3.1
This chapter considers the views of submitters and witnesses regarding the provisions of the bill.
3.2
The key issues raised throughout the inquiry in relation to the bill are discussed by schedule in this chapter.
Schedule 1—Staff of the Future Fund Management Agency
3.3
There were mixed views put forward in evidence as to the appropriateness of the proposed changes under Schedule 1 of the bill, which would remove Future Fund Management Agency (the Agency) staff from coverage of the Public Service Act 1999 (Public Service Act), and establish a new employment framework for the Agency in its place.
3.4
For example, the Community and Public Sector Union (CPSU) and the Australian Council of Trade Unions (ACTU) expressed concerns, with the CPSU asserting that the proposed removal of the Agency from coverage of the Public Service Act would have impacts beyond the Agency itself. It suggested this amendment could reduce the scope, status and standing of the APS, potentially making it a less attractive employer. The CPSU also gave evidence that amendments under this schedule could weaken important APS principles such as the merit principle and the employment principle.
3.5
The CPSU went on to argue that whilst, along with other Commonwealth agencies, the Future Fund needs the ability to attract and retain skills and expertise in high demand and specialist positions, that it is the Commonwealth’s workplace bargaining policy (which would still apply under the proposed new employment framework) that is the ‘real problem’ rather than coverage by the Public Service Act.
3.6
The CPSU noted that concerns with the bargaining policy have also been raised by other Commonwealth agencies including the Australian Securities and Investment Commission (ASIC) and the Australian Prudential Regulation Authority (APRA) and concluded that:
Unless the bargaining policy constraints that limit improvements in wages and conditions are removed, the inability to offer competitive salary and conditions that match market conditions shall remain. Removing the Public Service Act coverage will not address labour market issues and will only raise concerns about the impartiality and accountability of employment processes.
3.7
Concerns expressed by the CPSU were supported and reiterated by the ACTU in its evidence to the inquiry. The ACTU raised additional concerns with other provisions in the bill that would allow the Chair of the Agency to set and change the values of the organisation, its code of conduct, and employment frameworks.
3.8
The ACTU suggested that ‘unilaterally’ allowing the Chair to set and change the values of the Agency, code of conduct and employment frameworks could be ‘disastrous’ for the employment security of some staff of the Agency. Citing findings of the Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry, the ACTU cautioned that financial services sector norms should not be emulated, an approach suggested by the bill’s explanatory memorandum.
3.9
Conversely, the Department of Finance (the department) expressed in its submission and at the committees’ public hearing, that establishing a new employment framework for the Agency would better align it with its substantially commercial operating market and with comparable entities, such as ASIC, APRA and the Reserve Bank of Australia (RBA).
3.10
Further, the department went on to assert that the reforms would allow the Agency to improve its processes in the recruitment and retention of specialised staff, and ultimately facilitate its key objective of maximising investment outcomes.
3.11
In its submission, the department also explained that the new employment framework would maintain appropriate organisational controls, risk management practices and safeguards to ensure continued strong governance, noting, for example, the following:
Agency staff will remain as officials under the Public Governance, Performance and Accountability Act 2013 (PGPA Act).
Agency staff will continue to be employed on the same terms and conditions as those that applied immediately before the transition, and will retain all of their existing leave entitlements and access to existing superannuation arrangements.
The remuneration of senior executives and other highly-paid Agency staff will continue to be published in the Future Fund Annual Report in accordance with the PGPA Act.
The Chair will be required to determine and publish a Code of Conduct and Values for the Agency, that are, as far as practicable, consistent with the APS Code of Conduct and Values, and cannot reduce the benefits of an employee as provided under the minimum standards in the National Employment Standards.
The Agency will remain subject to the applicable Government workplace relations policies unless otherwise agreed.
3.12
The Future Fund advised that it had considered the department’s submission in respect to this Schedule, and expressed its support for the department’s position.
3.13
At the committee’s public hearing, Mr Cameron Price, the Agency’s General Counsel and Chief Risk Officer stated that the new employment framework was intended to allow the Future Fund to be as an attractive employer as possible, in the context of it having to compete for talent globally, in the financial and professional services industries. He further noted that a number of APS policies and processes the Agency is currently subject to under the Public Service Act are not meaningful or useful to the Future Fund.
