Superannuation Administration Amendment Bill 2008 
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| Wednesday, 09 April 2008 | ||||||
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Mr MIKE BAIRD (Manly) [5.21 p.m.]: I lead for the Opposition on the Superannuation Administration Amendment Bill 2008. The Opposition has reservations about this bill, and I will deal with those reservations in detail. It is alarming that the Treasurer is proposing to give himself the ultimate authority to access the superannuation reserves of public sector employees and to transfer these funds to other accounts. The Opposition will move an amendment to this bill because it does not believe that the public can be assured that the Government is acting in the best overall interests of public sector workers. In fact, it may be using this process as a budgetary tool. The bill will have the effect of allowing excess funds to be recorded on the State sector balance sheet, which will reduce the State's unfunded superannuation liabilities. I should provide some context. The State Government has a number of accounts within its pooled superannuation funds. Of these individual accounts, four have defined benefits. These are funded through a mixture of returns on existing assets, future contributions and earnings. The State Government has a gap of approximately $17 billion in its ability to meet these obligations, but on current projections in the budget papers it expects the gap to close by 2030. Australian Accounting Standard AASB 119 is the universal accounting standard. The State Government has a different approach to its forward estimates, and I will address that issue later. Some State Government and council funds have assets and no liabilities, and those funds cannot be released. The bill's proposal to release those funds makes eminent sense. The bill's provision allowing the SAS Trustee Corporation to debit all or part of these funds at the employer's request seems sensible, provided they are returned solely to contributors. The initial briefing I received indicated that that applied only to nil-liability accounts. However, the bill is broader than that and the Opposition is happy to consider it. The concern that is not necessarily addressed is whether councils could use the funds to prop up ailing investment portfolios. The Government should answer that question. How many are there? What sort of accounts are involved? Who would receive the funds? What is the total amount? What is the purpose? The request to introduce a two-year time limit to lodge a dispute with the SAS Trustee Corporation—which is designed to align this legislation with the Commonwealth superannuation law—is also commonsense and reasonable. The Police Association agrees with the two-year limitation on appeals, and it is most impacted by this provision. It states that it is "a satisfactory period and is consistent with time frames allowed for in like schemes". As I said, the Opposition has some concerns and several unanswered questions must be addressed. It is not clear exactly what accounts or funds are directly impacted. We have the broad context, but not the specifics. What accounts are planned to be debited or credited? We obviously do not have the in-depth analysis that is available to the Treasury and we are not sure where the funds will go. Again, the Opposition understands the broad context but does not have the specific detail. Nor does it have details about the formal process to be undertaken to determine the ongoing surplus assets. Members on this side of the House understand that there are references to various accounting standards and independent advice, but we do not have the details. The Opposition's primary concern is exacerbated by the fact that the surplus could be determined by reference to critical accounting standard AASB 119, but not necessarily utilising the requisite discount rate. Schedule 1 provides:
That is important because the accounting standard has a much more conservative discount rate. That must be put into context. There is the potential without some comfort given to the public and the members of these superannuation scheme that this could be the thin edge of the wedge. In the 2007-08 budget the Government amended the assumptions underlying the calculation of its provision for unfunded superannuation. This is for the forward estimates. The forward estimates changed the investment return assumption from 7.0 per cent to 7.7 per cent, increased the discount rate from 7.0 per cent to 7.3 per cent and increased pensioner mortality rates. All of these changes had the impact of significantly reducing unfunded superannuation liabilities. I understand that an independent consultant was used. However, the report reflected only on the discount rates; it did not make a comment on why that discount rate was used. That means that over the four years prior to last year's budget the Government had made an average contribution of $1.3 billion towards the reduction of its unfunded superannuation liabilities. Yet after the revised assumptions the Government commissioned a new report. It changed three critical assumptions and, voilà, we do not have to contribute as much. Last year the Government did not allocate anything. It just transferred a particular fund that had been set up to address unfunded superannuation primarily. Going forward to the estimate period, the rate the Government has contributed has gone down to $0.9 billion. So, over four years an extra $1.6 billion was found for the State budget. In this context that becomes very important. I do not necessarily want to use this defence, but it is appropriate. The Howard Government rate and the discount rate used in other States are markedly different. The Howard Government used an