JIM CHALMERS:
I wanted to speak primarily about our reforms to the Future Fund, but I’ve got a couple of other issues to cover off as well. First of all, I want to say that I am a big supporter of the Future Fund. I am a big believer in its role and in its potential in our economy as well. And I have said on a number of occasions, and I say again today, I pay tribute to Treasurer Costello for setting up the Future Fund.
I see it as one of the big national economic advantages that we have, given all of the global economic uncertainty but also all of the economic opportunity which is before us in the defining decade and beyond.
Today we are announcing new steps which are all about the future of the Future Fund. We will modernise the Future Fund, building on its success to ensure that it can play an enduring and prominent role in our economy in the service of our national economic interests.
We are refreshing and renewing this really core economic institution to make it stronger, to make it more successful and also to make it more sustainable into the future.
Our changes that we’re announcing today and I’m announcing on behalf of myself and obviously Minister Gallagher and the government more broadly, there are 3 key changes that we’re announcing today: first of all, making sure the fund is an ongoing feature of our economy; secondly, issuing a new investment mandate to maximise the fund’s role in a changing economy; and also releasing the first Statement of Expectations for the Future Fund in something like 15 years.
As I’ve said before, we’ve got a raft of economic challenges and opportunities, and one of the big advantages that we have going for us is this huge pool of capital in the Future Fund. The Future Fund already plays a really important role in the economy, and we want to make sure that we can maximise its role in the years ahead, especially in the context of all of these structural shifts that we’ve talked about on a number of occasions before laid bare in the Intergenerational Report, but largely the big transformational pulses in our economy – technological, demographic, global fragmentation and the like.
So a lot of the changes that we’re proposing today or all the changes we’re proposing today are in the context of all of that churn and change in the global and domestic economies.
I want to make it really clear that we are not changing the fundamental focus of the Future Fund when it comes to maximising returns. The Future Fund will still focus primarily on maximising its returns, but this will make sure that we can also maximise our opportunities in the context of our national economic interest as well. The new investment mandate will require the fund to consider priorities like housing, the energy transformation and also making sure that when it comes to infrastructure that there’s a particular emphasis on resilience and security as well.
So the 3 priorities: increasing the supply of residential housing, supporting the energy transition and delivering improved infrastructure including in relation to economic resilience and security infrastructure as well. So this will mean more investment where we need it most but without compromising the returns which will continue to be the primary focus of the Future Fund.
We’re also locking in the Future Fund and its role in strengthening the Commonwealth’s long‑term financial position and covering those unfunded superannuation liabilities. And the way that we’re doing this is that we’re announcing that we will not start any drawdowns from the fund until at least 2032–33. This is so that we can provide the Future Fund with the certainty that it needs to continue to build its portfolio. It’s pretty remarkable that the core Future Fund – the $230 billion part of the Future Fund – is expected to grow to $380 billion by 2032–33.
I also want to be really clear that the government remains committed to the Future Fund’s independence and to its commercial focus. There are no changes being proposed here to the existing benchmark rate of return or the risk profile. The government will not be directing specific investments being made by the fund. The fund and its board will continue to make its decisions about investments independently. Its primary objective will be to continue to maximise returns.
The benchmark return rate will remain between 4 and 5 per cent above CPI per annum over the long term, and there’ll be no change to the expected risk profile. So this is about ensuring that the fund will continue to provide strong returns to the government’s balance sheet while also supporting some of those big national priorities where it can.
I wanted to say that we’ve been working closely with the Future Fund on these changes. Katy Gallagher and I actually attended the board meeting of the Future Fund in August and we briefed the board members and discussed with board members there, a very, very productive discussion that we’re very grateful for. These changes have been in the works for some time.
We’ve been considering the future of the Future Fund for some time. We’ve included the Chair of the Future Fund and also the board of the Future Fund in those conversations to make sure that we can get to the outcome that we are announcing today. And I really wanted to genuinely thank the board members and the chair for all of that engagement over the course of some period of time now. So these changes will strengthen the Future Fund and they’ll strengthen the Australian economy more broadly as a consequence.