3.14
Mr Price pointed out that under the bill’s proposals, the new code of conduct is required to be as consistent as possible with the APS Code of Conduct. Mr Price suggested there could be some minor changes due to the differing nature of the Future Fund’s business in contrast to other APS agencies.
Schedule 2— Freedom of Information
3.15
A number of submitters and witnesses commented on the proposed partial exemption of the Future Fund Board of Guardians (Future Fund Board) and the Agency from the Freedom of Information Act 1982 (FOI Act), in respect of investment activities.
Transparency and accountability
3.16
In its evidence to the inquiry, the both the CPSU and ACTU raised concern that the bill’s provisions to partially exempt the Future Fund Board and Agency from the FOI Act, in respect of its investment activities would result in serious impacts for transparency and accountability of the Future Fund.
3.17
Whilst recognising the issues around FOI in relation to the investment activities and positions of the Future Fund, the CPSU considered that FOI exemptions should be for commercial sensitivity reasons alone, and not more broadly cast. This view was shared by the ACTU, who went on to state that as an investment vehicle, it would not be clear what the Agency does that isn’t an investment activity.
3.18
Similar concerns around the bill’s impact on Government and Agency transparency and accountability, were reflected in Ms Mon Zin’s submission, which highlighted the following:
Recently, Australian Centre for International Justice was able to obtain documents that exposed Future Funds’ investments in [an] Adani company. This Adani company is the very same one that United Nations have criticised for dealing with the Myanmar military Junta who has been abusing and violating human rights in Myanmar for many months since February coup … After implementing this Schedule 2 – FOI, individuals, environmentalists, human rights defenders, and civil society organisations will not be able to monitor whether social responsibilities and safeguards are respected.
3.19
Throughout the inquiry, the FOI disclosure mentioned above was brought to the committee’s attention, for example by Ms Zin’s submission and her reference to media reporting on this issue.
3.20
Evidence from the department and the Future Fund countered the arguments against the proposed FOI amendments, making a case for the partial FOI exemptions as proposed by the bill. Both witnesses argued that the partial exemption would be consistent with the treatment of other similar entities that regularly deal with commercial information, including NBN Co, Australia Post and Export Finance Australia.
3.21
In its submission, the Future Fund highlighted the necessity of the amendments, noting that its current engagement with the FOI regime both limited its investment opportunities, and required considerable time and resources. The Future Fund explained that:
… a number of potential co-investors, investment managers and other service providers have expressed concern about accepting the organisation as co-investors or clients, because we are subject to the FOI Act and cannot guarantee that we will be able to maintain the confidentiality of commercially sensitive information. Material time and resources are spent at times on extensive discussion and negotiations with investment partners about FOI disclosure issues and, in some instances, there has been a reduction in the amount and types of information that they are willing to provide. This has reduced our level of insight to, and risk management oversight of, the investments.
3.22
The Future Fund also gave evidence that granting a partial FOI exemption for the Board and Agency would be consistent with state government entities with similar functions, which have exemptions from equivalent state based FOI legislation, for example:
The Victorian Funds Management Corporation has a full exemption from the Freedom of Information Act 1982 (Vic).
The Queensland Investment Corporation Limited and its subsidiaries have an exemption from the Right to Information Act 2009 (Qld).
3.23
In its submission, the department confirmed that the purpose of the partial FOI exemption was to provide certainty to the Future Fund Board and Agency, and their relevant investment managers, that commercially sensitive or in-confidence investment information is automatically excluded from release under the FOI Act. The department argued this will help place the Future Fund on more even footing with commercial competitors in the highly competitive global institutional investment market.
3.24
The department’s evidence clarified that the FOI Act will continue to apply to the Future Fund Board and Agency in respect of documents concerning non-investment activities, such as operational functions. The department’s submission also set out in more detail, documents which the proposed exemption is intended to cover:
past, current or proposed investment strategies for the Australian Government’s investment funds;
the evaluation of potential or current investments and investment managers;
managing investments or making investment transactions;
the expected financial performance of specific investments or strategies;
advice from investment consultants on investment strategies and risks; and
internal investment-related process and policy documents.