investment return assumption of 7.5 per cent; the discount rate was 6 per cent, and pensioner mortality was falling, not rising, as one would expect with a rising population. The discount rate used in the New South Wales budget of 7.3 per cent—again, this is for the forward estimate period—was significantly higher than those used by the other States. Victoria's was 5.95 per cent; Tasmania, 5.7 per cent; South Australia, 5.9 per cent; the Australian Capital Territory, 6 per cent; and the Queensland Government has no unfunded liabilities. The Western Australian rate is not available. Running through that one sees that the New South Wales rate is almost 1.3 per cent higher than in any other State. If the Treasurer applies that when determining how much to put into the State budget, clearly he does not have to put as much in. If he increases the discount rate on that, he does not have to put as much in. I have concerns because I do not have the intricate details of what Treasury is doing in relation to the bill, but as it stands it appears to be building on this form of financial engineering. If one looks at the surpluses—and again this builds on the general concern about these transactions—they are really only estimates. To determine a surplus one has to ask an actuary. An actuary will run through a model that will make a number of different assumptions and then the actuary will create an asset. Mr Michael Daley: That is what happened. Mr MIKE BAIRD: I understand that. As at 30 June 2007, which was mentioned in the first speech, the surplus assets were determined at $699 million. Last week, in Treasury's briefing, they were $350 million. In 12 months, the same assets had moved $350 million. The year before that they were $284 million. So, they moved from $284 million to $699 million and then down last week to $350 million, and it may well be less than that. The point is, are they really surplus? If you have that sort of volatility in relation to this group of assets that you are trying to put from one account to another, there has to be a question on the surplus. What is ultimately driving this bill? Are we moving assets to make an impact in relation to this budget or are we acting in the best interests of New South Wales public policy? So, in that context the Opposition proposes an amendment that is, I understand, in the course of being agreed to in principle by the Treasurer. That is to provide more surety to unfunded public sector superannuation liabilities. It will be words to the effect that in any given year that a transfer occurs the Auditor-General will undertake a performance audit or similar of these transfers in accordance with section 38B of the Public Finance and Audit Act 1983. Why do we want the Auditor-General involved? Quite simply, we want him to sign off on the efficacy and appropriateness of these transactions. The community deserves to know that the transactions are in the broad public interest and, quite simply, we need independent verification. The Auditor-General can, in providing a performance audit, determine whether Treasury, in constructing these transactions, is doing so economically, is using the appropriate discount rate, is using the right reference to accounting standards and is overviewing the determination of surplus with efficiency. That is, is Treasury operating in the broader, long-term interests of members, not necessarily dictated to by short-term interests, in compliance with all relevant superannuation and trustee laws, and not against members interests: We think that is in the public interest. The Auditor-General can look at it in more detail by going through a performance audit and confirming the calculation of the surplus funds. He can confirm the ongoing use of appropriate discount rates and the arm's-length nature of the process and he can provide public comment on the change to accounts and confirm that the interests of employees and retired employees are not adversely affected. We want transparency. We want the people of New South Wales to understand that this transaction is entirely consistent with good public finance policy, that it is not at the behest of a Treasury objective solely driven by current budgetary pressures. If that transparency were present, we would support the bill. However, it is difficult not to have some concerns about the transaction, and we have outlined them. In relation to the moving of superannuation that has a material impact on unfunded superannuation obligations, it might make good sense but all we ask is that it is done in accordance with the public interest test, not solely a Treasury or budgetary test. We are concerned for the many public servants who may be impacted by this transaction and who have faith that they will receive the superannuation they are owed on retirement. I understand the State has guaranteed all those obligations but they have every right to question why some of their funds would be moved, and I believe the Auditor-General can provide that confirmation. As the bill stands, public sector workers could not be assured by an arrangement that would allow the Treasurer to move surplus superannuation funds from account to account when the value of the surplus changes on quite a regular basis. We again highlight that the surplus as determined by Treasury is arbitrary and may well move on a volatile basis. The KPMG partner whom I spoke to about this transaction said it is unusual and warrants several questions, many of which we have raised in debate today. The Coalition would oppose the transfer of the surplus funds unless the amendment is approved and the Auditor-General provides the requested transparency, but we support the other tenets of the bill as they stand.
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