‘Very bad’: Costello slams Chalmers over Future Fund

Former treasurer Peter Costello has rounded on Treasurer Jim Chalmers’ plan to have the $230 billion Future Fund favour investment in housing, renewable energy and cybersecurity infrastructure, labelling it a “very bad” idea that would ultimately hurt taxpayers.

Costello, who created the fund in 2006 and served as its chairman until this year, said the proposal – which the Coalition has vowed to overturn if it wins office – would reduce international respect for the fund and encourage rent-seekers to pursue financial support for poor projects.

Peter Costello, left, said Jim Chalmers’ plan broke almost 20 years of bipartisanship.Credit: Michael Chambers, Dominic Lorrimer

The fund, created to cover the cost of public servants’ superannuation, has operated under a broad mandate to deliver returns at least 4-5 per cent above the inflation rate. It made 11.9 per cent on its holdings last year.

Under Chalmers’ proposal, the fund would still have to meet that mandate but would also have to “consider Australia’s national priorities in its investment decisions” where possible and consistent with its financial return remit.

Costello said the Future Fund was never created to be a “political slush fund”, arguing Chalmers’ plan broke almost 20 years of bipartisanship, undermined the fund’s independence and would allow future administrations to direct the institution to bankroll government whims.

“This is not a small ‘modernisation’,” Costello said in a statement. “In fact, there is nothing ‘modern’ about this at all. This belongs to a very old tradition in politics: interfering with market investment for political purposes.

“With $230 billion to come into play, expect a long line of rent-seekers to form a queue outside the Future Fund.

“The Future Fund is something that makes Australia different from, and better than, comparable countries – something Australia was able to do exceptionally well. Unfortunately, the age of Australian exceptionalism is coming to an end.”

Shadow treasurer Angus Taylor said the government was coming for Australians’ money in the Future Fund because it could not manage the economy.

“Having blown the bank and fuelled inflation with his reckless spending, the treasurer is now raiding the nation’s nest egg to cover his economic failures,” he said.

Australian Chamber of Commerce and Industry chief executive Andrew McKellar said he was concerned the changes would affect the fund’s returns and performance.

“We think it is tinkering,” he said. “We think that it runs the risk that the Future Fund is increasingly exposed to politicisation and political interference. That’s not a good thing.”

But Chalmers, the first treasurer since Costello to deliver a budget surplus, said there was no change to the Future Fund’s primary objective, which was to maximise returns, while expectations around the institution’s risk profile remained the same.

“What we’ve said is when the fund is comparing possible investments with similar levels of return, those investments should be cognisant of some of the big economic challenges and opportunities that we have,” Chalmers said.

“I’m yet to find anyone objective who doesn’t think we need more investment in housing, energy or hardening our infrastructure.”

The fund already holds investments in various property, renewable energy and infrastructure companies such as Melbourne Airport’s planned $3 billion third runway.

Its total investment profile covers more than 3000 separate entities, from high-profile foreign companies such as Starbucks, Porsche and Burberry to Australian blue chips such as BHP, the Commonwealth Bank and Westpac.

In a statement, the fund’s board of guardians said it would assess the risk and returns of investments in the government’s priority areas alongside its broader obligations.

“Investments in national priorities would need to generate substantially the same risk-adjusted rate of return and other attributes as similar types of investments which might otherwise be considered by the board in accordance with its investment strategy,” it said.

Chalmers rejected suggestions investments from the Future Fund would flow into projects already earmarked out of the budget. He said the fund’s holdings would start to be used to cover public servants’ superannuation liabilities only from 2032-33, when it was expected to hold $380 billion.

The plan won support from the housing sector, which said Future Fund investment could overcome barriers to the supply of new apartments across the country.

Housing Industry Association managing director Jocelyn Martin said the housing shortage was due to a lack of investment, partly due to state and territory governments making it difficult for overseas financial institutions to build homes in Australia.

“An investment in new home building from the Future Fund would support increasing housing supply and could be used to overcome structural barriers to increasing the supply of new apartments, which are vital to addressing Australia’s housing shortages,” she said.

“Assuming that it takes four years to gain approval, and a further three years to build the apartments, this could see the Future Fund delivering apartments prior to the Olympics in Brisbane in 2032.”

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