3.25
The department and the Agency also noted that the Future Fund is subject to a range of existing transparency and accountability arrangements that provide a sufficient level of scrutiny and oversight. These include, for example:
publication of a Statement of Investment Policies providing investment information for each investment fund including appropriate details on the investment strategy and investment approach;
publication of a list of all investment managers;
publication of a list of the top 100 holdings in listed equities;
a requirement to produce and table an annual report and audited financial statements in Parliament;
the requirement to provide reports to the Minister upon request setting out specified information relating to the performance of the Board’s functions under the Act. The Minister may also direct the Board to publish this information;
scrutiny through Parliamentary questions to the Minister, and attendance at Senate Estimates hearings; and
reporting and disclosure obligations under the PGPA Act framework.
3.26
The Agency reiterated that robust arrangements remain in place for the scrutiny of the Future Fund’s operational and investment activities, and further remarked that the application of the FOI Act in respect of investment activities, presents a significant risk to the Future Fund’s ability to operate in competitive global financial markets and maximise risk-adjusted returns.
An industry double standard?
3.27
Industry Super Australia (ISA), a research and advocacy body for Industry SuperFunds gave evidence to the committee regarding the proposed amendments under Schedule 2 of the bill. Noting its support for policy settings that strike a balance between transparency and ensuring institutional investors can maximise returns for their clients (or in the case of industry super funds, their members), ISA suggested that the amendments to the FOI Act as proposed in this bill, would introduce an uneven playing field where the Future Fund would ‘be able to operate at a competitive advantage to superannuation funds of millions of Australians potentially diminishing their retirement savings’.
3.28
In its submission, ISA argued that the proposed amendments to partially exempt the Agency from FOI disclosure of its investment activities, would introduce a ‘regulatory double standard’ and that ‘regulatory disclosures should be reasonably aligned so the interests of taxpayers as well as superannuation fund members are served’. ISA stated:
Industry super funds operate in the same capital markets as the Future Fund. This legislation would undermine the sole purpose of industry funds to maximise the retirement savings of their millions of members if it were implemented alongside the government’s proposed portfolio holdings disclosure (PHD) regime.
3.29
The ACTU similarly reflected that the proposition to exempt the investment activities of the Future Fund from FOI requests was inconsistent with the Government’s expectations of superannuation funds. The ACTU submitted the following:
This position is inconsistent with the Government’s proposal to require superannuation funds to disclose every position and investment valuation, under the exposure draft of the Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021. Under the proposed regulations, superannuation funds would be required to disclose internal valuations of unlisted assets and values and positions taken in derivatives markets at regular intervals. Doing so could, according to the by the Government’s own admission, risk “negative impacts on investment outcomes” and “reduced access to investment opportunities” for superannuation funds, jeopardising the superannuation savings of millions of working Australians and leaving Australians worse off in retirement.
3.30
However, the ACTU acknowledged they were supportive of the principle of the partial FOI exemption, stating:
The principle behind the freedom of information exemption is sound in that there are commercial-in-confidence or investment valuations that are held by the fund which probably should not be disclosed to the public, and which, if their disclosure was made public, could potentially risk those investments.
3.31
Similarly, the ISA acknowledged their support of the FOI exemption.
3.32
On this issue at the committee’s public hearing, Mr Nathan Williamson, Deputy Secretary, Governance and Resource Management, Department of Finance, made the key distinction that the Future Fund is a sovereign wealth fund, not a superannuation fund, whilst acknowledging they compete in the same markets. Mr Williamson went on to clarify that, among other differences, objectives and appetites for risk differ between the Future Fund and superannuation funds.
3.33
Mr Scott Dilley, First Assistant Secretary, Governance & Resource Management for the Department of Finance, further noted that stakeholders for the Future Fund are the Government and the taxpayer and as such, other unique accountability mechanisms exist for the Future Fund, that don’t apply to individual superannuation funds.
3.34
The Agency concluded that providing a partial exemption from the FOI Act to the Future Fund will protect and further enhance its ability to pursue the objectives of the Future Fund Act 2006, namely to strengthen the Commonwealth’s long-term financial position.
Schedule 3—Medical Research Future Fund
3.35
Several submitters gave evidence to the committee regarding the bill’s proposed changes to the Medical Research Future Fund Act 2015 (MRFF Act), as discussed below.
Changes to the disbursements framework
3.36
In relation to the proposed changes to the Medical Research Future Fund (MRFF) disbursements framework, evidence provided to the inquiry was focused around three key areas:
the proposed adoption of a more aggressive investment mandate for the MRFF;
the proposed fixed maximum disbursement amount of $650 million per year from 2022-23; and
the removal of legislative protections of the MRFF’s initial $20 billion endowment.
