SUPERANNUATION UNFUNDED LIABILITY

Mr GRIFFITHS (Goyder) (14:38): My question is for the Treasurer.

The Hon. K.O. Foley: Did Vickie pass it down to you?

Mr GRIFFITHS: No; this is a good one, Kevin.

The SPEAKER: Order!

Mr GRIFFITHS: This is a good one. What will be the impact of the $3 billion increase in the state's superannuation unfunded liability? The unfunded superannuation liability in the 2008-09 budget was $7 billion. That figure was calculated using the longest dated commonwealth government nominal bond and at a subsequent discount rate. In the last budget, the $7 billion liability assumed its discount rate of 6.3 per cent. The Treasurer told the house on 14 October that the discount rate was now 5.7 per cent and that the unfunded super had blown out to $8.6 billion.

Yesterday the Under Treasurer (Mr Jim Wright) told the Budget and Finance Committee that the latest discount rate was now 4.9 per cent. Using the government's own calculation, this suggests a further blow-out of unfunded super of $1.44 billion, taking the total liability to $10.04 billion. The Under Treasurer told the committee that such a surge in unfunded liability makes our balance sheet less strong and raises questions about the state's standing.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:39): Yes; and I really wish that I had the ability to stop what is happening in the world stock markets. I really wish I had that ability, as I am sure the Leader of the Opposition has and everyone else who own shares in this place, but I do not.

Ms Chapman interjecting:

The Hon. K.O. FOLEY: How was I to avoid that, Ms Vickie? How was I to avoid that?

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: I heard the former Treasurer on the radio this morning. He was treasurer when short selling was first adopted as a strategy by Funds SA. His defence to that was, 'But as Treasurer, by law I am prohibited from interfering in the asset allocation of Funds SA.' He then went on to attack me for allowing short selling to occur and asking why wasn't I stopping it? Give me a break! The law of this state is very specific in that I have no power—nor would I want to, I might add—to intercede and interfere in the asset allocation decisions of Funds SA. Quite appropriately, we have a corporatised entity, with a board chaired by one of Australia's most senior and experienced company directors, a member of the Macquarie Bank board, the chair (I think) of Swiss Re in Australia, a board member of Origin Energy in Helen Nugent, and a very good quality board—

Mr Griffiths interjecting:

The Hon. K.O. FOLEY: Well, can you just wait? You asked your question, and I am giving an answer.

Members interjecting:

The SPEAKER: Order!

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: What? You're a financial disaster waiting to happen. Thankfully, Mr Speaker—

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: Thankfully, Mr Speaker—

Members interjecting:

The SPEAKER: Order, the leader!

The Hon. K.O. FOLEY: Thankfully, we have an experienced government here which is managing the state's finances very well.

Members interjecting:

The SPEAKER: Order!

Members interjecting:

The Hon. K.O. FOLEY: Sir, I am happy to continue giving the answer. I would like not to have to scream above the members opposite.

Members interjecting:

The SPEAKER: Order!

Ms Chapman interjecting:

The SPEAKER: Order!

The Hon. P.F. Conlon: And you don't know your elbow from your what?

The SPEAKER: The Minister for Transport!

The Hon. K.O. FOLEY: The discount rate is the rate by which we value the unfunded liability. At budget time—the member is correct—it was 6.3 per cent, or thereabouts. It has dropped; it was down to 5.7; it dropped below 5.7. It went back up, from memory; and, yes, I was advised on Monday that the discount rate was at 4.9 per cent. That variation from 5.7 to 4.9 I think did add another billion into the unfunded liability. But, Mr Speaker—

Mr Hamilton-Smith interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: How do I control a discount rate?

Mr Hamilton-Smith interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: You are a financial—

Mr Hamilton-Smith interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: He got an MBA on taxpayers' money, and he can't even understand the balance sheet.

Members interjecting:

The SPEAKER: Order! The Treasurer will take his seat for a moment. Members will cease interjecting, and the Treasurer will assist me in preventing members from interjecting by not responding to interjections. The Treasurer.

The Hon. K.O. FOLEY: In terms of the discount rate at 4.9 per cent, what I have said repeatedly is that we will deliver a financial statement which is looking more and more likely to be the Mid-Year Budget Review brought forward a little bit.

Mr Pisoni interjecting:

The SPEAKER: Order! The member for Unley is warned a second time.

The Hon. K.O. FOLEY: When a discount rate directly affects the unfunded liability, which directly affects the financial liabilities to revenue ratio by which the rating agencies measure a state's financial position, the volatility is so huge you can have a swing of $1 billion in a week. It is impossible to put a firm quality document or statement together until we think we have some sense of stability. These are totally out of the control of not a state government, not even a national government, of world governments. George W. Bush has summoned the leaders of the G20 to Washington in two weeks' time to discuss these very issues.

I have made it clear that the government will have to slip some of its capital works projects. It will have to adjust its capital programs, because that is the only set of measures available to us quickly to ensure that our revenue to liabilities stays within a region that is acceptable to rating agencies.

A week or so ago I went to Melbourne and had a long meeting with Standard and Poor's about this very matter. I am comforted that they understand the impact of a very volatile discount rate on state balance sheets and are less concerned about that than I thought they might be—because it is totally out of the control of a government—and they accept that the volatility at some point will settle down. It is the structural shape of a budget that is the important issue for them.

Next week I am going to the United States and to the United Kingdom with the head of our financing authority to meet with a number of entities that we borrow from, that we have financial arrangements with and that we have managing our funds under management, so that we can get a better feel and understanding, if it is possible, as to what is happening at this very moment. It is an incredibly volatile situation; something the world has not seen before. Every single person's superannuation fund is being affected and we should all be scared—very scared—about what is happening in the world, and not trying to make cheap political points, and actually trying to keep—

Members interjecting:

The Hon. K.O. FOLEY: Yes.

