The Australian‘s economics editor Alan Wood is normally regarded
as the driest business commentator going around. When Jeff Kennett
slashed spending 10% across the board in 1993, one of his colleagues remarked
“Even Woody will be impressed with this.”

This makes his column about The Future Fund on Saturday all the more bemusing, because Woody brazenly declared the following:

Unfunded public service liabilities are not a problem. The size of the
liability is not large relative to future budgets and will steadily
decline now the Government has closed off most of its defined benefit
funds.

Earth to Woody – here’s a table showing how unfunded super has blown
out during the Howard years and the forecasts going forward:

Financial Year Unfunded Liability
1995-96 $69.03bn
1996-97 $68.87bn
1997-98 $69.33bn
1998-99 $71.35bn
1999-00 $71.35bn
2000-01 $71.93bn
2001-02 $81.97bn
2002-03 $89.04bn
2003-04 $91.54bn
2004-05 $98.67bn
2005-06 $94.65bn
2006-07 $98.11bn
2007-08 $101.34bn
2008-09 $104.69bn

Peter Costello has publicly predicted the liability could hit $140
billion by 2020 and if that is “not large” then I don’t know what is. Woody then
adopts a Whitlamesque stance by quoting Nicholas Barr from the LSE as
follows:

Pensioners are not interested in money but in consumption – food,
clothing, heating, medical services, seats at football matches and so
on. Money is irrelevant unless the production is there for pensioners
to buy.

Stick it on the credit card, she’ll be right mate. Woody’s fiscal
recklessness shows no bounds when he concludes his column thus:

We are already stuck with the $18 billion the Commonwealth
is going to tip into the fund from its deposits with the RBA, and
probably this year’s budget surplus, and, say, $25 billion from the
sale of the remainder of Telstra – around $60 billion. But please, not
one cent more.

Think about how much better off we’d be today if the Howard Government
had injected an additional $5 billion a year into its super funds from
1996, rather than tolerating a $29 billion blow-out. Given the
spectacular returns over the past decade, we’d now have a $100 billion
fund. Imagine the bonanza for taxpayers if they’d transferred 20% of
the Commonwealth Bank into it at $10 a share in June 1996.

The stupidest thing about the Future Fund is that it is being created
at all – let alone at the height of an asset bubble. The money should
simply be paid into the existing CSS/PSS schemes like any other
employer superannuation contribution. However, CSS/PSS is run by
Stephen Gibbs, a former official from the Australian Services Union,
and the Howard Government wouldn’t want to actually give employees
investing and voting power over their own hard-earned money.

Peter Fray

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