A more aggressive investment mandate
3.37
Submitters were largely supportive of the Government’s intention to amend the bill to seek greater returns and generate additional funding for health and medical research innovation.
3.38
In evidence to the committee, Research Australia highlighted its support for proposed amendments that would enable the MRFF to adopt a more aggressive investment strategy, stating:
Research Australia believes that the proposed legislative changes will allow the MRFF to be invested more aggressively, with the objective of maintaining the capital of the mid- to long-term rather more protecting it against short-term fluctuations.
… We [Research Australia] are confident the Future Fund's Board of Guardians can invest the MRFF's capital in a way that will achieve the dual objectives of a higher return and protecting the capital in the longer term. We also welcome the proposal to determine the amounts to be distributed up to five years in advance. Health and medical research is a long-term prospect, and the degree of certainty this measure provides about the amount of funding available is welcome.
3.39
The Association of Australian Medical Research Institutes (AAMRI) was similarly supportive of the intention to pursue a higher average annual benchmark rate of return for the MRFF, echoing Research Australia’s sentiments in its submission to the inquiry:
AAMRI supports this policy and believes that the fund is currently too conservatively invested and that greater returns would over the long-term bring about enhanced investment in medical research. This will deliver increased health and economic benefits for the nation. It is recognised that investing the MRFF in assets that will deliver higher returns does entail taking on increased risk, and there will be greater volatility in returns between years. However, over the long-term it is anticipated that returns will be higher and that this increase in volatility can be managed between years.
3.40
The Australian Society for Medical Research (ASMR) took a slightly different view on this matter and raised the following concerns around investment risk:
… the proposed short-term return on investment losses may negatively impact the disbursements available in a given year due to reduced returns with no requirement for the Government to maintain credit balances (Item 6 of the Bill), as it did in 2020 in response to lower returns due to COVID-19. In the long-term it is presumed that investment certainty and revenue will be greater despite higher risk investments, a lack of evidence to support an investment approach, and no certainty these presumptions will bear out.
3.41
In response to these views, the department stated that the amendments will allow approximately three per cent of the MRFF’s balance to be disbursed in a given year from 2022-23, and assured the committee that this would ‘reflect an appropriate balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective over the long term’.
3.42
The department added the following:
Under the current framework, the Future Fund Board’s determination of the maximum disbursement amount relates to a single year, which limits certainty about future commitments. A fixed maximum disbursement will provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, as the level of disbursements will be independent from short term market fluctuations.
3.43
In its submission, the department also noted that the responsible Ministers would be required to review the maximum disbursement amount at least every five years, and would have the ability to update the amount for future years via a disallowable legislative instrument. The department pointed out this would allow the responsible Ministers to increase the maximum disbursement amount if the MRFF is able to support higher disbursements in the future, whilst ensuring appropriate parliamentary scrutiny and oversight via the disallowance process, in line with standard parliamentary procedures.
A limitation on annual disbursements from the MRFF Special Account
3.44
Many submitters expressed concerns in relation to the proposed amendments to cap the annual disbursements from the MRFF Special Account for medical research at $650 million per year, from 2022-23.
3.45
Submitters including the George Institute for Global Health, the Australian Academy of Health and Medical Sciences (AAHMS), AAMRI and ASMR shared the view that the bill should specify a fixed minimum annual disbursement amount of $650 million per annum, and that disbursed funds should be subject to indexation.
3.46
At the public hearing of the committee, Professor Steve Wesselingh, Vice President of the AAHMS expressed the organisation’s support for a fixed amount of research funding being made available from the MRFF each year, but suggested that the $650 million per annum should be a minimum, subject to annual indexation. Professor Wesselingh continued that:
We understand that the intention underlying the bill is to provide better stability and security for strategic investments in research, leading to better outcomes. However, our recommendation is that the best way to deliver this stability is to set a minimum amount of research funding each year and ensure that this amount is indexed. If the performance of the fund exceeds expectations, there should be an allowance to increase the amount of research funding in a year, and particularly as a mechanism to respond to emerging areas of national need.
3.47
In its submission to the inquiry, AAMRI similarly contended that:
The Bill should also include a minimum amount of funding to be provided for medical research. There is currently no legal requirement for investment returns to be spent each year on medical research, and as the Act is being amended the opportunity should be taken to change this. Having a minimum amount available would provide greater certainty and confidence that the MRFF will be investing in medical research at a set level irrespective of the cyclical nature of the MRFF investment returns. This minimum amount should be set at least $650 million per annum to ensure existing commitments in the forward estimates are met.