A couple of other issues to touch on. First of all I wanted to say that both headline and underlying inflation in the UK went up overnight. What that means is that inflation is now rising in the UK, the US, Canada and Europe while it’s falling here in Australia. And as I said yesterday in that Ministerial Statement, we’ve made very welcome, encouraging progress in the fight against inflation, but we know it’s not mission accomplished. We’ve seen around the world that inflation doesn’t always come down in a perfectly straight line. We’re seeing that in major advanced economies right now. We are maintaining a primary focus on this fight against inflation and helping people with the cost of living. But we’ve made sure that the reform wheels are continuing to turn in our economy at the same time.
So if you think about that in the context of these Future Fund announcements today but also what I said last week about the new single front door, the Productivity fund we’re agreeing with the states, the changes to cash acceptance, the retirement phase of superannuation, the mergers legislation which is going through the House of Representatives today – the biggest change in the mergers regime in 5 decades – this shows that we’ve been able to maintain a primary focus on cost of living and fighting inflation but at the same time as we’ve kept the reform wheels turning in our economy at the same time.
And if there’s a common theme of so much of what we’re trying to do, whether it’s in the Future Fund, the Productivity Fund, the single front door, we are trying to make sure that the flow of capital in our economy serves our national economic interests and, most importantly of all, serves our workers and communities, our businesses and investors at the same time. I encourage you to see these changes in that light.
One final thing before I take your questions: Bill Shorten gives his valedictory today. Bill Shorten has so much to be proud of, and we are so proud of him. And we’re looking forward to hearing from him this afternoon, but also recognising and remembering that Bill’s got still a lot of work to do and a huge contribution to make in this parliamentary term and beyond that as well.
I work really closely with Bill on the NDIS and on a whole range of issues as well and, as I said, he has so much to be proud of, and the Labor Party is very proud of Bill.
Happy to take some questions.
JOURNALIST:
When Peter Costello devised the Future Fund, he described it as a locked box that would stop it from being tampered with by – for part political purposes. You say you’re not changing its primary focus, and that is best returns possible. But what do you say to those who say, well, you clearly are fiddling with it by giving it a mandate, an investment mandate, focusing on house, energy and infrastructure, particularly when you have other funds that are precisely for that? And take housing, for example, that housing is not – money is not the issue; it’s finding the people to build the houses.
CHALMERS:
We’re working on that as well. We do need to make sure we’ve got the skills base to build more homes. But we need to come at this housing challenge from a whole range of perspectives and policies, and that’s what we’re doing.
A couple of things about the first part of your question. I respect Peter Costello and I’ve paid tribute to him on a number of occasions for setting up the fund. I think it would be strange to set something up in the early 2000s and pretend that exactly as he had set it up would endure for the rest of time. And my job is to make sure that our economic institutions, the ones I support, the ones with big roles and potentials in our economy that I welcome, that they’re the best versions of themselves.
And you’ve seen me put this kind of effort into some of the other institutions as well. This is about modernising the Future Fund and making sure it serves our national economic interests to the ultimate benefit of the Australian people.
And so I think it would be unrealistic for Peter to assume that as he set things up 2 decades ago would continue forever. My job is not to preserve what I’ve inherited, it’s to improve it and that’s what we’re doing.
And then when it comes to some of these investments, the other important point is that the Future Fund is already investing in some of these areas. It already holds a range of assets consistent with the national priorities. You know they’ve got over a billion dollars invested in wind and solar. That makes them one of the biggest investors in renewables in Australia. And they’ve got other investments as well.
JOURNALIST:
But isn’t that the point, that if it makes investment sense, they’ll do it anyway? So why mandate, which means that they’re going to have to make decisions that aren’t the best for returns.
CHALMERS:
No, I completely, completely reject that last part of your question. And I’ve said repeatedly here and in the material that we’ve released to you that the primary objective of the fund is to maximise returns. We haven’t changed our expectations of risk. We haven’t changed our expectations of rate of return.
What we’ve said is when the fund is comparing impossible investments with similar levels of return, those investments should be cognisant of some of the big economic challenges and opportunities that we have. And I’m yet to find anyone objective who doesn’t think we need more investment in housing, energy or hardening our infrastructure.
Mark and then Jacob.
JOURNALIST:
Treasurer, just on that theme, there seems to be an inherent contradiction in what you’re saying though – that you’ll maintain the independence of the fund yet you’re giving it new directions to prefer certain classes of investments, which apparently it’s already doing. But if the primary objective is to maximise returns and the Future Fund considers that this isn’t the best way to maximise returns, will it be free not to do this? Not to invest in it?
