Chalmers’ social ambitions reflected in Future Fund

As the Albanese government reveals its true nature to capture and redistribute private wealth for social aims through changes to high-balance superannuation and the stage three tax cuts, Jim Chalmers can rightly tell voters they were warned. Not before the election, mind you, as would have been more honest. But exactly one year ago, in an essay published in The Monthly, the Treasurer set out his economic framework, which helps to make sense of Labor’s broken promises and the nation’s growing sovereign risk.

Dr Chalmers’ intellectual framework for the essay was a rejection of supply-side economic theory that advocates tax cuts as a way to encourage job creation, business expansion and entrepreneurial activity. The Treasurer envisioned a new paradigm of shared investment by business and the state to achieve predetermined social ends. He said his plan was to build a more inclusive and resilient economy, increasingly powered by cleaner and cheaper energy. He promised co-ordination and co-investment; based in a recognition that government, business, philanthropic and investor interests and objectives were increasingly aligned and intertwined. The government, he said, would “renovate” the Reserve Bank and “renew and revitalise” the Productivity Commission.

The appointment on Monday of former union and superannuation heavyweight Greg Combet to replace former Liberal treasurer Peter Costello as head of the Future Fund is another piece in the puzzle. Mr Combet has most recently been operating as the Albanese government’s climate tsar, charged with bringing some order to the chaotic energy transition. The signature policy announcement by Chris Bowen in that period has been a new scheme in which government will underwrite the profitability of renewable energy projects at an unknown cost to taxpayers. Mr Combet has unfinished business at the Net Zero Economy Agency before he turns his attention mid-year to the nation’s $270bn sovereign wealth Future Fund, which was established to offset commonwealth superannuation liabilities and in recognition of generational equity and the challenges of an ageing population.

Over the past 10 years the Future Fund has delivered an annual average return of 9.1 per cent. Mr Costello has warned against allowing government to raid the Future Fund kitty, as happened with other wealth funds under Labor during the Rudd government. Dr Chalmers has praised the fund’s performance but clearly has other things on his mind. “What we want to do here is to make sure that the Future Fund is an important economic and financial institution into the future,” the Treasurer said. “The first step in ensuring that is making sure that we get this fresh thinking and this fresh leadership.”

Before getting carried away with “fresh thinking”, the government and new Future Fund leadership should heed the words of David Murray, the inaugural chairman of the Australian Government Future Fund Board of Guardians and chair of the International Forum of Sovereign Wealth Funds. He said liquidating the fund or mandating its investing towards so-called nation-building ventures would put at risk $200bn of likely returns. He said the fund had shown clear success in maintaining independence through clarity of mandate, commercial investment principles and accountability. The mandate includes achieving a set return for shareholders above other concerns. This is where the focus should be maintained.

Mandating the fund to invest in fashionable priorities of today, whether they be climate change, low-cost housing or disability care, risks robbing wealth from future generations, the antithesis of what a sovereign wealth fund is all about.