3.48
Dr Ryan Davis, President of the ASMR indicated ASMR’s similar view that instead of an upper cap on annual disbursements, a guaranteed minimum annual disbursement should be established. Dr Davis also argued that proposed amendments to cap annual disbursements did not make sense alongside other provisions that seek to establish a more aggressive investment mandate to return more funds, if these funds would not then be disbursed.
3.49
Citing an independent Deloitte Access Economics report commissioned by ASMR in 2014, Dr Davis explained the findings that for every dollar invested in the MRFF, there was a $3.40 return in future heath and productivity gains. Dr Davis elaborated that capping annual disbursements at $650 million was therefore a ‘missed opportunity’ in this regard, adding that every opportunity should be taken to disburse as much as possible back into the research sector.
3.50
In his submission to the inquiry, Dr Lesley Russell also cited the aforementioned findings of the 2014 report prepared by Deloitte for the ASMR, highlighting that the bill’s proposed maximum disbursement cap of $650 million per annum was ‘considerably short’ of the Government’s original commitment to disburse $1 billion from the fund per year when the MRFF was established. Dr Russell was of the view that the Government was fulfilling only 65 per cent of its original commitment in this regard.
3.51
In presenting the rationale for the proposed fixed maximum disbursement amount, the department advised that under the current framework, the Future Fund Board’s determination of the maximum disbursement amount relates to a single year, which limits certainty about future commitments. The department explained that a fixed maximum disbursement would provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, as the level of disbursements would be independent from short term financial market fluctuations.
3.52
The department went on to highlight that the responsible Minsters would be required to review the maximum disbursement amount at least every five years, and that under the proposed provisions, they would have the ability to update the amount for future years, via a disallowable legislative instrument.
3.53
The department noted that the bill would appropriately allow the responsible Ministers to increase the maximum amount if the MRFF were able to support higher disbursements in the future, whilst ensuring necessary parliamentary scrutiny and oversight via the disallowance process, in line with standard parliamentary procedures.
Changes to legislative protections of the MRFF’s initial $20 billion endowment
3.54
As noted in Chapter 2, the Explanatory Memorandum (EM) to the bill explains that the MRFF ‘has been credited with $20 billion to date and the Government does not have any further credits to the MRFF scheduled’. Further, following commencement of the bill, there would be ‘no requirement to preserve the nominal value of credits ($20 billion) to the MRFF…With the MRFF now fully capitalised, the Government intends to issue a new investment mandate for the MRFF with a higher benchmark rate of return’.
3.55
Several submitters shared the view that the MRFF’s initial $20 billion endowment should remain protected, and that current legislation protecting the nominal credits in perpetuity should not be removed. For example, Professor Steve Wesselingh, Vice President of the AAHMS stated that:
… the Academy recommends retaining the legal protection that stops the $20 billion MRFF capital from being spent down. Amendments that lift this protection should be removed from the bill. The MRFF is now an essential part of the funding landscape for health and medical research in Australia, and as a stable and secure funding source it provides an unprecedented opportunity to benefit national health and wellbeing. This should be continued and protected by the legislation.
3.56
Professor Peter Schofield, Board Director, AAMRI, similarly expressed at the committee’s public hearing that it would be important to see current legislation which protects the initial $20 billion investment in the fund remain. Professor Schofield contended ‘in this way, the fund will always be a source of investment in perpetuity, protected from any future financial difficulties’.
3.57
Research Australia noted that the bill would give responsibility for determining the amounts available for disbursement from the MRFF to the Minister for Finance and the Treasurer (the responsible Ministers). Research Australia asserted that this amendment would not require the responsible Ministers to give consideration to maintaining the capital of the MRFF, stating that ‘in theory at least, they [the responsible Ministers] could determine to draw down the full capital of the MRFF’.
3.58
The department recognised that under the new disbursements framework, the requirement to consider the principle of preserving the nominal credits to the MRFF over the long term would no longer exist. However, the department considered that this approach would allow the Government to issue a new investment mandate for the MRFF with a higher benchmark rate of return, suggesting this would in fact increase expected earnings and support the perpetual funding objective of the Future Fund.
