Labor Senators note the intent of the changes proposed in the bill, but raise the following issues.
Granting the partial FOI exemption for the Future Fund and Future Fund Management Agency
Labor Senators note that as the same time the Government is proposing to exempt documents of the Future Fund and the Future Fund Management Agency (FFMA) relating to its investment activities from the operation of the Freedom of Information Act 1982 (FOI Act), the Government is—through the operation of the Corporations Amendment (Portfolio Holdings Disclosure) Regulations 2021—making superannuation funds disclose internal valuations of unlisted assets and values and positions taken in derivatives markets at regular intervals.
We note that the arguments for the partial FOI exemption in this bill include dealing with the potential negative impact on investment outcomes and the access to investment opportunities being compromised. Therefore, it logically follows that the potential impacts of the superannuation funds disclosure would be negative impacts on investment outcomes and the access to investment opportunities being compromised, leading to detriment to the superannuation savings of millions of working Australians and leaving them worse off in retirement.
The hypocrisy of the Government in granting the Future Fund an exemption from public disclosure on one hand but requiring public disclosure of superannuation funds on the other hand is stark, and is yet another demonstration of the Government’s hatred of the superannuation system.
Notwithstanding this hypocrisy, Labor Senators acknowledge the requirement to protect highly sensitive commercial information from disclosure. Ensuring that the Future Fund is able to conduct its commercial operations in a way to maximise the Fund’s returns, and through that the various investment funds the Fund is responsible, benefits all Australians. We note that section 47 of the FOI Act already acts to exempt documents from disclosure if it would disclose trade secrets or information having a commercial value that would or could reasonably be expected to be, destroyed or diminished if it was disclosed. We acknowledge that there are specific exemptions for other commercial-related entities within the government that are similar to what is proposed here for the Future Fund.
However we are concerned that the exemption proposed in the bill is too broad.
In evidence to the committee, the FFMA said that they had not disclosed highly sensitive commercial and proprietary material information under FOI laws. So with the existing commercial exemption, and without the extra protection proposed in this bill, there has been no disclosure of the type of information the bill purports to protect from disclosure.
Both the Department of Finance and the FFMA said that the proposed exemption would remove the assessment and work required to go through documentation to see whether the section 47 exemption would apply. The FFMA said:
Even if section 47 did apply, it might only apply to parts of documents, not all of documents. There might be redactions. You can't say what parts will or won't be redacted. That is my point. You can't provide complete certainty in this area, and that is the risk that we are talking about.
However, it logically stands that the proposed exemption here would capture an entire document, even if it only partially related to investment activities.
Over a century ago, US jurist Louis Brandeis argued for the importance of transparency in combatting corruption, popularising the adage that ‘sunlight is the best of disinfectant’. That statement is no less true today, and the principle continues to underpin transparency and accountability mechanisms in all democratic nations. The Fraser Government clearly had this principle in mind when it introduced the Freedom of Information Act in 1982.
The Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry demonstrated that even our largest, most trusted banks, already subject to multiple levels of regulation, had been engaging in widespread financial fraud and other criminal misconduct at the expense of ordinary Australians. While secrecy has a crucial role to play in commercial operations, the findings of the Banking Royal Commission demonstrated that a degree of accountability is also important. In this context, for the FFMA to lament that it does not have ‘complete certainty’ that it can operate entirely in secret suggests that recent lessons about the importance of transparency and accountability mechanisms have not been learned.
This desire of the current government to throw a cloak of secrecy over the operations of the Future Fund is even more concerning given the Future Fund is entirely public money, being invested by a public authority.
Labor Senators recognise that a balance needs to be struck between transparency that is in the public interest, and the protection of commercially sensitive information that is important for the operation of the Future Fund. Labor Senators are concerned that the proposed FOI exemption in this bill provides blanket secrecy without any need to assess, let alone demonstrate, the commercial need for that secrecy in relation to particular information, and therefore fails to strike the appropriate balance.
Removal of FFMA from the Public Service Act
Labor Senators recognise the unique work that is done by staff of the FFMA is different to most other Australian Public Service (APS) entities and note there are examples within other public sector agencies where staff are employed under separate legislation.
We note some of the reasons provided by both the Department of Finance and the FFMA for the proposal to employ staff under the Future Fund Act, which includes providing a ‘more flexible employment framework to suit the FFMA’s unique operating environment’ and being ‘as attractive as we possibly can to talent in our industry’.
