ROSS GREENWOOD:
Well, let's move back home. And today the former Treasurer, Peter Costello announced he will step down as Chair of the $206 billion Future Fund in an anticipated move as his term expires next February. But in the past year, since the new government was appointed, there have been calls for the fund to be liquidated to pay down the government's debt, something that Costello, the architect of the fund, is vehemently against.
This comes as the government also seeks to raise tax on superannuation funds for those with balances above $3 million. So, let's bring in the Assistant Treasurer, Stephen Jones, who joins me from Canberra. Stephen, always good to chat to you here on the program. Can I start with Peter Costello and his legacy at the Future Fund? He's clearly been there twelve years. It's a fairly long stint for the man who actually, as Treasurer, created the Future Fund in the first place.
STEPHEN JONES:
Well, let's start by thanking him for his public service. If you look at our Future Fund and you compare it with the performance of sovereign wealth funds around the world, you'd have to say that it's certainly amongst the best. Important part of our economic architecture and it'll serve the nation for many decades to come.
GREENWOOD:
It was created in an era of surpluses where there was excess government money, cash lying around the place. You're back in surplus now. Is there any sense that the Future Fund will be added to in the future because clearly it doesn't cover all of the public servants future pensions?
JONES:
No, it doesn't. And as things stand at the moment, Ross, we're able to meet those liabilities of public servants defined benefit superannuation arrangements and there's no question that we can't. Into the future, we actually see a bigger, not a smaller role for the Future Fund. And that group of funds manages a whole heap of the government's special investment vehicles and it's an important part of our economic architecture. It's taking pressure off future budgets, but also ensuring that in a disciplined and predictable way, that wealth, a part of the wealth that is generated in this generation is there and available for future generations of Australians. So, it's an important part of our architecture.
GREENWOOD:
You say it's an important part of the architecture, but the argument against such a fund would be if its returns can't keep up, with what other funds might be able to achieve. In other words, if the government could get a better bang for the money. And I noticed Peter Costello in the press release today, an 8.8 per cent return over the past twelve years. The fact of the matter is whether the government could do better with that money itself.
JONES:
Look, I think firstly, the Future Fund's done a good job and it's had steady and decent returns over that period. It operates at arm's length and independently from government. You don't have a government sitting on its shoulder saying you should invest in that, and you shan't invest in this. It operates at arm's length from government and that sets itself apart from a lot of other sovereign wealth funds around the world where the governments do exactly the opposite. And I think that's a part of the success of the fund, its independent investment board.
Look, it may be that money invested over the short term could have done a better job in one investment or another investment, but we're actually looking for a bit more out of our Future Fund and that is solid but predictable returns over the long term. And I think the investment performance of the Future Fund has delivered exactly that. And we'd want it to continue to do that well into the future. As I said, it's an important part of our architecture. Yes, it puts discipline on government to ensure that a part of the wealth generated in one generation isn't spent on the immediate, but is available for future generations. To ensure that our kids not only don't have the burden of debts racked up in one era, but have the benefits for the wealth that is generated in one decade, in decades to come.
GREENWOOD:
Okay, so we talk about the Future Fund being about the future retirement savings of public servants in Australia but then you go to the future retirement savings of ordinary Australians. You're doing a lot of work in this area as well right now. Trying to have payday superannuation is one thing you've announced today but on top of that also new taxes to raised to 30 per cent for those with more than 3 million in their funds. Just one issue in this which I've never asked you about this. One point the superannuation industry asks about is unrealised gains. So, if a person has a farm in a superannuation fund, on an annual basis any gains are taxed on those but there might not be the cash there to pay those taxes. How do you reconcile that in terms of how people with large balances, surely, are going to be able to deal with those situations where they can't get the cash to pay their tax?
JONES:
Well, under the existing law, Ross, you'd be probably aware that trustees have an obligation that they have sufficient liquidity within their fund. Whether that's an APRA regulated fund or whether it's a self managed superannuation fund they have an existing legal obligation to ensure they have cash on hand available to meet their fees and taxes that they're obliged to pay under existing laws. So, in that respect nothing changes. Yes, there'll be a requirement for them to ensure that they have sufficient liquidity available within the fund to meet tax liabilities under the new high balance superannuation arrangements. The flexibility will be available to ensure that if they don't have sufficient liquidity inside the fund then they can pay that liability from funds outside the fund as well. So, there'll be sufficient flexibility in that respect. We anticipate and one of the reasons we've given a significant lead time in the implementation of this is we anticipate that people will make some adjustments to their funds if they don't believe they have sufficient liquid reserves inside the fund at the moment to meet those liabilities. Can I also say –
GREENWOOD:
No, I've got to go. Stephen Jones. I'll be back with you again in the near future. I've got to keep running. I've run out of time. Many thanks for your time today.
JONES:
Great to be with you Ross.