National Reconstruction Fund not in the business of ‘picking winners’, CEO Ivan Power says

NRF boss Ivan Power has distanced the $15bn fund he leads from the heated national debate over Labor’s Future Made in Australia policy.

Ivan Power, the chief executive of the $15bn National Reconstruction Fund, says it has been business as usual since Labor announced its Future Made In Australia policy. Picture: NCA NewsWire/Martin Ollman

National Reconstruction Fund boss Ivan Power says the $15bn facility can “look at risk differently to the private sector” when financing projects that align with the Albanese government’s industry goals, but is vowing to ensure investments will make a commercial return.

Mr Power said the fund — which is expected to come under the umbrella of Labor’s Future Made in Australia policy — was not in the business of picking winners, amid concerns Labor’s industry policy would waste money on uncompetitive sectors.

Mr Power said he has not heard from the government since Anthony Albanese unveiled plans to legislate a Future Made in Australia Act, with the NRF to reveal its maiden investments within months.

While Mr Albanese has flagged the need for top-down government intervention that operates outside the market, Mr Power said the NRF would be operating in the “grey zone” where potentially great businesses are unable to take the next step because they are either too small or deemed too risky to get backing from major institutions such as banks and super funds.

The NRF will co-invest and help get such deals over the line, he said. “It’s not just us believing (these companies) can win. It’s also private capital believing they can win as well. And we think that adds great discipline. That’s actually capitalism.”

Labor’s industrial policy — aimed at supporting manufacturing in key industries such as the low emissions sector — has sparked concerns for a range of distinguished economists and experts, including current and former heads of the Productivity Commission, that taxpayer money will be wasted on propping up uncompetitive companies.

Mr Power, a former Macquarie Group banker who was appointed to the job late last year, made it clear that the NRF operated independently under a mandate determined by an act of parliament.

“And until I hear anything different, I’m just putting my head down, and we are walking – I’m not going to say running – but we are walking very fast and very ­determinedly towards the achievement of those goals,” he said.

Mr Power said he and his team were not in the business of “picking winners” – an approach that the International Monetary Fund this past week warned had led some governments around the world to waste taxpayer money on trying to kickstart uncompetitive industries.

The NRF is required to generate returns over the medium term equivalent to the five-year government bond rate, plus 2-3 per cent – or roughly 6-7 per cent at current rates.

“We can’t give grants. We’re not a lender of last resort, we have to invest commercially, respon­sibly; but we can look at risk differently to the private sector,” Mr Power said.

With Jim Chalmers promising “significant” new public investments in the May budget, the recent failures of electric vehicle fast-charger company Tritium and Australia’s largest plastics producer, Qenos, have highlighted concerns that high energy ­prices – amplified by increasingly assertive unions – have created a difficult operating environment for manufacturers.

Mr Power said the recent debate about the Made in Australia policy had focused too much on manufacturing at a “commoditised” level – the making of things – rather than the value-added industrial components.

Productivity Commission chair Danielle Wood. Picture: Aaron Francis/The Australian

“There is a lot a huge amount of industrial capability, whether it’s designing, or refining, or making, or building. It is this incredible breadth that we need to be considering,” he said.

Mr Power said it was well accepted – including by the Reserve Bank and Productivity Commission – that smaller and medium-sized companies in Australia struggled to gain access to reasonably priced funding from large institutions, including the major banks.

PC chairwoman Danielle Wood last week warned that a return to interventionist industrial policy risked wasting taxpayer money, but Mr Power said comments from Ms Wood’s predecessor, Michael Brennan, highlighted how the NRF was operating in line with orthodox economic thought.

“He (Mr Brennan) gave a speech in 2021 talking about the fact that smaller, less mature companies didn’t have the same level of access to finance, and we think that (it’s) actually really important to be finding ways to be facilitating flows of capital for that area, because our goal (is) the devel­­opment of industrial capability,” he said.

“The great backbone of Australia’s industrial capability is ­actually among small and medium enterprises that form so many of these components and supply chains.

“Making sure they have ­adequate access to well-priced fin­ance – and by the way, we’re talking about well-priced, we’re not talking about massive, concessional finance – we think is incredibly important to the development of Australia’s economy, and therefore that’s part of our mission.”