Jim Chalmers has defended changes to the Future Fund’s mandate, referring to himself as a “big supporter” of the sovereign wealth fund, amid fierce opposition from the Coalition, which has pledged to reverse any changes if it wins next year’s election.
Shadow treasurer Angus Taylor has accused Treasurer Chalmers of “raiding Australia’s nest egg to cover its economic failures”, after the latter revealed the government has asked the Future Fund to prioritise ‘national priorities’ as part of its investment decisions.
Speaking at Parliament House on Thursday, Treasurer Chalmers said: “The Future Fund will still focus primarily on maximising its returns, but this will make sure that we can also maximise our opportunities in the context of our national economic interest as well.”
On Thursday, it was revealed that the Future Fund will get a new investment mandate and statement of expectations, under which it will have to consider national priorities – including supporting the energy transition, the supply of residential housing, and infrastructure – when making investment decisions.
In a joint statement, Treasurer Chalmers and Finance Minister Katy Gallagher said the changes will mean “more investment where we need it most but not at the expense of returns”.
“The government is also confirming the fund’s enduring role in strengthening the commonwealth’s long-term financial position and covering unfunded superannuation liabilities,” the pair said.
Treasurer Chalmers also confirmed that to support this new mandate, the government won’t start any drawdowns from the fund until at least 2032–33, providing it with the certainty it needs to continue to build its portfolio.
“The government remains committed to the fund’s independence and commercial focus,” the Treasurer said.
In a statement of its own, the Future Fund Board of Guardians welcomed the announcement to both defer drawdowns and the release of a new mandate, saying that it “provides the foundation” for the sovereign wealth fund “to be an enduring institution able to invest for the long term”.
“Today’s announcements are an endorsement of the work that the Future Fund has done over 18 years to deliver its demanding Investment Mandate of CPI + 4-5 per cent a year over the long term,” said Greg Combet, chair of the Future Fund Board of Guardians.
“Delivering that investment target remains the focus for the Future Fund under this new investment mandate. The board of guardians will continue to make investment decisions independent of government with the priority of generating commercial returns.”
Combet said that the priority areas are aligned with the Future Fund’s thinking, as set out in its position papers, and consistent with its investment focus on seeking more local currency exposure and protection against sustained higher inflation.
“The announcements by the government mean that the Future Fund will be in place for years to come. This is a great outcome for all Australians,” Combet said.
“With that certainty we will be able to continue to invest for the long term, make sustainable contributions to the Federal Budget and continue to grow the value of the Fund long into the future.”
However, the opposition is far from pleased, with shadow treasurer Taylor scheduling an emergency press conference this morning to condemn the government’s intentions.
“We will oppose this, and if elected to government, we will overturn what they do here,” Taylor said.
“Let’s be clear about this, the Future Fund is Australia’s money. It’s not the Treasurer’s money, it’s not the Prime Minister’s money. It’s not there to invest in their pet projects.”
Joining Taylor, senator Jane Hume said the Coalition is “very concerned” about this “dramatic shift from a bipartisan position”.
“Now let’s recall reading why the Future Fund was set up in the first place. It was with future taxpayers in mind. It was because unfunded liabilities from the superannuation of public servants were looming large with an ageing population,” Hume said.
RIAA applauds changes
The co-CEO of the Responsible Investment Association Australasia (RIAA), Dean Hegarty, applauded the government’s announcement, saying this will bring the $230-plus billion sovereign wealth fund in line with other leading sovereign wealth funds that have directives to use their investments to support national goals.
In a LinkedIn post, Hegarty said: “While there will be the inevitable comments about using money for politics, few can argue that Australia needs more houses and people need affordable homes to live in.
“Likewise, better access to affordable clean energy is a key strategic need of the country. RIAA research tells us renewable, efficient energy is the number 1 environmental and social issue Australians care about when investing. It makes sense that tax payer money being invested on their behalf, delivers projects that matter to them.”
Hegarty also touched on “inevitable” comments about sacrificing returns, saying that the “evidence simply doesn’t back that up”.
“Our recent Benchmark Report demonstrates that high quality funds that factor in environmental and social issues perform. But if you don’t believe us, look across the ditch at the NZ Super Fund,” said the co-CEO.
“Alongside maximising their returns, they have a mandate to avoid prejudicing New Zealand’s reputation as a responsible member of the world community.
“This guides much of the work they do and their investment strategy and choices. Incidentally, they’ve outperformed the Future Fund over the past 10 years by 2.36 per cent. A quick back of the envelope count means that’s about $60billion worth of outperformance. The joys of compounding returns.”
