via the disallowance process, in line with standard parliamentary procedures.

3.80 Overall, the committee is supportive of the proposed changes to the MRFF’s disbursements framework and considers that the bill’s intentions regarding disbursements would strike the right balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective of the Fund over the medium and long term.

3.81 The committee is also in favour of the bill’s proposals to streamline the administration of the MRFF grants programs. In particular, and like many submitters and witnesses, the committee welcomes provisions that lengthen and align the Australian Medical Research and Innovation Strategy and Priorities, as this will better reflect the long term nature of medical research and innovation, and reduce the consultation burden on the sector.

3.82 Further, the committee notes there were mixed views among submitters in regard to the bill’s proposal to include the state and territory governments as eligible entities to apply for MRFF grant programs. The committee shares the department’s view that allowing states and territories to apply for competitive MRFF grants rounds would encourage competition for MRFF grants, resulting in grants being awarded to the entity best placed to deliver the intended policy outcome.

3.83 The committee welcomes the bill’s proposal to transfer the responsibility of expenditure from the ERF, from the Department of Home Affairs to the newly established NRRA. The committee trusts that other proposed amendments to the ERF Act will streamline administrative activities for the ERF, further supporting the valuable funding stream it will provide into the future and to help increase resilience and preparedness for natural disasters.

41

3.84 Overall, the committee is of the view that the bill’s amendments are necessary to protect and enhance the Future Fund. This bill would support and enable the Future Fund to achieve its goal of strengthening the Commonwealth’s long term financial position, for the benefit of future generations of Australians.

Recommendation 1

3.85 The committee recommends that the Investment Funds Legislation Amendment Bill 2021 be passed.

Senator Claire Chandler Chair

43

Additional Comments - Australian Labor Party

1.1 Labor Senators note the intent of the changes proposed in the bill, but raise the following issues.

Granting the partial FOI exemption for the Future Fund and Future Fund Management Agency 1.2 Labor Senators note that as the same time the Government is proposing to exempt documents of the Future Fund and the Future Fund Management

Agency (FFMA) relating to its investment activities from the operation of the Freedom of Information Act 1982 (FOI Act), the Government is—through the operation of the Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021—making superannuation funds disclose internal valuations of unlisted assets and values and positions taken in derivatives markets at regular intervals.

1.3 We note that the arguments for the partial FOI exemption in this bill include dealing with the potential negative impact on investment outcomes and the access to investment opportunities being compromised.1 Therefore, it logically follows that the potential impacts of the superannuation funds disclosure would be negative impacts on investment outcomes and the access to investment opportunities being compromised, leading to detriment to the superannuation savings of millions of working Australians and leaving them worse off in retirement.2

1.4 The hypocrisy of the Government in granting the Future Fund an exemption from public disclosure on one hand but requiring public disclosure of superannuation funds on the other hand is stark, and is yet another demonstration of the Government’s hatred of the superannuation system.

1.5 Notwithstanding this hypocrisy, Labor Senators acknowledge the requirement to protect highly sensitive commercial information from disclosure. Ensuring that the Future Fund is able to conduct its commercial operations in a way to maximise the Fund’s returns, and through that the various investment funds the Fund is responsible, benefits all Australians. We note that section 47 of the FOI Act already acts to exempt documents from disclosure if it would disclose trade secrets or information having a commercial value that would or could reasonably be expected to be, destroyed or diminished if it was disclosed.3 We acknowledge that there are specific exemptions for other commercial-related

1 Future Fund, Submission 11, p. 4.

2 Australian Council of Trade Unions, Submission 13, p. 2.

3 Freedom of Information Act 1982, s. 47(1).

44

entities within the government that are similar to what is proposed here for the Future Fund.

1.6 However we are concerned that the exemption proposed in the bill is too broad.

1.7 In evidence to the committee, the FFMA said that they had not disclosed highly sensitive commercial and proprietary material information under FOI laws.4 So with the existing commercial exemption, and without the extra protection proposed in this bill, there has been no disclosure of the type of information the bill purports to protect from disclosure.