Could I also just cheekily ask you about the super industry. Another story today that Australian Super having to pay compensation for unconscionable delays in debt penalty payments. What’s your message to the super industry?
CHALMERS:
Obviously 2 very different questions. First of all, the Future Fund will continue to prioritise returns. We’ve been very clear about that, very upfront about that. What we’re saying is that the Future Fund, which will continue to make individual investment decisions independently, that they should be cognisant of these national priorities. This is not an especially controversial change that we are proposing.
It’s not unusual for governments to indicate what they consider to be their national economic priorities. We haven’t interfered with the independence of the Future Fund. We haven’t interfered with expectations around rate of return or risk.
But we have said to the Future Fund – and we’ve worked with them closely behind the scenes before this announcement today – to make sure that where they are weighing up investments which have similar rates of return and similar risk profiles, that it would be in Australia’s interests to make sure we’re continuing to build housing stock, we’re continuing to get the energy transformation right and we’re hardening our infrastructure.
On superannuation, obviously there have been a number of very concerning reports out of the superannuation sector. And I support fully the important work of the regulators in getting to the bottom of some of these issues that have been raised. Where these issues that have been raised involve legal processes, I’ve been very careful not to engage in a running commentary on that, as you would understand.
But obviously we follow closely some of these developments, some of these reports, and we want to make sure that the superannuation system is the best version of itself, and that means supporting the work of the regulators.
JOURNALIST:
In terms of the super investments in these areas you’ve identified, can you explain why you’re not doing that directly, why, for instance, isn’t the government borrowing money to invest in housing, in green energy, in infrastructure, instead of going this route through the Future Fund? Why don’t you do more of it directly yourself?
And, secondly, the fund is set up to cover these unfunded liabilities for the public service and former colleagues of yours who’ve retired on healthy defined benefits schemes. How much headroom is there in that fund now to cover those liabilities into the future? Like, how much cream is sitting there if you like?
CHALMERS:
I’ll take it in reverse order. Future governments will make decisions about how they draw down the fund and how they cover those liabilities. One of the benefits, the original purpose and one of the major benefits of the fund is that it takes some of the pressure off the budget funding those otherwise unfunded super liabilities.
That’s one of the reasons why we support it. And what we’ve tried to do today and we’ve, again, consulted and collaborated very closely with the Future Fund on this, is to say one of the reasons why we’ll commit not to draw down before 2032 is because we want to give them the certainty to build up that pool to fund those liabilities.
There’ll be a future government of either political persuasion after that period who will determine, any further tweaks or changes to that. But we wanted to give them security and certainty around that period because we want to fund those liabilities.
In terms of your other question about government investment, we don’t see it as an either/ or. These challenges that we have in our economy – housing, the energy transformation, making sure our economy is as resilient and secure as it can be in a pretty uncertain world – we are coming at these challenges from everybody conceivable and every responsible age.
We’ve got a lot of direct investment in housing and the energy transformation and national security and resilience. But the challenges and opportunities are so great that we need to find every way that we can responsibly ensure that capital is flowing in our economy in the service of our national economic interests, our workers and communities, our businesses and investors.
JOURNALIST:
Thank you, Treasurer. The first Chairman of the Future Fund, David Murray, has told me this morning that by setting these priorities you are actually interfering in the independence of the Future Fund and it risks putting more taxpayer money into boondoggle projects. How would you respond to that?
CHALMERS:
I saw that comment that he made in your story online, and it’s not correct. I obviously don’t agree with him because it’s not factually true.
JOURNALIST:
Following that on, how is it – how do you say it’s not correct if that’s their opinion coming from the top? And, secondly –
CHALMERS:
Coming from the top of what?
JOURNALIST:
From John’s question. If it’s coming from people in this space saying that it’s interfering, coming from you, how is it not? And you claim this isn’t controversial. How do you then just – I guess, back that in and justify it when it’s drawn such fierce criticism from the opposition. Sussan Ley has called you economically illiterate, were her words this morning.
CHALMERS:
We have very low expectations of the Liberal Party and their friends. One of the reasons we start so far behind on these big economic challenges – housing, energy, national security and resilience – is because they wasted a decade stuffing around and failing. It’s on us to clean up the mess that they left us and to try and make up some of the lost ground that they left us.