However, Labor Senators also note the existing issues with pay and conditions in the APS, due to the Government’s workplace bargaining policy. We acknowledge CPSU’s evidence to the inquiry where they said it was:
… the bargaining policy that is the barrier to the Future Fund and other agencies offering employment conditions necessary to attract, retain and reward staff. The bargaining policy has delivered real wage cuts, wage freezes, pay rise deferrals and caps to wage growth, all of which have impacted on the capacity to recruit, retain and reward staff.
We also note with interest that according to the Government they want to import the norms of the financial services industry to the Future Fund through this proposed change. We question what norms from this industry should be incorporated into the Future Fund after what was discovered in the scathing Royal Commission into Misconduct in the Banking, Superannuation and Financial Services Industry.
Over eight long years the Government has attacked the public service, imposing an artificial staffing cap and cut jobs, resulting in the significant decrease of capability within the APS and an overreliance in consultants and contractors – privatisation of the APS by stealth.
While Labor Senators understand why it is proposed to change the employment framework for FFMA staff, Labor Senators contend that a more fundamental change to the way the APS is governed is required to improve the conditions and settings for all staff in the APS, not just those in the FFMA.
Maximum disbursement from the Medical Research Future Fund
Broken Promise
Labor Senators note that legislating for a maximum of $650 million to be annually disbursed from the Medical Research Future Fund (MRFF) represents yet another broken promise from this Government when it comes to Health.
When the MRFF was first announced in the 2014-15 Budget, the budget papers stated a clear commitment to funding:
The MRFF will provide a sustained funding stream for medical research, with payments from the MRFF expected to reach around $1.0 billion per year from 2022-23.
Consequence of the shortfall
A 35 per cent reduction in funding available for any purpose would have a significant impact, let alone in the field of medical research.
Labor Senators note the evidence given by Dr Ryan Davis, President of the Australian Society for Medical Research (ASMR) who said that ‘Research in Australia is under severe stress’. ASMR’s submission to the inquiry also referred to independent modelling of the benefit-cost-ratio of investment from the MRFF was estimated to return $3.39 in future health and productivity gains for every $1 invested. This means that the $350 million shortfall caused by capping disbursements at $650 million—which Dr Davis called a ‘missed opportunity’—means nearly $1.2 billion in lost health and productivity gains per year that arises from the Government’s broken promise.
Labor Senators also note the evidence from Professor Wesselingh, Vice President of the Australian Academy of Health and Medical Sciences, who said it would be a fair statement that the impact of the shortfall would be most felt by early and mid-career researchers, and it is one of the sector’s main concerns to provide career development for young researchers and the opportunity to provide support.
Could $1 billion be provided for?
Labor Senators understand the importance of maintaining the requisite amount of capital within the MRFF to provide a steady stream of income.
However, Labor Senators note the Government’s intention to have a new investment mandate for the MRFF that is more aggressive, generating higher returns, given the MRFF is now fully capitalised (and in fact is more than fully capitalised, sitting at just over $22 billion as at 30 June 2021).
As was pointed out by Dr Davis in his evidence, ‘it doesn't make sense to cap something and then have a more aggressive investment mandate to return more funds from your investment if you're not then going to disburse them’.
Labor Senators note that, based on a $20 billion capital base, in order to have $1 billion per year spent while maintaining the capital base, the returns need to be at least 5 per cent per year.
Even in this current environment of low interest rates, the Future Fund has enacted investment strategies for the funds that have made significant returns. For example, in 2020-21, the Future Fund had a return of 22.2 per cent, the Future Drought Fund and Emergency Response Fund both had a 14 per cent return, and the MRFF itself had a 10.9 per cent return. With the right investment mandate, significant returns can be achieved.
Ministerial Discretion
Labor Senators note the increase in ministerial discretion that is proposed in the bill, including in relation to the Health Minister requesting debits from the MRFF Special Account without having to identify each individual grant to which a debit relates—noting grant outcomes would be reported on the Department of Health’s website.
When there are already concerns about a lack of transparency and the Health Minister having too much discretion, Labor Senators want to ensure that the significant powers granted to the Health Minister are being exercised in a proper manner.
Senator Tim Ayres
Deputy Chair