1.8 Both the Department of Finance and the FFMA said that the proposed exemption would remove the assessment and work required to go through documentation to see whether the section 47 exemption would apply. The FFMA said:

Even if section 47 did apply, it might only apply to parts of documents, not all of documents. There might be redactions. You can't say what parts will or won't be redacted. That is my point. You can't provide complete certainty in this area, and that is the risk that we are talking about.5

1.9 However, it logically stands that the proposed exemption here would capture an entire document, even if it only partially related to investment activities.

1.10 Over a century ago, US jurist Louis Brandeis argued for the importance of transparency in combatting corruption, popularising the adage that ‘sunlight is the best of disinfectant’. That statement is no less true today, and the principle continues to underpin transparency and accountability mechanisms in all democratic nations. The Fraser Government clearly had this principle in mind when it introduced the Freedom of Information Act in 1982.

1.11 The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry demonstrated that even our largest, most trusted banks, already subject to multiple levels of regulation, had been engaging in widespread financial fraud and other criminal misconduct at the expense of ordinary Australians. While secrecy has a crucial role to play in commercial operations, the findings of the Banking Royal Commission demonstrated that a degree of accountability is also important. In this context, for the FFMA to lament that it does not have ‘complete certainty’ that it can operate entirely in secret suggests that recent lessons about the importance of transparency and accountability mechanisms have not been learned.

4 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, p. 45.

5 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, p. 47.

45

1.12 This desire of the current government to throw a cloak of secrecy over the operations of the Future Fund is even more concerning given the Future Fund is entirely public money, being invested by a public authority.

1.13 Labor Senators recognise that a balance needs to be struck between transparency that is in the public interest, and the protection of commercially sensitive information that is important for the operation of the Future Fund. Labor Senators are concerned that the proposed FOI exemption in this bill provides blanket secrecy without any need to assess, let alone demonstrate, the commercial need for that secrecy in relation to particular information, and therefore fails to strike the appropriate balance.

Removal of FFMA from the Public Service Act 1.14 Labor Senators recognise the unique work that is done by staff of the FFMA is different to most other Australian Public Service (APS) entities and note there are examples within other public sector agencies where staff are employed

under separate legislation.

1.15 We note some of the reasons provided by both the Department of Finance and the FFMA for the proposal to employ staff under the Future Fund Act, which includes providing a ‘more flexible employment framework to suit the FFMA’s unique operating environment’6 and being ‘as attractive as we possibly can to talent in our industry’.7

1.16 However, Labor Senators also note the existing issues with pay and conditions in the APS, due to the Government’s workplace bargaining policy. We acknowledge CPSU’s evidence to the inquiry where they said it was:

… 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.8

1.17 We also note with interest that according to the Government they want to import the norms of the financial services industry to the Future Fund through this proposed change. We question what norms from this industry should be incorporated into the Future Fund after what was discovered in the scathing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.

6 Department of Finance, Submission 10, p. 3.

7 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, p. 47.

8 Mr Michael Tull, Assistant National Secretary, Community and Public Sector Union, Proof

Committee Hansard, 28 September 2021, p. 15.

46

1.18 Over eight long years the Government has attacked the public service, imposing an artificial staffing cap and cut jobs, resulting in the significant decrease of capability within the APS and an overreliance in consultants and contractors - privatisation of the APS by stealth.

1.19 While Labor Senators understand why it is proposed to change the employment framework for FFMA staff, Labor Senators contend that a more fundamental change to the way the APS is governed is required to improve the conditions and settings for all staff in the APS, not just those in the FFMA.

Maximum disbursement from the Medical Research Future Fund

Broken Promise 1.20 Labor Senators note that legislating for a maximum of $650 million to be annually disbursed from the Medical Research Future Fund (MRFF) represents yet another broken promise from this Government when it comes to Health.

1.21 When the MRFF was first announced in the 2014-15 Budget, the budget papers stated a clear commitment to funding:

The MRFF will provide a sustained funding stream for medical research, with payments from the MRFF expected to reach around $1.0 billion per year from 2022-23.9

Consequence of the shortfall 1.22 A 35 per cent reduction in funding available for any purpose would have a significant impact, let alone in the field of medical research.

