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WESTERN AUSTRALIAN FUTURE FUND BILL 2012

Second Reading

MR T.R. BUSWELL (Vasse — Treasurer) [12.29 pm]: I move —

That the bill be now read a second time.

As members will recall, the government announced in the 2012–13 budget its intention to establish a future fund in order to set aside and accumulate a portion of the revenue from the state’s finite mineral resources for the benefit of future generations of Western Australians. The bill I now introduce provides for the establishment and

ongoing operation of the Western Australian Future Fund. The broad framework for the future fund as provided for in the bill is as follows.

The future fund will be established with seed capital from the royalties for regions fund, totalling an estimated $1.04 billion over the period 2012–13 to 2015–16. From 2016–17 onwards, the future fund will be credited each and every year with a minimum one per cent of the state’s annual royalty income, which, in the initial stages, is indicatively estimated at around $65 million to $70 million per annum. Earnings on the future fund balance will be retained and reinvested in the future fund over the first 20 years of its operation—that is, to 30 June 2032. During this 20-year accumulation period, drawdowns from the future fund are prohibited. The balance of the future fund at 30 June 2032, indicatively estimated at around $4.7 billion, will be maintained in perpetuity. The income earned on the balance of the future fund after 30 June 2032, indicatively estimated at around $230 million per annum, may be applied for the purpose of providing public works and other public infrastructure in the metropolitan and regional areas of Western Australia. This means that in 20 years’ time, our state will be able to apply around $230 million a year in interest earnings to industrial infrastructure, technology infrastructure, science and education infrastructure, health or research infrastructure—whatever is in the best interests of the state at the time. And future governments will be able to do that each year forever, if they so choose.

The bill provides that the future fund is to be a Treasurer’s special purpose account, is to be administered by the Treasurer, and is subject to the normal accountability and reporting requirements of the Financial Management Act 2006. The bill also provides that money standing to the credit of the future fund will form part of the public bank account and can be invested only in accordance with the FMA and associated regulations governing investment of the public bank account. This will restrict investment of the future fund to cash and various debt instruments of high-credit quality. The future fund will not be able to be invested in equities, property or other investments outside of those permitted by the Financial Management Regulations. Investment of the future fund will be managed as a separate pool within the overall public bank account by the Western Australian Treasury Corporation and the Department of Treasury. The future fund will target an investment return in excess of the state’s cost of debt, which modelling by the Treasury Corporation suggests is both realistic and achievable.

Importantly, the bill includes an entrenching or "manner and form" provision at clause 10, outlining the required manner and form of any amendments to, or repeal of, the future fund act during the 20-year accumulation period. This provision requires that any bill introduced before 1 July 2032 that seeks to amend or repeal specified sections of the future fund act will require an absolute majority of both houses of Parliament to have effect, and is designed to ensure that the future fund balance accumulates for the benefit of future generations as intended and is not able to be used for other purposes or otherwise be tampered with by future governments, unless the "manner and form" requirements of clause 10 are satisfied.

The bill also recognises the contributions made to the future fund by the royalties for regions fund in its initial years. In this regard, the bill requires that the application of the future fund’s income from 2032–33 onwards be appropriately divided between the metropolitan and regional areas of the state, with both this division and the purposes for which the income is to be applied in the regions to be agreed by the Treasurer and the Minister for Regional Development.

The Western Australian Future Fund is a financial gift, a transfer of wealth generated from finite resources, from present Western Australians to their children. I commend the bill to the house.

Debate adjourned, on motion by Mr D.A. Templeman.