It’s a bit rich coming from them when we are quite near the end of a three‑year parliamentary term and they don’t have any credible, costed or coherent economic policies. So let’s hear Sussan’s alternatives. Let’s not hear just the usual kind of thoughtless babbling. That’s on that point. And we know their record that’s why they’re risky on all of these matters – energy, housing and the like.
When it comes to the comments from – I think you described the reaction to the information we put out overnight. We expect the usual kind of partisan hyperventilating from the usual partisan places. And over time you get better at recognising and responding to the objective commentary and ignoring the partisan hyperventilating.
JOURNALIST:
It seems like the central question at the next election will be are you better off than you were 3 years ago. How do you shape that message on the one hand not appearing to lecture people that they are better off when they may not feel that way?
CHALMERS:
I’m happy to answer your question, but that’s really one of the central issues that I tried to tackle yesterday in the Ministerial Statement and then with your counterpart Sarah Ferguson last night on 7.30. We acknowledge that even with the quite remarkable progress that’s been made in the national data, that doesn’t always immediately translate into how people are feeling and faring in the economy.
We recognise that, we’ve been upfront about that. And we’ve also been upfront about the fact that when we came to office people were already going backwards – real wages were falling substantially for 5 consecutive quarters and so because of all of that, we know that people have a lot of ground to make up in their household budgets.
We also know that without the tax cuts and all of the other ways we’re providing cost‑of‑living help, people would be much worse off. And remember our political opponents didn’t support our cost‑of‑living help. And so people would be worse off were it not for the help that we are providing in many responsible ways, and they’d be worse off if the other guys were in charge.
And this is why we say that Peter Dutton is such a risk to the economy and to household budgets, because we know their record – falling real wages, much higher inflation, huge deficits, much more debt. That’s their record and that’s what makes them risky.
We say to the Australian people we do acknowledge that you are still under substantial pressure. We know that you’ve got a lot of ground to make up in your household budgets. We’re doing what we can in responsible ways to help you, and you’d be much, much worse off if the Liberals and Nationals got back in.
JOURNALIST:
Thanks, Treasurer. Just back to the Future Fund, the Greens are calling on you to go further and they’re talking about divestment from fossil fuels and the like. What do you make of their position? Is that something you’d consider?
CHALMERS:
No, today is about focusing the Future Fund and making sure that it’s an enduring part of our economy. It’s not about exclusions. It’s about the positive investments that the Future Fund can continue to make in our national economic prosperity and security. It’s not about the sorts of things that we hear from the Greens from time to time.
JOURNALIST:
Have you made any progress in finding a compromise with the Greens to get them to support your housing bill?
CHALMERS:
We’re in discussions with the Greens about housing but about a whole range of other matters as well. I think one of the strangest features of this parliament right now is just how frequently the Coalition and the Greens vote together.
The Coalition and the Greens in the Senate have had the same view on housing, on the environment if you can believe it, and on migration. And I’m not sure what you expected of this parliament, but that’s a pretty strange state of affairs when the Coalition and the Greens are on a unity ticket on housing, migration and the environment. That’s pretty strange.
And so we’re in discussions with Senate crossbenchers, as you’d expect, about our housing bills, but also about a whole range of other legislative priorities that we have. We want to pass as much of our agenda as we can. We would expect to receive the enthusiastic support of the Greens but, unfortunately, they’ve shown that they are more willing to support the Coalition than to support housing or other sensible changes in our communities and our economy.
JOURNALIST:
Treasurer, with the investment process overhaul, have you effectively created a dual band essentially for the Future Fund in that its got to focus on these national priorities and returns? I mean, how do they – can you sort of just tell us a bit more about how they will balance those 2 priorities?
CHALMERS:
I’ve been very clear, Jack – primary focus on returns. We’re not talking here about, as you would describe it, as a dual mandate. We’ve made is very clear – 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, where it’s appropriate, to consider investing in housing, energy and national economic security so that we can tick more than one box.
But I’ve been very clear – I think probably half a dozen times here already – we’re not changing its primary focus on returns. We’re not changing its independence when it comes to investment decisions that the board makes. It’s not unusual. It shouldn’t be controversial for a government to indicate its priorities.
We haven’t seen major changes like this to the Future Fund since its inception, and there’s not many institutions that would expect to go for 2 or 3 or 4 decades without anybody having a view about how you could improve them. That’s what today is about.
