The Australian government plans to overhaul the investment mandate of its A$230-billion (鈧�142bn) Future Fund to drive capital into affordable housing, green energy projects and critical infrastructure.
While insisting that the fund would remain 鈥渋ndependent鈥�, Federal Treasurer Jim Chalmers has changed its investment mandate to direct capital to sectors the government considers as 鈥渘ational priorities鈥�.
The national priorities are to increase the supply of residential housing, support for the energy transition for net zero transformation, and delivery of infrastructure projects that will improve the domestic supply chain.
Chalmers said: 鈥淭he government remains committed to the fund鈥檚 independence and commercial focus. Its primary objective will continue to be to maximise returns.鈥�
He said the fund was to keep its mandated average annual returns rate at between 4% and 5% above the inflation rate.
The fund was established in 2006 by the-then Conservative government with seed capital of A$60.5bn to take care of unfunded federal government superannuation liabilities. It has delivered average returns of 8.3% over the 10 years to June 30, 2024, against the target return of 6.9%.
Angus Taylor, Australia鈥檚 shadow treasurer accused Chalmers of 鈥渞aiding Australia鈥檚 nest egg鈥� to cover the government鈥檚 鈥渆conomic failures.鈥�
鈥淟et鈥檚 be clear about this, the Future Fund is Australia鈥檚 money. It鈥檚 not the treasurer鈥檚 money, it is not the prime minister鈥檚 money, it is Australians鈥� money. It is not there to invest in pet projects.鈥�
Chalmer has committed to preserving the fund鈥檚 capital until 2032-33 鈥� an extension of six years, when it will then start to drawn down the money to help pay for the pensions of retired public sector workers.
Greg Combet, a former Labour minister, who now chairs the Fund, said: 鈥淭oday鈥檚 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鈥�5% a year over the long term.鈥�
Combet said delivering that investment target remained the focus for the Future Fund under the new investment mandate, independent of government, with the priority of generating commercial returns.
鈥淭he Government鈥檚 decision to defer withdrawals from the Future Fund until at least 2032-33 provides the Future Fund with the confidence to provide more focus and resources to areas of national priority identified in the new investment mandate that align with our risk and return hurdle,鈥� he said.
The (government鈥檚) priority areas were aligned with the Future Fund鈥檚 thinking, he added, pointing out that the fund was already prioritising investments in supporting energy transition, the supply of residential housing and infrastructure.
鈥淲e are continuing to assess opportunities to invest in businesses that will play a vital role in the energy transition,鈥� he said, adding that the fund would be appointing an executive director to oversee investment in energy transition.
鈥淲e will also be developing strategies for further investment into housing and infrastructure 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.鈥�
The Future Fund has A$12bn 鈥� more than half of its infrastructure portfolio 鈥� worth of direct holdings in businesses that play an important role in the lives of Australians.
These include its investment in Tilt Renewables, one of the largest operators and developers of green energy infrastructure in Australia, with 1.8 GW in operational and late-stage wind, solar and battery storage projects. Other investments include A$6 billion in two major airports and in CDC, the largest operator and developer of data centres in Australia and New Zealand.
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