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Mr MIKE BAIRD (Manly) [11.22 a.m.]: I acknowledge at the outset that, in its context, the Superannuation Legislation Amendment Bill 2010 has some sensible provisions that the Opposition will support. However, I will make a couple of points in relation to unfunded superannuation schemes and the Government's treatment of that problem. The object of the bill is to amend legislation governing certain closed public sector defined benefits superannuation schemes to address Commonwealth tax changes and meet machinery provisions relating to benefits, and to amend the State Authorities Superannuation Act 1987 to facilitate death and disability award arrangements for New South Wales ambulance officers.
The Opposition acknowledges that this amending legislation is necessary for modernisation of the legislation and accordingly supports the bill, which will bring New South Wales into line with Commonwealth superannuation laws and employment arrangements. However, I note that the New South Wales Government has consistently ignored its unfunded superannuation liability. In fact it has gone well beyond ignoring it: I would argue, and have argued for a few years, that it has been manipulating its liability and accordingly has been underfunding superannuation liabilities. That has led to a position that was revealed recently in the State budget of the Government having to sell assets to begin meeting its obligations.
The amount of that liability at the end of January was $29.4 billion. Admittedly that liability was reduced somewhat in the most recent budget, but it is a significant liability that must be meaningfully addressed. I argue that if the New South Wales Labor Government had followed the lead set by the former Federal Treasurer, Peter Costello, when the liability was first detected as a significant problem for public finances and had established a Future Fund, it would have been able to begin making contributions towards this liability instead of having to sell State assets, such as NSW Lotteries, to address that liability. The scenario is a classic case of Labor failing to plan for the future and leaving problems to increase, with the result that we will all have to pay for it.
Well over 100,000 public sector employees are covered by defined benefit superannuation schemes. The last major defined benefit superannuation scheme in the New South Wales public service closed in the early nineties. The schemes affected by the bill include the Police Superannuation Scheme, the State Authorities Superannuation Non-contributory Superannuation Scheme, the State Authorities Superannuation Scheme and the State Superannuation Scheme. We understand the trustee, the SAS Trustee Corporation, requested this amending legislation to address the tax levied by the Commonwealth on superannuation funds in relation to members who have not provided their tax file number.
The Commonwealth will levy the tax on the superannuation fund rather than the individual member at 31.5 per cent, and that rate is on top of the usual 15 per cent levied by the Commonwealth on superannuation contributions. While standard superannuation funds can deduct that additional tax from the accounts of their members, it is not so easy for defined benefit schemes. The amendments in the bill will overcome the difficulty and allow the SAS Trustee Corporation to deduct any additional tax from members' entitlements. The Opposition understands that the object of the amending bill is to encourage members to provide their tax file numbers to streamline administration and reduce the tax obligation on the broader fund and wider membership. The Opposition supports those provisions.
The bill also provides further amendments to the State Authorities Superannuation Scheme to offer choice to members when they move to private sector in employment in relation to payment or transfer of benefits. Former members of the scheme requested that. Schedule 3 to the bill facilitates death and disability award arrangements that were negotiated recently for ambulance officers. The bill provides regulations to enable ambulance officers with an opportunity to opt out of their State Authorities Superannuation Scheme additional benefits cover to become fully covered by the award. Similar amendments have been passed for firefighters and police officers.
As I have stated already, the Opposition supports the machinery provisions of the bill because they make sense. However, I turn now to ongoing liability in the broader context of this amending bill. Whenever legislation is introduced that touches on the broader policy approach of the Government, it is appropriate for the Opposition to comment. As the shadow Minister, I am obliged to discuss the State Labor Government's track record of ignoring unfunded superannuation liability of public servants who are members of defined benefit superannuation schemes. From a number of years I have highlighted that unfunded superannuation is an ongoing problem. That was before the global financial crisis emerged.
As the global financial crisis increased its grip on our economy, the Government adopted the most up-to-date accounting standards applicable to the treatment and determination of total liability for unfunded superannuation payouts. As a result of the impact of the global financial crisis, the Government's liability blew out to approximately $32.1 billion. The bill is a good reminder for every member of the House that every State budget must do two things: It must provide for improved current services, and it must mitigate long-term liabilities for which families in the State are responsible and which ultimately become an obligation of the State Government. The State Labor Government has ignored its responsibilities and its liabilities. It ignored long-term obligations when it brought down the mini budget, which provided for no increased contributions despite the fact that the global financial crisis was bearing down upon us.
