The Government's Future Fund policy is a fundamental part of the Government's sound economic and budget management.
We have been able to take a decision to create an asset fund, which will alleviate part of the burden on future generations. This has come about because we have done the hard yards getting the budget into surplus and paying down the massive debt we inherited.
It is easy to be complacent about this achievement, but it is worth bearing in mind that the reduction in public debt has freed up over $5 billion per year in interest payments, which we have been able to redirect to higher priority areas such as health, national security and education.
In much the same vein, the creation of a Future Fund is a further strengthening of the government's balance sheet.
By building an asset and allowing it to grow over time, we will be able to better meet the challenges of an ageing population without putting the budget into deficit.
There is no lessening of budget flexibility, since contributions to the Fund will be made from realised surpluses. All the Australian States, as well as a number of other national governments have taken steps to fund their unfunded superannuation liabilities.
It is therefore quite interesting to hear opposition members claim that we shouldn't be worried about funding our liability. Having reduced debt, it is entirely logical to focus our attention on the largest liability on the government's balance sheet.
The proposed amendment from the Member for Melbourne seeks to take the proposed governance arrangements for the Future Fund, but have the earnings of the fund used to fund infrastructure.
This proposal ignores the fact that the governance arrangements for the Future Fund have been particularly designed with the purpose of the Future Fund in mind.
The Bill creates an independent Board, who will be fully responsible for investing the Fund to maximise long term financial returns. It will do this without intervention from Government about its investment decisions.
By contrast, under the proposed amendment the Board will be hit up for money on an ad hoc basis to fund as yet unnamed projects.
How could it be expected to run a sensible investment strategy under such a scenario? Who would want to be on such a board?
The proposed amendment attempts to have a bob each way with ill-conceived governance arrangements and will still leave us with an unfunded superannuation liability of $140 billion in 2020.
The bill contains sound governance arrangements, which have been modelled on those in other pieces of legislation such as the Corporations Law.
The Future Fund Board of Guardians will be statutorily responsible for one thing only to maximise long term returns consistent with international best practice for institutional investment.
They will be guided by an investment mandate from the responsible ministers, which addresses the key issues of risk and return. Beyond this high level guidance, which is a hallmark of any investment arrangement, there is no intervention by the government.
The Board will be fully accountable for the investment arrangements and performance of the fund.
The accountability arrangements for the Board will be of the highest order not only will they be subject to full parliamentary scrutiny and be open to enquiry by the Australian National Audit Office, there are provisions in the bill which go further.
For instance, under section 24 of the bill, the Board will be required to formulate a range of policies which they will have to make public. This will provide up-front assurance about how the Board will operate.
Unlike the proposed amendment from the Member from Melbourne which would see the fund open to intervention, the Future Fund will be a locked box. The bill makes it very clear that the Fund can only be used for a particular purpose and only once an independent actuary has verified that funds can be withdrawn.
The Fund will be safeguarded, since the bill says that no money can be drawn from the Fund until 2020 or when the liability has been fully funded.
This safeguarding means that a future government cannot get its hands on the Fund without abolishing the legislation. This is the same arrangement which has been adopted in other countries such as New Zealand and Ireland.
In conclusion, the Future Fund represents a sensible approach to dealing with future fiscal pressures. The proposed arrangements are soundly based and will withstand the test of time. I thank the honourable members for their contribution to the debate and I commend the Bill to the House.