1.23 Labor Senators note the evidence given by Dr Ryan Davis, President of the Australian Society for Medical Research (ASMR) who said that ‘Research in Australia is under severe stress’.10 ASMR’s submission to the inquiry also referred to independent modelling of the benefit-cost-ratio of investment from the MRFF was estimated to return $3.39 in future health and productivity gains for every $1 invested.11 This means that the $350 million shortfall caused by capping disbursements at $650 million—which Dr Davis called a ‘missed opportunity’12—means nearly $1.2 billion in lost health and productivity gains per year that arises from the Government’s broken promise.

1.24 Labor Senators also note the evidence from Professor Wesselingh, Vice President of the Australian Academy of Health and Medical Sciences, who said

9 2014-15 Budget, Budget Paper No. 2, p. 132. Emphasis added.

10 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, p. 4.

11 Australian Society for Medical Research, Submission 8, p. 2.

12 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, p. 4.

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it would be a fair statement that the impact of the shortfall would be most felt by early and mid-career researchers, and it is one of the sector’s main concerns to provide career development for young researchers and the opportunity to provide support.13

Could $1 billion be provided for? 1.25 Labor Senators understand the importance of maintaining the requisite amount of capital within the MRFF to provide a steady stream of income.

1.26 However, Labor Senators note the Government’s intention to have a new investment mandate for the MRFF that is more aggressive, generating higher returns, given the MRFF is now fully capitalised (and in fact is more than fully capitalised, sitting at just over $22 billion as at 30 June 2021).14

1.27 As was pointed out by Dr Davis in his evidence, ‘it doesn't make sense to cap something and then have a more aggressive investment mandate to return more funds from your investment if you're not then going to disburse them’.15

1.28 Labor Senators note that, based on a $20 billion capital base, in order to have $1 billion per year spent while maintaining the capital base, the returns need to be at least 5 per cent per year.

1.29 Even in this current environment of low interest rates, the Future Fund has enacted investment strategies for the funds that have made significant returns. For example, in 2020-21, the Future Fund had a return of 22.2 per cent, the Future Drought Fund and Emergency Response Fund both had a 14 per cent return, and the MRFF itself had a 10.9 per cent return.16 With the right investment mandate, significant returns can be achieved.

Ministerial Discretion 1.30 Labor Senators note the increase in ministerial discretion that is proposed in the bill, including in relation to the Health Minister requesting debits from the MRFF Special Account without having to identify each individual grant to

which a debit relates—noting grant outcomes would be reported on the Department of Health’s website.

13 Professor Steve Wesselingh, Vice President, Australian Academy of Health and Medical Sciences,

Proof Committee Hansard, 28 September 2021, p. 11.

14 Department of Finance, Medical Research Future Fund, www.finance.gov.au/government/australian-government-investment-funds/medical-research-future-fund

15 Dr Ryan Davis, President, Australian Society for Medical Research, Proof Committee Hansard,

28 September 2021, p. 4.

16 Future Fund, Portfolio update at 30 June 2021, 26 August 2021.

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1.31 When there are already concerns about a lack of transparency and the Health Minister having too much discretion, Labor Senators want to ensure that the significant powers granted to the Health Minister are being exercised in a proper manner.

Senator Tim Ayres Deputy Chair

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Additional Comments - Australian Greens

1.1 Schedule 2 of this Bill seeks to exempt the Future Fund from Freedom of Information (FOI) laws ‘in relation to documents in respect of the investment activities’ of the Future Fund.

1.2 The Explanatory Memorandum for the Bill claims this ‘partial exemption’ is so as to ‘reduce the risk of disclosing highly sensitive commercial and proprietary material’ given to the Future Fund by the private investment managers that it uses to make its investments.

1.3 The Explanatory Memorandum goes on to say that the current application of FOI laws to the Future Fund ‘presents the risk of negative impacts on investment outcomes, reduced access to investment opportunities and it could also prejudice investment managers in their dealing with other market participants’.

1.4 Apparently the application of Australia's FOI laws to the Future Fund are the weak link for global investment managers that might lead to market sensitive information being released and everyone losing their money.

