Superannuation Legislation Amendment Bill 2007 
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| Friday, 22 June 2007 | ||||||
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Mr MIKE BAIRD (Manly) [2.59 p.m.]: The Opposition does not oppose this bill. However, it has concerns about the Government's handling of superannuation, and I will discuss those concerns shortly. The first part of bill will enable salary sacrificing in the State Superannuation Scheme and thereby will provide tax benefits for 28,000 members. Superannuation contributions will be taken from pre-tax salary and therefore will be taxed at a lesser rate than if they were taken from after-tax salary. The Coalition does not oppose the second part of the bill, which grants the board and chief executive of the State Authorities Superannuation Trustee Corporation clear indemnity for actions taken in good faith. However, it is unclear whether the Government has received legal advice in relation to this change. Is there a retrospective liability of which we are not aware? The Government must tell us whether it received independent legal advice when it considered the change. The third part of the bill clarifies an executive officer's ability to transfer his or her superannuation benefits from the State Superannuation Scheme and the State Authorities Superannuation Scheme to the Public Sector Executive Superannuation Scheme, First State Super or another complying fund. The Coalition does not oppose the measure, as it seeks to remove ambiguity from the legislation rather than change the legislation. I will address the three parts of the bill in turn. As to the first section dealing with salary sacrificing, we note that some 60,000 members of the State Authorities Superannuation Scheme were given the ability to salary sacrifice from 1 April this year. The Government has not explained why it changed that scheme in April, but members of the State Superannuation Scheme cannot salary sacrifice until the bill is passed. I seek a response from the Government in relation to this point. Why not change the system for all at the same time? That would be cleaner and less time consuming and would obviously benefit members of all schemes. Turning to indemnity, why has the Government only now sought to indemnify the board and chief executive of the State Authorities Superannuation Trustee Corporation? The board made that recommendation in 2004, so we have waited a considerable time for this bill. I seek some answers from the Government. I also ask: Does any retrospective liability apply? The legislation indemnifies officers who act in good faith, and excludes dishonesty and deceitful actions. But we must understand the full consequences of any legislative changes, and in this case we do not. The third part of the bill deals with the ability of officers in the New South Wales senior executive service to transfer superannuation entitlements. This removes ambiguity about a seemingly minor point. It clarifies existing legislation and permits officers to move their benefits from a scheme at any time. They are the key parts of the bill, and the Coalition does not oppose them. However, crucial to this discussion is the issue of unfunded superannuation liabilities. I asked the Premier directly about this yesterday in Parliament and—believe it or not—I am still waiting for a reply. It is all very well seeking to indemnify the trustees for decisions taken in good faith, but does the Government have the means to cover its superannuation liabilities? That is a crucial point considering the Government is telling its superannuation members that they can salary sacrifice. I will cite some figures on the Government's unfunded superannuation liabilities. In 2000- However, crucial to this discussion is the issue of unfunded superannuation liabilities. I asked the Premier directly about this yesterday in Parliament and—believe it or not—I am still waiting for a reply. It is all very well seeking to indemnify the trustees for decisions taken in good faith, but does the Government have the means to cover its superannuation liabilities? That is a crucial point considering the Government is telling its superannuation members that they can salary sacrifice. I will cite some figures on the Government's unfunded superannuation liabilities. In 2000-01 these liabilities totalled $7.9 billion but, according to this week's budget they will leap to $17 billion by 2011. Mr Brad Hazzard: How much? Mr MIKE BAIRD: Seventeen billion dollars. There will be an almost $10 billion jump in the State Government's unfunded superannuation liabilities. What is it doing about that? I will tell the House. The budget papers have had an impact on the vernacular. When I was growing up—I remember economics class particularly well—I had the great joy of learning about the Keating J curve. I am sure that members will remember the Keating J curve. Mr Brad Hazzard: Some of us lived through it rather than learned about it. Mr MIKE BAIRD: Indeed. The Keating J curve had an impact on us all. Mr Daryl Maguire: Was it before or after the banana republic? Mr MIKE BAIRD: The banana republic came before; it had an impact on the J curve. Mr Daryl Maguire: What about the recession we had to have? Mr MIKE BAIRD: It followed. The J curve was a lovely curve that showed that things would get worse before they got better. It was wonderful. As an economics student, I always looked for the benefit but, funnily enough, it never came. Mr Barry Collier: I used to teach that; you should look at my textbook. Mr