The government’s adjustment to the Future Fund’s mandate could set a dangerous precedent, warns an economist, raising concerns that it may pave the way for problematic future policies in the superannuation industry.
Speaking on a recent episode of Relative Return Unplugged, AMP’s Shane Oliver said the government’s move is a “slippery slope”.
“You start directing funds – Future Fund today, super funds tomorrow – to go into pet projects, you could ultimately detract from returns, which could lead to conflict,” the chief economist said.
“Normally, the requirement around such funds is to maximise returns with minimum risk or according to a level of risk tolerance and, in the case of super funds, to act in the best interest of members. If you then direct them to invest in certain sorts of things, then you are comprising that potentially.”
On Thursday, Treasurer Jim Chalmers unveiled a new “statement of expectations”, directing the sovereign wealth fund to prioritise Australia’s key national goals, including supporting the energy transition, the supply of residential housing, and infrastructure.
The shadow treasurer swiftly called a press conference, vowing to reverse any changes to the Future Fund if the Coalition is elected to government next year.
“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,” Angus Taylor said.
Responding to this on Friday, Treasurer Chalmers described the Coalition’s response to the Future Fund announcement as “unhinged and ill-informed”.
“What we heard from the Coalition yesterday was really, I think, a pretty frank admission that they don’t want to see more investment in housing, cleaner and cheaper energy, or more resilient infrastructure, and that’s what this is really about,” Treasurer Chalmers said.
“Now there will always be predictable partisan hyperventilating from predictable partisan people, and we’re just saying the usual suspects.”
According to Treasurer Chalmers’ statement issued on Thursday, the sovereign wealth fund’s new investment mandate will require the fund to consider national priorities in its investment decisions, where feasible, and aligned with strong returns.
Oliver highlighted the Treasurer’s use of the word “consider”, saying that it is technically a suggestion, not a directive.
“The return objective remains the same, so you could argue that it’s a fairly modest intervention at this stage. But I would get concerned if it continues because then you are going down a slippery slope, which could ultimately compromise returns,” the chief economist said.
Among those criticising the government’s announcement is Peter Costello, who said that the $230 billion Future Fund he founded risks becoming a political slush fund. John Howard also voiced his opinion in The Australian, describing the decision as “fiscal vandalism”.
Responding to Howard’s choice of words, Treasurer Chalmers simply said: “John Howard on the front of The Australian bagging the Labor Party has been happening since before I was born.”
According to the government, by 2032–33, the Future Fund is expected to grow to $380 billion.
