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House of Assembly - Fifty-First Parliament, Third Session (51-3)
2008-10-14 Daily Xml
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FUNDS SA

Mr HAMILTON-SMITH (Waite—Leader of the Opposition) (14:46): My question is again to the Treasurer. Is he certain that the information he provided today about losses made by funds under investment on behalf of taxpayers since 30 June 2007 to 30 September 2008 are accurate and complete? In particular, what losses have occurred within the Motor Accident Commission, the WorkCover Corporation, or SAFA's insurance arm activities?

Part A, Audit Overview, of the Auditor-General's Report, tabled today, refers on page 2 to a deterioration in the Motor Accident Commission's statutory solvency level and raises concerns about further negative investment performance that may put at risk statutory solvency requirements. The report also refers to negative market returns and reduced SAFA insurance investment assets.

According to page 50 of the 2006-07 Funds SA annual report, the government had $13.1 billion under investment at the end of June 2007. Since then, equity markets have declined by 34 per cent. The listed investment categories would suggest and indicate estimates of Funds SA losses more in the area of in excess of $3 billion since June 2007, bringing the balance of funds down from $13.1 billion to as low as $9.7 billion.

The Hon. K.O. FOLEY (Port Adelaide—Deputy Premier, Treasurer, Minister for Industry and Trade, Minister for Federal/State Relations) (14:48): This is embarrassing for the Leader of the Opposition. He does not understand figures. First, the figures I presented to the parliament today were given on advice, and they have been checked. So, we will double-check the veracity of those.

Before I answer the question in total, can I explain the embarrassing faux pas the leader just made. It is important that we focus on this. He said that, at 30 June 2007, funds under management were $13.1 billion. He then said that it had lost 30 per cent, so it should be more like $9.7 billion. Do you know what he forgot to include? The amount of money people are putting into their superannuation funds—the inflow of dollars.

There are 70,000 public servants putting 9 per cent of their salary, by statute, into the superannuation fund. You actually get money in as well, and you get growth on that money. That is why the fund is much higher than what you were trying to do with your back-of-envelope mathematics, saying that it should be $9.7 billion. You forgot that we get hundreds of millions of dollars, billions of dollars of inflow of capital, into these programs through the sheer fact that people are paying in 9 per cent of their salary. So, that is a little lesson for you.

In relation to the Motor Accident Commission, when we came to office we did inherit a Motor Accident Commission that was less than sufficiently solvent in my opinion. We took some hard decisions that saw an increase in premiums and some political pain for government, but we rebalanced that entity and what we have seen are solvency ratios as high as 160 per cent. The reason we have such a significant prudential cover is that if things go horribly wrong we are in a very strong position. The Motor Accident Commission has been in a very strong, healthy position and been able to withstand a significant drop in value in its share markets and investments. I am happy to report back to the house tomorrow the relative position of all the funds mentioned. They were not included in my ministerial statement because they are non-budget impacting entities; they do not hit the general government sector.

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: Well, you do not understand how government finances are. They do not hit the government budget sector.

Members interjecting:

The Hon. K.O. FOLEY: It does not matter whether they lose their money. Members should look at their own share portfolio. Has much has it decreased?

Mr Hamilton-Smith interjecting:

The Hon. K.O. FOLEY: What I am saying is that members should look at their own share portfolio. I think at last look it would be down 15 per cent. That is what happens in a bear market when there is a run on stock markets and a collapse in financial and banking confidence. That is beyond the control of a government. No financial institution—be it an insurance corporation, WorkCover Corporation, or whatever—is immune from those effects.

I come back to my earlier point. I am more than happy to be criticised and questioned over the performance of the government, but on this issue we are grappling with a set of circumstances that this state has never faced. I simply ask the opposition to take a leaf out of Turnbull's book and show a bit of maturity and statesmanship in order to try to work with the government through a difficult period so we give a united voice to the public of South Australia, not one of partisan politics.

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