1.5 Which, of course, is bunkum.

1.6 There is no risk of disclosing highly sensitive commercial and proprietary material, because Section 47 of the FOI Act1 as it stands provides government bodies with an exemption from the release of information that would have the effect of ‘disclosing trade secrets or commercially valuable information’.

1.7 Instead, during the inquiry hearing it was revealed that, rather than there being an actual risk of commercially sensitive information being released, there is simply a perceived risk held by some investment fund managers who are, most likely, completely unfamiliar with Australian FOI law:

Senator McKIM: You've been in existence for 15 years. You haven't yet had to disclose highly sensitive commercial and proprietary material information. The problem is that there are some investment managers who are saying that they're worried that FOI laws might lead to the disclosure of that kind of information, even though it has never happened because the laws actually exempt you from having to disclose it. Is that right?

Mr Price: That is correct.2

1.8 That the Future Fund posted a record 22% growth for the 2021-22 Financial Year,3 following years of consistently high returns, demonstrates just how immaterial the minor fears of a handful of investment managers are.

1 Freedom of Information Act 1982

2 Senator Nick McKim and Mr Cameron Price, General Counsel and Chief Risk Officer, Future

Fund, Proof Committee Hansard, 28 September 2021, p. 46.

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1.9 Also revealed during the inquiry hearing was that Schedule 2 is not a partial exemption because, as confirmed by Department of Finance officials, the only core activity of the Future Fund is investment activities:

Senator McKIM: Does the Future Fund have any core activity other than its investment activities? Apart from investing money, what does it do?

Mr Williamson: Investments are its core activity.

Senator McKIM: Does it have any other core activities?

Mr Williamson: No.4

1.10 Further, during the inquiry hearing it was confirmed that this FOI exemption would be so complete that it would cover the amount invested in any particular company:

Senator McKIM: I'm specifically asking you to confirm that, if this bill were passed, documents in respect of the fund's investment activities would be exempt from the FOI Act, and I think you have agreed with that proposition.

Mr Dilley: That's correct: documents in relation to investment activities would be exempted under the proposed bill.

Senator McKIM: That's right. Thank you. And I think you've confirmed again that, in effect, that would mean that documents relating to the amounts that the fund had invested into particular companies would be exempt from the provisions of the FOI Act. Is that correct?

Mr Dilley: Yes, that fits within the definition of activities.5

1.11 This directly contradicts the statement from the Minister for Finance, Senator Birmingham, that the Future Fund would still be expected to ‘publish details of its actual investments, including in response to FOI requests’.6

3 The Hon Josh Frydenberg MP, Treasurer, and Senator the Hon. Simon Birmingham, Minister for

Finance, ‘Future Fund continues to deliver huge dividend for Australia’, Joint Media Release, 26 August 2021, www.financeminister.gov.au/media-release/2021/08/26/future-fund-continues-deliver-huge-dividend-australia

4 Senator Nick McKim and Mr Cameron Price, General Counsel and Chief Risk Officer, Future

Fund, Proof Committee Hansard, 28 September 2021, p. 46.

5 Senator Nick McKim and Mr Scott Dilley, First Assistant Secretary, Governance Division,

Governance and Research Management, Department of Finance, Proof Committee Hansard, 28 September 2021, p. 36.

6 Christopher Knaus, ‘‘Calculated response’: Coalition moves to protect Future Fund from FOI

laws’, Guardian Australia, 26 August 2021, https://www.theguardian.com/australia-news/2021/aug/26/calculated-response-coalition-moves-to-protect-future-fund-from-foi-laws

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1.12 Finally, it was accepted during the inquiry hearing that the argument that processing FOI requests was an unreasonable administrative burden for the Future Fund was just filler:

Mr Price: But I think it's fair to say that the administrative side of it is not the core proposition of the exemption.7

1.13 In summary, the paranoia of a handful of investment managers is being used as an excuse to hide from the public where $250 billion of their money is being invested, despite there being no evidence that this perceived risk is having a negative impact on the fund’s performance, or their being any particular burden on the Future Fund.

