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Legislative Assembly for the ACT: 2001 Week 5 Hansard (3 May) . . Page.. 1394 ..

MR HUMPHRIES (continuing):

Financial Management Act 1996 and the Territory Superannuation Provision Protection Act 2000.

Financial derivatives are one of the many asset classes available to fund managers to ensure diversification of the funds resources to manage risk and return. A financial derivative is defined as a financial asset or liability whose value depends on or is derived from other assets, liabilities or indices-in other words, the underlying asset. Derivative transactions are financial contracts and include a wide assortment of instruments such as forwards, futures, options, warrants, swaps, share ratios and other composites.

Recent budgets have highlighted the importance of assets put aside by the territory to meet the long-term emerging employer superannuation costs. The future earnings of the superannuation provision account are dependent upon prudent investment decisions and the adoption of appropriate risk management models, and ultimately the tools and processes available to fund managers to minimise risk and maximise returns within the individual manager investment mandates.

In addition, there is a significant amount of surplus government cash held and invested through external funds managers. Similarly, there is an explicit responsibility upon government to ensure that investments processes are undertaken in a manner of minimal risk for appropriate return.

Financial derivatives are an integral part of the funds management industry and are an important tool to assist in balancing risk/return objectives in timely and cost-effective ways for both the territory's assets and liabilities. The use of derivatives by external funds managers has been identified by members of the Finance and Investment Advisory Board as being critical to improving the territory's investment processes and for the long-term financial benefits of the ACT.

Subject to passage of legislation, I will then table the financial guidelines as disallowable instruments in the Assembly. These guidelines will set the control mechanisms and clearly state the circumstances under which the use of derivatives is allowed by fund managers to ensure that the territory's investments are made within appropriate risk management strategies. I commend the bill to the Assembly.

Debate (on motion by Mr Quinlan ) adjourned to next sitting.

First Home Owner Grant Amendment Bill 2001

Mr Humphries , pursuant to notice, presented the bill and its explanatory memorandum.

Title read by Clerk.

MR HUMPHRIES (Chief Minister, Minister for Community Affairs and Treasurer) (10.54): I move:

I ask for leave to have my speech incorporated in Hansard.

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