Legislative Assembly for the ACT: 1998 Week 3 Hansard (27 May) . . Page.. 662 ..
MR STEFANIAK (continuing):
Mr Deputy Speaker, I want to speak briefly about superannuation. A significant portion of the operating loss is undoubtedly strongly related to the cost of superannuation. This issue has been recognised by the Government and work already has commenced on the development of options to deal with the growing unfunded superannuation liability of the Territory. The approach of this Government to the costs of employee superannuation has been one of full disclosure. The move to accrual budgeting and reporting has given the full picture of the costs of superannuation at both the agency level and the whole-of-government level. The problem we have with unfunded superannuation liabilities has been faced also by most State governments in recent years.
The reaction of most States has been to close more expensive schemes and replace them with schemes for new staff which provide employer contributions at around the level of the superannuation guarantee - currently 7 per cent of salaries or wages, rising to 9 per cent from 2002. Employer contributions to the new schemes are generally fully funded from commencement, to ensure that there is no further growth in the unfunded liabilities relating to the new employees. Mr Deputy Speaker, we will give new employees in the ACT Public Service the opportunity to nominate the superannuation fund into which they want the Government's employer contribution to be paid. The fully-funded employer contribution, subject to any further negotiations, will meet the requirements of the superannuation guarantee legislation.
The difficult issues for us here in the Territory, as for the States, are how to tackle the funding of the annual accruing liabilities for members of the expensive closed schemes and what to do about the unfunded past liability. The starting point for the ACT includes some funding. The superannuation provision has assets of more than $200m invested through external fund managers, representing 30 per cent of the total accrued liabilities. The Towers Perrin report provides a basis for considering financing options. That report outlines the costs and results of a range of options, from immediate full funding to a more gradual increase in the funding of both the annual liabilities and the unfunded liability.
The conclusion is that, generally, the options which involve higher funding in early years have a lower present value of employer costs. The option of immediate funding of both past and annual accruing liabilities has the lowest present value at $1.167 billion, based on 9 per cent investment return, compared with a present value of government appropriations under current arrangements of up to $1.872 billion, but obviously has a very high short-term outlay. The Towers Perrin report notes that action by the Government to increase funding will be limited by the extent to which there is capacity to make additional contributions to the superannuation provision in the short term, and the extent to which increases in payments and unfunded liability can be sustained in the longer term. A proper balance is needed, Mr Deputy Speaker, between long-term cost savings and increased near-term outlays. The superannuation financing strategy needs to be consistent with overall budget capacity and objectives.
The Government acknowledges that these superannuation financing issues are matters which require attention not only in the coming budget but also for some years to come. Mr Deputy Speaker, I would again like to tell the Assembly that this Government considers a reduction of sustainability of the Territory's operating position is very much a major priority. We really cannot - indeed, we will not - allow future generations of