Page 1802 - Week 07 - Tuesday, 15 June 1993
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You will notice that there are some dissenting comments submitted by Ms Ellis and Mrs Grassby. I do not have their comments before me, having tabled them. Essentially, the question is whether this body is to be an advisory body. The recommendation is quite clear. It is not to be an advisory body. It is essentially to be a management body. But the Government may desire to determine that it also be an advisory body. If you have the kinds of expertise that we envisage would be present in such a management board, it may well be appropriate for the Government to give it an advisory role as well. We are leaving it, in many ways, open to the Government to determine just how the system will be set up; what their investment strategy will be; what sort of contractual arrangements will be in place to determine how these external funds managers handle our money and our trust fund money.
There is only one other aspect, Madam Speaker. There has been some debate, which I guess I precipitated, in terms of the fact that it is intended that some part of this money may be invested in the form of derivatives. There are some who maintain that this is a highly speculative form of investment. In fact we were advised that we should not allow any of this money to be invested in derivatives because of the speculative nature of these devices. We have not entirely accepted that recommendation. We can see that there are some reasons why you might want to invest in some forms of derivatives, using some limited amount of the money, if you like, as a form almost of insurance in some respects; but this is highly speculative. The interest percentage that you can gain through this form of investment is itself indicative that it is a more risky type of investment than many others. When you start moving into higher return on your money there goes with that a corresponding increase in risk.
We do not believe that we should be risking this money at all; so we are recommending that there be a limit of 5 per cent of the amount of money available in the ACT Borrowing and Investment Trust Account that should be invested at any time in these mechanisms called derivatives. We believe that that does allow some scope for their use where it is considered reasonable and prudent and proper, but it does not allow these investment managers outside to get into the business of speculating with this form of money, which we think is totally inappropriate.
Madam Speaker, I think that the committee essentially has agreed that, if the Government is prepared to take seriously the recommendations that we have made to them in this report, we in turn will support the passage of the Bill; but this does require, in one place, that the Government amend their Bill to impose this limit of 5 per cent on the amount of money that can be put into financial derivatives. That does require some immediate action on the part of the Government before the Bill can be passed. Madam Speaker, I commend the report to the Assembly.
MS ELLIS (5.08): Madam Speaker, I rise to speak to this, the first report of the Standing Committee on Public Accounts, and to advise members on why Mrs Grassby and I submitted a dissenting report. In particular, I would like to speak to the second set of recommendations which have been put forward by the majority members of the committee. In effect they represent a set of conditions to be agreed to by the Government.
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