Members interjecting:

The SPEAKER: Order!

Members interjecting:

The SPEAKER: Order!

The Hon. R.J. McEwen interjecting:

The SPEAKER: Order! The Minister for Agriculture will come to order.

Mr Williams interjecting:

The SPEAKER: And the member for MacKillop.

Ms Chapman interjecting:

The SPEAKER: And the Deputy Leader of the Opposition.

The Hon. K.O. FOLEY: If members opposite do not think we are in a frightening period of the economic—

Mr Williams: We do; we know; you made it worse.

The SPEAKER: Order! The member for MacKillop will come to order.

The Hon. K.O. FOLEY: I have had a rough week, I have to say, but now I am apparently responsible for what is happening on Wall Street. All right, I am sorry. Give me a break!

Members interjecting:

The Hon. K.O. FOLEY: Jack, can we keep these people under control?

The SPEAKER: Order!

Members interjecting:

The SPEAKER: Order!

The Hon. K.O. FOLEY: If the members opposite want to blame me for what has happened on Wall Street, okay. However, I can say that these are very scary times in the world, and if you do not think that is the case I do not know what papers you are reading in the morning; I do not know what you are watching on television at night. The contagion has now hit the Middle East; we are seeing China's demand drop; we are seeing banking systems in countries in Europe almost dysfunctional; we have seen the Russian stock market close three or four times in a day. The Hang Seng was down 12.6 per cent or something yesterday and the Nikkei down 6 per cent. We are seeing Iceland's whole system collapse. These are scary, terrifying times financially and we have to be calm and cautious and across it—

Members interjecting:

The SPEAKER: Order!

Mr Hamilton-Smith interjecting:

The SPEAKER: The Leader of the Opposition will come to order.

The Hon. K.O. FOLEY: My language is exactly what everybody else is saying who is following this and having to manage it.

Mr Hamilton-Smith: Not treasurers.

The Hon. K.O. FOLEY: Not treasurers—for goodness' sake!

Mr Hamilton-Smith interjecting:

The SPEAKER: The Leader of the Opposition will come to order.

The Hon. K.O. FOLEY: You know, I am not the hero like you, Mr Hamilton-Smith; I am just a humble treasurer from humble backgrounds—all right?—doing what I think is the right thing for this state and keeping ourselves calm and will—

Ms Chapman interjecting:

The SPEAKER: The Deputy Leader of the Opposition will come to order.

The Hon. K.O. FOLEY: We will adjust our budget accordingly. If members opposite do not think this is the most frightening financial period this world has ever seen, arguably worse than the Great Depression, then I feel very sorry for—

Mr Williams interjecting:

The SPEAKER: The member for MacKillop will come to order.

Mr Williams interjecting:

The SPEAKER: The member for MacKillop will come to order.

The Hon. K.O. FOLEY: I am not fit? Why am I not fit for the job?

Mr Hamilton-Smith: You are reckless and irresponsible.

Members interjecting:

The SPEAKER: Order! The Treasurer will take his seat.

Members interjecting:

The SPEAKER: Order! The Leader of the Opposition is warned.

Mr HAMILTON-SMITH: On a point of order, Mr Speaker, I gather you were warning me because the Treasurer put a question to me and demanded an answer. It was not an interjection.

Members interjecting:

The SPEAKER: Order!

Mr HAMILTON-SMITH: Where is the fairness in your ruling, Mr Speaker? If you are going to pull us up, what about them?

Members interjecting:

The SPEAKER: Order! I do not like the tone that the Leader of the Opposition has taken. I warned the Leader of the Opposition for continuing to interject that the Treasurer was reckless in his comments, despite my earlier calls to order. I do not see how I can be any more fair to either side. I do ask the Treasurer not to respond to interjections. When he does respond to an interjection, he does take it, to an extent, out of my hands to bring members to order, but when I call for order, I expect members to observe that call. If they do not, then I will warn them and, if necessary, I will name them, not so much for the interjection but for refusing to follow the call of the chair to order. Has the Treasurer finished his remarks?

The Hon. K.O. FOLEY: I just conclude my remarks by saying this: clearly, the Leader of the Opposition is rattled. He is under pressure, and his body language is showing that.

Members interjecting:

The SPEAKER: Order! The Treasurer is debating. We will just move on. The member for Little Para.

Mr HAMILTON-SMITH: I rise on a point of order, Mr Speaker. Will you start to enforce warnings for members of the government when they respond to interjections and when they encourage interjections so as to create warnings? Will you start to be fair?

Members interjecting:

The SPEAKER: Order! The Leader of the Opposition will withdraw his call for me to start to be fair, which implies that the chair has not been fair. I direct the Leader of the Opposition to withdraw unreservedly.

Mr HAMILTON-SMITH: I withdraw the term 'be fair', sir.

An honourable member interjecting:

The SPEAKER: Order! If the Leader of the Opposition has any quibble with my chairing of question time, he has two options. One is that I am more than happy to see him privately. I am more than happy to see privately any member of the house and to talk to them about any grievance they have about any ruling that I have made. The other alternative is to move dissent with my ruling or move a no confidence motion. Only under those circumstances can members call into question my conduct in the chair.

No member of the opposition, in the entire time that I have been Speaker, has ever made an approach to me about my conduct in the chair. I reject the Leader of the Opposition's accusation and take it very seriously. As soon as the Treasurer began to debate the question, having called the house to order, I sat him down in order to proceed to the next question, and that is what I will do. The member for Little Para.