JOURNALIST:
Treasurer, you’ve reiterated today that there’s not enough investment in the energy transformation. Firstly, is that an acknowledgement that existing climate policy settings are not sending the right signals to the market? And potentially is realigning the Future Fund’s priorities putting it closer in line with the Net Zero Economy Authority and the investment front door? Would that compromise the board’s independence, making it more influenced by these bodies?
CHALMERS:
Definitely not, the last part of your question. As I keep saying, the board retains its independence. But I think you’re right to say that there is a whole bunch of effort across a range of institutions and investment vehicles to try and make sure that we maximise the opportunities of the net zero transformation. It’s the biggest change in the global economy since the Industrial Revolution.
I believe Australia can be a major beneficiary of that change. We can make ourselves indispensable to this global net zero transformation. And that requires us to make sure that capital is flowing as efficiently and effectively as it can in our economy. And so in all of the ways that you listed in your question, all of them are important. They are complementary, not contradictory.
But in no way do they change the way that the Future Fund Board considers its independence. More broadly on the challenge, there are there investment vehicles, there is the Future Fund. We’ll be introducing our legislation on the production tax credits. There is a whole bunch of effort to make sure we make the most of this opportunity.
JOURNALIST:
Treasurer, today Allegra Spender released her tax green paper with input from people like Ken Henry, John Daley, Rob Breunig. One of the findings is that the tax arrangements around housing have contributed to the expense of that, and one of the factors is lower home ownership among younger people and the drop‑off in the fertility rate? Do you agree?
CHALMERS:
Do I agree with what?
JOURNALIST:
Whether what’s going on in the housing market and the tax arrangements have contributed to higher prices, lower ownership and a drop off in fertility?
CHALMERS:
Well, I haven’t read Allegra’s paper. I’ve got a lot of time and respect and regard for Allegra. I think she puts a lot of thinking into these matters and I welcome it more broadly, and she’s assembled a pretty impressive squad by the sounds of it to help her think through some of these issues, and that’s her right as a crossbencher in the parliament. I don’t really want to kind of respond to something I haven’t read.
I think we’ve acknowledged more broadly that one of the intergenerational issues in our economy is when it comes to young people and housing and there’s more than one way to go about addressing that. Building more homes is part of it. The way we’re changing support for renters. The way we’re trying to pass Help to Buy through the parliament. More broadly, the changes to student debt.
All of these things are about recognising that there is an element of intergenerational unfairness in our economy, but we also need to recognise that there’s more than one way to address that. You don’t necessarily need to go down the path that it sounds like Allegra is proposing to address some of those issues. We’re doing it in other ways to try and take the pressure off young people, recognising that the last few years have been especially difficult for younger people.
JOURNALIST:
Treasurer, I just want to ask about, obviously, the Budget centrepiece was this Future Made in Australia policy position. The government said you modelled this on the Inflation Reduction Act in the United States. Donald Trump said he’s going to walk away from Paris. Does the transition to net zero remain lucrative if the biggest economy in the world is no longer on that trajectory?
CHALMERS:
Yes. The direction of travel in the global economy is very clear. It is impossible to imagine a world that isn’t attracted to cleaner and cheaper energy and for Australia, the industrial opportunities of that are immense. If you sat down with a blank page of paper and wrote down every country’s advantages when it comes to this transformation, Australia would have the most compelling combination of advantages.
Obviously, we are impacted by policy changes in big economies like the American economy, obviously but we are well placed and well prepared to deal with that. The world will shift to cleaner and cheaper energy. The policies of administrations will change, including here in Australia over time. But the direction of travel is clear. The opportunities for Australia are even clearer and we intend to make the most of them.
I’m just asked to make one other set of comments about what we’ve seen in Sydney in the last little while and I wanted to say this. We condemn all forms of violence and hate speech. Antisemitism has no place in Australia and it needs to stop. As the Director‑General of ASIO has said, we need to take down the temperature of debate in this country and not import foreign conflicts to our shores.
We back our law enforcement agencies to deal with this. But what we have seen in Sydney is completely and absolutely unacceptable. We completely condemn all forms of violence and hate speech. Antisemitism has no place in Australia and this sort of outrageous behaviour needs to stop.
Thanks very much.