The lack of offsetting contributions was revealed by logical extension in the Government's recent actions. For many years the New South Wales Labor Government has been creative with its accounting for the express purpose of underestimating its liability. I have stated that regularly on the public record. The discount rate used in the 2007-08 budget was significantly higher than the rate used in other States. The New South Wales rate was 7.3 per cent, the Federal Government's rate was 6 per cent, Victoria's rate was 5.95 per cent, Tasmania's rate was 5.7 per cent, South Australia's rate was 5.9 per cent and the Australian Capital Territory's rate was 6 per cent. It is interesting to consider those rates in the context of the current debate on the mining super profits tax.
The Government used the long-term bond rate as the appropriate discount rate, yet the New South Wales rate was significantly higher. The significance of that is that the Government underestimated its unfunded superannuation obligation. I contend that the State Labor Government was not being honest and transparent with the people of New South Wales in relation to a significant liability of the State. The Government also changed the investment return assumption from 7 per cent to 7.7 per cent, which had the impact of depressing the overall liability figure by creating the assumption that more would be received from investments than was the case. In contrast to that, the Federal Government applied a lower figure. Furthermore, the State Government increased pensioner mortality rates even though we have an ageing population.
Those factors suggest to me that the State Labor Government has not made a serious commitment to meet its unfunded superannuation obligations. As a matter of fact, the true position is worse than that. By adopting those assumptions, the Government has been hiding from the people of New South Wales a significant liability that the full glare of the global financial crisis revealed to the whole community. We must pay something toward that liability of more than $30 billion. What is the impact? It is important that everyone in New South Wales understands the impact. It may sound like financial engineering or simply statistics and numbers, but this sort of approach has a real impact for people across New South Wales. That was shown by the Government's approach to the proceeds from the sale of New South Wales Lotteries.
Years of pursuing this sort of approach with unfunded superannuation obligations has obviously left a hole in the State's finances. Clearly, if the State is unable to meet those unfunded obligations it has a commitment to provide funds from the State budget. However, the Treasurer announced in the budget that the Keneally Government has decided to invest $510 million of the $850 million received from the sale of New South Wales Lotteries into the State's unfunded superannuation liability. That is an admission of guilt. The Government has admitted that the unfunded superannuation obligations have not been treated with the seriousness they deserve; they have been put aside and deferred for future generations to deal with. And the community of New South Wales has seen the costs of that today.
If a Future Fund had been set up all those years ago and if part of incoming surpluses—certainly, there was record revenue coming in during that period—had been put into that fund, the Government would be in a much better position. It would not have to put proceeds from the sale of New South Wales Lotteries towards this fund. If it had managed the unfunded superannuation liability appropriately on a yearly basis, rather than pushing it out, that $510 million could have been invested in many worthwhile infrastructure projects across the State, whether they be roads, transport or health.
Every community across this State is entitled to say, "Why was that $510 million not put into critical infrastructure that we deserve?" The answer is simple: At best, State Labor has ignored this long-term liability in unfunded superannuation. At worst, Labor has been manipulating assumptions to the point of saying that the liability is lower than it actually is. The full glare of the global financial crisis, together with adopting the most up-to-date accounting standards, has shown that the Government has not choice but to deal with its liability. So an opportunity has been lost to the people of New South Wales. The Government's lack of appropriate financial management means that $510 million cannot be invested in local road requirements, hospital requirements or railway requirements.
In conclusion, I support the tenets of the bill, which bring the legislation up to date and in line with Commonwealth superannuation laws and employment arrangements. However, I note the difference between New South Wales Labor's approach and the Howard Government's approach to unfunded superannuation liabilities. I emphasise to members that it is important to deal with long-term liabilities in an appropriate manner. Every budget should be used as an opportunity to address long-term liabilities; if the Government does not do that, we saw what happened in the recent budget. The State Government has taken $510 million that could have been invested in necessary infrastructure and put it into an unfunded liability existence it has denied during the whole time I have been in this place. We commend the bill, but we highlight that the State Labor Government has failed this State in the way it has dealt with unfunded superannuation liabilities generally.
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