3.59
The department’s submission stated that:
The Bill will simplify the disbursements framework and provide increased certainty by specifying a fixed maximum disbursement amount of $650 million per year from 2022-23. This is expected to avoid the need for unplanned supplementation and provide confidence that the Government will meet its spending commitments in the MRFF 10-year Investment Plan. It will allow approximately 3 per cent of the MRFF’s balance to be disbursed in a given year from 2022-23, which reflects an appropriate balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective over the long term.
Administrative amendments to the MRFF grants programs
Australian Medical Research and Innovation Strategy and Priorities
3.60
Submitters to the inquiry were widely supportive of the proposed amendments to lengthen and align the Australian Medical Research and Innovation Strategy (Strategy) from five to six years, and the Australian Medical Research and Innovation Priorities (Priorities) from two to three years. For example, AAMRI stated that:
… the proposed changes to the length of the Strategy and Priorities, to 6-years and 3-years respectively, should be supported.
3.61
Similarly, AAHMS noted that it:
…supports the proposed changes to lengthen the Australian Medical Research and Innovation Strategy and Priorities to 6-years and 3-years respectively.
3.62
The department affirmed that these amendments would better reflect the long term nature of medical research innovation, and that aligning the timing of future updates of the Strategy and Priorities would reduce the consultation burden on the medical research and innovation sector.
Expanding avenues to state and territory governments to access MRFF funding
3.63
There were diverse views among submitters about the proposal to include states and territories as eligible entities to apply for MRFF grant programs. For example, the following arguments were put forward in support of the proposal:
The George Institute for Global Health supported the proposed expansion of avenues to provide MRFF funding to the states and territories, noting this would enable greater integration and cooperation of medical research within the overall Australian health system.
The AAHMS also supported this amendment, noting it would importantly enable funding of research conducted in health settings that are controlled by state and territory governments and their agencies. However the AAHMS also recommended that agreements relating to funding state and territory governments from the MRFF should specify use for medical research activities and projects only.
AAMRI stated that mechanisms should be put in place to ensure that funding provided to state and territory governments through the MRFF are directed to specific medical research projects and not used for other purposes.
3.64
Conversely, ASMR took the opposite view and submitted that state and territory governments and their departments should not be able to access MRFF funding. ASMR argued that introducing eligibility for state and territory governments to be grant applicants or recipients would reduce the availability of funds to researchers and increase competition for highly sought after research funding in a limited pool.
3.65
In its evidence, the department pointed out that allowing states and territories to apply for competitive MRFF grants rounds would be consistent with funding avenues for other entities such as medical research institutes, universities and corporations. The department considered that these amendments would promote competition for MRFF grants, and would result in grants being awarded directly to the entity best placed to deliver the intended policy outcome.
Schedule 4—Emergency Response Fund
3.66
In relation to the bill’s proposed changes to the Emergency Response Fund Act 2019 (ERF Act), the department submitted that the transfer of responsibility of expenditure of the Emergency Response Fund (ERF) from the Department of Home Affairs to the newly established National Recovery and Resilience Agency (NRRA) reflects Machinery of Government changes, and supports recommendation 3.5 of the Royal Commission into National Natural Disaster Arrangements.
3.67
The department went on to indicate that these changes would facilitate the streamlining of administrative activities for the ERF, to further support the valuable funding stream it will provide into the future.
Committee views
3.68
As Australia’s sovereign wealth fund, the Future Fund needs to operate efficiently and effectively to grow and manage its investments, for the benefit of future generations of Australians. Currently managing over $245 billion in funds on behalf of Australian taxpayers, the committee also recognises the Future Fund must operate with forethought, strong governance and under an appropriate level of scrutiny and oversight to ensure transparency and accountability.
3.69
The committee understands the significance of the Future Fund to the Australian people, and notes that any legislative changes affecting the Fund should only be made following comprehensive policy consideration.
Staffing of the Agency
3.70
The committee notes concerns raised by the CPSU and ACTU regarding the bill’s proposal to remove the Future Fund Management Agency from coverage of the Public Service Act and establish a new employment framework for Agency staff. However, in considering all evidence to this inquiry, the committee is of the view that these amendments would benefit the Agency by allowing it to align more closely to the unique and highly commercialised environment it operates in. The committee believes a new employment framework would also allow the Agency to improve its processes to recruit and retain the specialist staff it needs to achieve its key objective of maximising investment returns.