1.14 So what is this all about?

Adani 1.15 Last year, the Australian Centre for International Justice obtained—through FOI—documents showing that the Future Fund has invested $3.2 million in Adani Ports.8

1.16 This is the same Adani Ports that struck a $290 million deal with generals in the Myanmar military to build and operate a commercial port in Rangoon.9

1.17 And these are the same Myanmar military generals who led the coup against the democratically elected government earlier this year, and who the US Government says have committed ‘gross human rights violations’ and ‘atrocities’ against the Rohingya Muslims.10

1.18 And this is also the Adani Ports who is part of the Adani Group who are wanting to develop the Charmichael coal mine in the Galilee Basin.

1.19 The Future Fund’s support for one of the most climate destroying projects in the world, and in a company helping one of the worst human rights violators in the world, was only discovered because the Future Fund is subject to FOI laws.

7 Mr Cameron Price, General Counsel and Chief Risk Officer, Future Fund, Proof Committee Hansard,

28 September 2021, p. 48.

8 Michael Slezak, ‘Australia's Future Fund 'in bed with Adani' after freedom of information request

reveals $3.2 million investment’, ABC News, 16 December 2020, www.abc.net.au/news/2020-12-16/future-fund-invests-millions-in-adani-project/12984734

9 Australian Centre for International Justice and Justice For Myanmar, Port of Complicity: Adani Ports

in Myanmar, March 2021.

10 US Department of State, ‘Public Designation, Due to Gross Violations of Human Rights, of

Burmese Military Officials’, Press Statement, Michael R. Pompeo, Secretary of State, July 16, 2019, 2017-2021.state.gov/public-designation-due-to-gross-violations-of-human-rights-of-burmese-military-officials/index.html

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1.20 But, instead of responding to what is an international embarrassment and divesting from Adani Ports, the Future Fund and the government want to pull up the shutters.

1.21 It’s one of the hallmarks of this government: whenever they’re caught out, whenever they come under public scrutiny, their first reaction is to cover up.

1.22 Schedule 2 of this Bill is just the latest attempt by this government to avoid scrutiny.

Recommendation 1

1.23 That Schedule 2 of this Bill not be passed.

Senator Nick McKim Greens Senator for Tasmania

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Appendix 1

Submissions and additional information

Submissions 1 Dr Lesley Russell 2 Mr Robert Heron 3 Research Australia 4 Association of Australian Medical Research Institutes Ltd 5 Industry Super Australia 6 Australian Academy of Health and Medical Sciences 7 The George Institute for Global Health 8 Australian Society for Medical Research

 8.1 Supplementary to submission 8

9 Ms Mon Zin

10 Department of Finance 11 Future Fund 12 Community and Public Sector Union 13 Australian Council of Trade Unions

Answer to Question on Notice 1 Answer to a question taken on notice by the Future Fund Management Agency at a public hearing on 28 September 2021. Answer received 5 October 2021. 2 Answers to questions taken on notice by the Department of Finance at a public

hearing on 28 September 2021. Answers received 5 October 2021.

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Appendix 2

Public hearing and witnesses

Tuesday, 28 September 20211 Committee Room 2S1 Parliament House Canberra

Australian Society for Medical Research  Dr Ryan Davis  Dr Daniel Johnstone

Research Australia  Mr Greg Mullins, Head of Policy

Association of Australian Medical Research Institutes Ltd  Professor Peter Schofield, Board Director

Australian Academy of Health and Medical Sciences  Professor Steve Wesselingh, Vice President

Community and Public Sector Union  Mr Michael Tull, Assistant National Secretary  Ms Rebecca Fawcett, Director, Legal and Industrial

Australian Council of Trade Unions  Mr Joseph Mitchell, Workers' Capital Lead

Industry Super Australia  Mr Matthew Linden, Deputy Chief Executive

Department of Finance (via teleconference)  Mr Nathan Williamson, Deputy Secretary, Governance and Resource Management  Mr Scott Dilley, First Assistant Secretary, Governance, Governance and

Resource Management  Mr Neil Robertson, Assistant Secretary, Funds and Superannuation Branch, Governance Division, Governance and Resource Management

Future Fund  Mr Cameron Price, General Counsel

1 All witnesses appeared via videoconference unless otherwise specified.