Page 1557 - Week 06 - Tuesday, 18 May 1993
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provision - who is to be responsible for managing the experts and prohibiting speculation - are essential. The Assembly must be satisfied with these guidelines, in my view, before it can endorse this course of action on the part of the Government.
The accountability structure in the Audit Act must be reviewed to ensure that the Assembly retains direct oversight of investments of this kind. The Government simply must not engage in this newly proposed activity without knowledge and approval of the security criteria for these equities. Equities should be assessed on the basis of such matters as good management; diversity of location of investments, whether onshore or offshore; diversity of income streams - for example, property, shares, other share market products, and the like; a low debt to equity ratio; a long-term track record. That does not mean that only blue-chip investments perform well or provide sufficient levels of security, but the investment vehicles need to satisfy these criteria so that there are no fly-by-night investments, so that no unnecessary risks are being taken. In this vein, margin trading should be limited, say, to less than 10 per cent of the portfolio. That is just a figure that I pull off the top of my head.
Madam Speaker, this Assembly must seriously consider whether futures trading is appropriate for trust funds. At question time today I asked a question about where the speculative element came into this kind of trading. The Chief Minister cannot answer it, and I suggest that the Treasury cannot either, because when you get into futures trading it is entirely a matter of trying to second guess the future. Many a good merchant banker has had his fingers burnt in dealing in futures. I think that we should seriously consider whether futures trading is appropriate for trust fund moneys at all. Secondly, we should determine whether derivatives, in whatever form, should be perhaps only a minor part of the portfolio mix rather than a major part. Again, there has been no prescription as to just how much of the investment can be in derivatives. The Government must recognise that, in the use of external funds managers and the use of high risk, high return investment vehicles, it is playing with other people's money and that demands a higher duty of care than might otherwise be the case. Superannuation money is other people's money.
To ensure that the Assembly is satisfied and informed, I suggest that the Government should consider reforming the ACT Borrowing and Investment Trust. It should be a more independent body with its own board of directors. The directors should be drawn from the Government, principally the Treasury and Treasury officials; from Assembly representatives, perhaps, if they are qualified; and from external representatives with financial management expertise. It should be required to report regularly and comprehensively to this Assembly on what it is doing with this trust fund money. Without these provisions for security, accountability and prudence, this Bill is a recipe for disaster. It will not give the community confidence in the Assembly or in the Government, and it will not enhance our prospects for developing a strong economy.
Madam Speaker, the Bill is a very small Bill. On the face of it, it makes two minor changes to the Audit Act, but I cannot overemphasise that those two minor changes mean massive change. If it is not properly done and if the arrangements as to how this is to be done are not set out clearly beforehand - who is to do it, who is to oversight it and what the risks are - then it simply is not good enough.
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