MIKE BAIRD: The member for Miranda might like to tell us how wonderful the J curve was. The DEPUTY-SPEAKER: Order! The member for Manly is doing very well without the need for prompting from his backbench colleagues. Mr MIKE BAIRD: I will show members a document. This is the replacement for the J curve. I will hold it up so that members can see it. It is chart 4.8, on page 4-16 of Budget Paper No. 2, Budget Papers 2007-2008. Some in the House have described this as the "Iemma-Costa droop", but I submit that it should be called the "Iemma-Costa rainbow". The DEPUTY-SPEAKER: Order! I remind the member for Manly that props cannot be used in the House. Hansard is recording his speech for perpetuity and the material to which he is referring cannot be recorded. I ask the member for Manly to deliver his speech in the appropriate way. His focus should be on the verbal presentation of his argument rather than on the use of props. Mr MIKE BAIRD: I seek leave to table a copy of the graph. The DEPUTY-SPEAKER: Order! The standing orders do not permit that. Mr MIKE BAIRD: It is in the budget papers. The DEPUTY-SPEAKER: Order! The standing orders do not allow the member to table the graph. Mr MIKE BAIRD: I will lay it on the table of the House so that any member who is interested can see it. The Iemma-Costa droop, or Iemma-Costa rainbow—we will see which term gains more support—shows that things are going to get better. We have two leprechauns in Parliament: the leprechaun Morris and the leprechaun Michael Costa. Apparently they intend to run down the curve of the rainbow and collect the pots of gold at the end of it. They are saying, "We've considered the assumptions about the unfunded superannuation liabilities and we don't think we have to contribute; we can keep those funds for ourselves." Furthermore, the Government believes if it plays around with the assumptions—I have asked for them to be clarified—it will not need to contribute to superannuation for 23 years. That is what the budget reveals. In his Budget Speech the Treasurer said that the budget represented: ? responsible financial management—using the dividends of the present to reduce liabilities for future generations. How can the Government look public servants in the eye when it knows that the unfunded superannuation liabilities are getting larger? The Federal Government uses a discount rate of 6 per cent. In the budget papers the State Government uses a discount rate of 7.3 per cent. Without going into the economic technicalities, if you use a discount rate of 7.3 per cent instead of 6 per cent—which the Federal Government uses—you will have a significant number of liabilities that are not accounted for. That means the State Government is understating the liabilities of our public service superannuation funds. I have sought clarification from the Government on this point but that is what the budget papers say. Why did the Government make these assumptions? It is clear that if we change our assumptions, we can change the outcome. In this instance the outcome suggests that the State Government does not have to contribute further to State superannuation. If that is the case, well and good. But the reality is that industry tells me that this is a very brave decision on the part of the Government. Let us consider the facts. At the moment the Government is deferring State superannuation liabilities—setting that cost aside—while continuing to borrow. The projections indicate that we will go from $19 billion in debt to $39 billion in the forward estimates period. It is effectively doubling debt and deferring liabilities by using assumptions that appear to suit, that is, by not contributing. In comparison the Federal Government in its budget this year has said that the States have established funds to make provision for unfunded superannuation liabilities now, rather than passing costs on to future generations. Annual contributions are typically made from the budget each year to independent trustees, who manage the funds. It would be remiss of me not to raise this today because our State's funds have been paid into State Super. However, the Federal Government has used a lower discount rate of 6 per cent that aligns with accounting standards—the long-term government bond rate, which is akin to 6 per cent—and it also takes the approach of managing through the cycle. The Howard Government talks about a long-term proposition that should not be manipulated by short-term circumstances. It is a Government that takes a prudent approach and uses a lower discount rate, manages through the cycle and, at the same time, continues to contribute to the Future Fund until the unfunded obligations are met. That is a great example of conservative, financially responsible economic management. In contrast this Government is relying on assumptions that favour it strongly in relation to not making contributions, to enable this obligation to mysteriously disappear overnight. I believe that the Iemma-Costa rainbow is a danger that students in the years ahead will be talking about. It is a danger to the New South Wales economy and it is a danger to public servants, who are the recipients of their superannuation from this Government. Although the Opposition does not oppose the principle of the legislation, it would be remiss of me not to point out that unfunded superannuation obligations remain a concern of the Opposition and I believe should be a concern of the people of New South Wales. Add to:          Write Comment
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