Chalmers defends sweeping changes to ‘modernise’ $230bn sovereign wealth fund

Jim Chalmers has defended the sweeping changes to help “modernise” Australia’s $230bn sovereign wealth fund to prioritise issues like housing and renewable energy.

Jim Chalmers has defended sweeping changes to Australia’s $230bn sovereign wealth fund, including how it will prioritise issues like housing and renewable energy.

The Future Fund, a pool of cash to help Australia with long-term financial positioning, gives the federal government savings to dip into and is independently managed.

The Treasurer late on Wednesday announced several guidance updates to the fund to delay withdrawals until next decade and better align its investments with “national priorities”, such as housing and renewable energy.

Mr Chalmers fought off pointed questions on Thursday, saying the government was not fiddling with the fund.

He said it did need to be updated to remain useful.

“I think it would be strange to set something up in the early 2000s and pretend that exactly as he had set it up it would endure for the rest of time,” Mr Chalmers told reporters in Canberra.

Treasurer Jim Chalmers is fighting off pointed questions about the Albanese government’s changes to Australia’s sovereign wealth fund. Picture: NewsWire / Martin Ollman

“This is about modernising the future fund and making sure it serves our national economic interests to the ultimate benefit of the Australian people.

“I think it would be unrealistic for (Peter Costello) to assume that as he set up two decades ago would continue for ever.”

The national priorities outlined by Mr Chalmers include housing, transitioning to a net zero power grid and supporting Australia’s domestic supply chain.

He also committed to not taking money from the fund until 2032-33, when it is expected to grow to $380bn.

It is currently at $230bn.

Current legislation has allowed withdrawals from the Future Fund since July 2020. But the former Coalition government committed to not eating into it until at least 2026-27.

Mr Costello set the fund up in 2006 while serving as treasurer in the Howard government.

Mr Chalmers reiterated the changes would not change the ultimate objective of the fund’s board, which is to maximise returns without excessive risk.

Mr Chalmers committed to not taking money from the fund until 2032-33, when it is expected to grow to $380bn. Picture: NewsWire

Essentially, the board is required to choose investment options in the line with the national priorities if they offer the same returns and risk expectations as alternatives.

But asked about why the fund needed to be directed if options deemed in the national priority were already equitable, Mr Chalmers fired up.

“I completely reject that last part of your question and I have said repeatedly here and in the material we have released here that the primary objective of the fund is to maximise returns,” he replied.

“We have not changed our expectations of risk, have not changed our expectations of rate of return.

“What we have 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.

“I am yet to find anyone objective who does not think we need more investment in housing, energy or hardening our infrastructure.”

Mr Chalmers also denied that the government was setting a “dual mandate”.

“We made it clear there is a primary focus on returns, no change to the benchmark, no change to how they think about risk but we’ve asked them where they can and where it is appropriate, to consider investing in housing, energy and national economic security so we can tick more than one box,” he said.

“But I’ve been very clear, probably half a dozen times here already, we’re not changing primary focus on returns, we are not changing its independence when it comes to investment decisions that the board makes.

“It is not unusual, it shouldn’t be controversial for a government to indicate its priorities.

“We haven’t seen major changes like this are the Future Fund since its inception and there are not many institutions that we would expect to go forward two, three or four decades without a view on how to improve them.”

Originally published as Chalmers defends sweeping changes to ‘modernise’ $230bn sovereign wealth fund