Legislative Assembly for the ACT: 2008 Week 06 Hansard (Thursday, 26 June 2008) . . Page.. 2157 ..
MR MULCAHY (Molonglo) (9.47): I have spoken previously about the ongoing issue of whether expected long-term gains on superannuation assets should be included in the budget bottom line. This has been an ongoing issue which I have continually pressed the government on and it is an issue on which I have found a great deal of support, particularly from specialists in the field, and an issue on which there has been academic commentary published in the Canberra Times in support of my views. I also note that my concerns are shared by Standard and Poor’s who, according to the Under Treasurer, are “not particularly enamoured” with the government’s approach.
I will not repeat the details of this issue here since I believe I have already made my views fairly clear. Instead, I would like to turn my attention to the issue of full funding of defined benefit superannuation liabilities. This is an important issue and one where the government is far behind private business. Whereas private businesses are required to set aside assets to fund their superannuation liabilities, the government does not currently have its superannuation liabilities fully funded and will rely on future revenue from taxpayers and elsewhere to meet these liabilities. This is, once again, an area in which governments operate in such a way that certainly would not be acceptable in the private sector.
The government has set a target for fully funding all of its defined benefit superannuation liabilities by 2030. I am glad that a target is in place, though, as I have said in previous years, there have been opportunities where this target could have been brought forward due to revenue windfalls. According to figures in the budget, by the end of the current financial year the government projects that it will have a shortfall of $1.111 billion in unfunded superannuation liability. In the past year, the goal of fully funding all superannuation liabilities by 2030 has proceeded behind the schedule budgeted in the 2007-08 budget.
Budgeted projections in the 2007-08 budget stated that the government budgeted that by the end of this financial year it would be at 67 per cent funding. In fact, the government is now only at 65 per cent funding. With the revised estimates based on the current performance of superannuation assets, the government now does not anticipate reaching the 67 per cent funding level until the end of the 2011-12 financial year. This is four years later than projected in the previous budget.
The fact that the government has now fallen behind its previous schedule may or may not be cause for serious long-term concern, and in large part this will depend on investment returns in future years. This is, of course, dependent on the state of investment markets in Australia and anywhere else where money has been invested. There is some risk in the future that if investment conditions do not meet the government’s expectations they may fall further and further behind schedule or else have to make larger and larger payments into the asset base to keep up with the schedule. This of course shows us the dangers of failure to fund defined benefit schemes in the first place and it should be a lesson to governments the world over, many of which operate superannuation on the basis of what are essentially taxpayer pyramid schemes.
I certainly do not want to be alarmist on this issue, since the long-term prospects of funding these liabilities depend on investment returns and market conditions for at