His admission, delivered under questioning at his annual post-budget address to the Press Club yesterday blunts his attack on Labor’s Kevin Rudd for his plan to divert $2.7 billion of the Fund’s money.
Mr Costello warned that there were politicians who wanted to put their paws into the Future Fund honey pot. “If you start raiding it and taking money out of that Future Fund now, future generations will have to pay for it”...
The Future Fund was set up to accumulate the estimated $200 billion the Commonwealth will need to meet its superannuation liabilities by the middle of the century.
It announcing the Fund during the 2004 election campaign the Mr Costello said that he expected all of each year’s surplus to be deposited in it.
At the Press Club yesterday he conceded that this year, $5 billion of the surplus would be directed instead to the new Higher Education Endowment Fund. He defended the diversion saying that the Future Fund was “on track to meet its target” without the money.
Asked why he thought that the Fund could cope with losing $5 billion, but could not cope with losing $2.7 billion the Treasurer said that his $5 billion diversion was “not a raid on the Future Fund because we are taking nothing out of it.”
Labor’s Finance Spokesman Lindsay Tanner said the Treasurer’s defence of his $5 billion diversion destroyed his claim that Labor’s $2.7 diversion to establish a broadband service would destroy the Fund’s ability to meet its target.
“According to the Treasurer drawing down $2.7 billion of the fund is shameful economic vandalism, but taking $5 billion previously promised to the Fund is a visionary initiative,” he said.
As recently as March the Finance Minister Senator Nick Minchin confirmed that the $5 billion had been promised to the Fund saying that “certainly this year’s surplus and next year’s surplus will be going into the Future Fund”.
In truth the Fund is accumulating money faster than expected and does not need all of each year’s surplus in order to reach its goal. But the Treasurer’s admission that it can afford to do without $5 billion for the purpose of establishing an education endowment fund may be seen as a turning point in the debate about its use.
As he said at the Press Club yesterday, “the moment you open up that Fund for one so-called good purpose, politicians of Australia will find hundreds of good purposes. If you let a bear put its paw into a honey pot, the honey will diminish.”
2 comments:
Excellent point... though pollies of all sides seem to have no problem fully disowning their own comments given the lapse of about a week, for circumstances to have changed...
I think the magic of it all was the talking in billions rather than a couple of hundred million. Everyone thinks it is such a large amount, but $5b invested might return only 6% or $300m pa, or $10-15m per significant university, and if that had been the headline news, people would have pounced saying that the uni system needs far more. Previously, pollies only went so far as to say budget increases were such-and-such an amount which, when you read the fine detail, was spread out over a 3-5 year period... This could well set a new trend with pollies in future always announcing capital amounts, to further exaggerate the benefit. In the early 1970s, my grandmother would tell you what she'd won at the horses in the new-fangled 'dollars', but always tell you her losses in 'guineas' (ie using an archaic version of the pre-1966 currency though it was accepted parlance in racing circles up to the 1950s)....
The other problem with Costello's theory is that the ALP isn't raiding the Future Fund as such. The Fund contains two assets, the cash it has received from T3 and surpluses and the Government's remaining Telstra stake.
It is only the latter that the ALP intends to access, and the latter has been put in the fund in a way that it can be accessed.
The Treasurer also likes to lambast the ALP for "not thinking of the future" in respect of public sector super - but forgets the 9% compulsory super that Keating introduced which dealt with the far bigger private sector future outlays (called old age pensions). By the way, of course, without selling Telstra the future dividend flow would probably have paid all the super liabilities as they fell due.
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