3.71
The committee is also satisfied that under the new employment framework, the appropriate safeguards would remain in place to protect the rights and entitlements of Agency staff and ensure continued strong governance.
Partial exemption from FOI
3.72
The committee acknowledges the concerns expressed by some submitters, suggesting that the bill’s amendments to partially exempt the Future Fund from the FOI Act would reduce transparency and accountability of the Government, and the Future Fund Board and Agency.
3.73
However, on balance, the committee is persuaded that the Future Fund would remain subject to a sufficient level of scrutiny and oversight through a number of other robust transparency and accountability arrangements, as detailed in the evidence provided by the department and the Agency. The committee also considers that the partial FOI exemption would be consistent with the treatment of other comparable government entities that regularly deal with commercial information, both at a Commonwealth and jurisdictional level.
3.74
The committee also considered evidence from ISA and the ACTU that suggested the proposed FOI Act amendments would introduce an ‘industry double standard’ between the Future Fund and other institutional investment funds, such as superannuation funds, operating in similar markets. The committee reiterates the department’s point that the Future Fund is a sovereign wealth fund, with a number of differences (such as different objectives and appetite for risk) when compared to superannuation funds.
3.75
Overall, the committee is of the view that the partial FOI exemption is needed to provide certainty to the Future Fund Board and Agency, and its investment managers, that commercially sensitive information relating to the fund’s investment activities would not be at risk of FOI disclosure. The committee believes these amendments are necessary to ensure the Future Fund is on even footing alongside its commercial competitors in the highly competitive global institutional investment market.
Medical Research Future Fund
3.76
The committee joins those submitters and witnesses supportive of amendments in the bill that would enable the MRFF to adopt a more aggressive investment mandate, to seek higher returns and generate additional funding for health and medical research innovation.
3.77
The committee notes the concerns expressed by some submitters in regard to the bill’s proposal to cap the annual disbursements from the MRFF Special Account for medical research at $650 million per year (from 2022-23), to retain legislative protections of the MRFF’s initial $20 billion endowment, and to specify a fixed minimum annual disbursement amount of $650 million per annum.
3.78
The committee acknowledges these views, but was persuaded by the department’s evidence and agrees with its assertions that a fixed maximum disbursement would provide greater certainty of funding and assist in the orderly planning and administration of medical research grants programs, including by working to protect the perpetual nature of the MRFF.
3.79
The committee is also satisfied with provisions in the bill that would appropriately allow the responsible Ministers (via a disallowable legislative instrument) to increase the maximum disbursement amount if the MRFF were able to support higher disbursements in the future. The committee is comfortable that the bill would ensure necessary parliamentary scrutiny and oversight, including via the disallowance process, in line with standard parliamentary procedures.
3.80
Overall, the committee is supportive of the proposed changes to the MRFF’s disbursements framework and considers that the bill’s intentions regarding disbursements would strike the right balance between making meaningful disbursements for medical research and innovation in the short term, and supporting the perpetual funding objective of the Fund over the medium and long term.
3.81
The committee is also in favour of the bill’s proposals to streamline the administration of the MRFF grants programs. In particular, and like many submitters and witnesses, the committee welcomes provisions that lengthen and align the Australian Medical Research and Innovation Strategy and Priorities, as this will better reflect the long term nature of medical research and innovation, and reduce the consultation burden on the sector.
3.82
Further, the committee notes there were mixed views among submitters in regard to the bill’s proposal to include the state and territory governments as eligible entities to apply for MRFF grant programs. The committee shares the department’s view that allowing states and territories to apply for competitive MRFF grants rounds would encourage competition for MRFF grants, resulting in grants being awarded to the entity best placed to deliver the intended policy outcome.
3.83
The committee welcomes the bill’s proposal to transfer the responsibility of expenditure from the ERF, from the Department of Home Affairs to the newly established NRRA. The committee trusts that other proposed amendments to the ERF Act will streamline administrative activities for the ERF, further supporting the valuable funding stream it will provide into the future and to help increase resilience and preparedness for natural disasters.
3.84
Overall, the committee is of the view that the bill’s amendments are necessary to protect and enhance the Future Fund. This bill would support and enable the Future Fund to achieve its goal of strengthening the Commonwealth’s long term financial position, for the benefit of future generations of Australians.
3.85
The committee recommends that the Investment Funds Legislation Amendment Bill 2021 be passed.
Senator Claire Chandler
Chair