Australia’s Sovereign Wealth Fund directed to focus on housing and climate change investments.
The Future Fund now stands at $230 billion and was established to reduce the government’s dependence on taxpayers.
The Albanese Labor government has tapped into the Future Fund to tackle the housing crisis and address climate change issues.
Announced on Nov. 21, Treasurer Jim Chalmers revealed that the Fund will be used to invest in housing, infrastructure, and green energy transition, focusing on profitability.
The government has committed not to draw from the $230 billion fund for at least eight years, until 2032-33, to provide stability.
In a joint statement, Chalmers and Finance Minister Katy Gallagher highlighted significant economic shifts like the global net zero transformation and technological advancements facing Australia.
They believe the Fund can guide the country through these changes effectively.
“The Future Fund has shown its potential to seize economic opportunities and support Australia’s prosperity,” the statement read.
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They emphasized that the Fund’s main focus is to maximize returns and the changes made will enhance its ability to serve future generations.
What is the Future Fund?
The Future Fund was established in 2006 by former Treasurer Peter Costello to strengthen the government’s financial stability in the long term, reducing reliance on taxpayers for initiatives like the age pension.
The independent Fund started with $60.5 billion from federal surpluses and government shares in Telstra. Fund managers are required to deliver returns of 4-5 percent, avoiding high-risk investments.
As of Sept. 30, 2024, the Fund has grown to $229.7 billion.
The Labor government believes it can maintain high returns by redirecting the Fund’s focus, highlighting investment opportunities like the Clean Energy Finance Corporation, National Reconstruction Fund, and Housing Australia.
Future Fund Board Reacts to Drawdown Deferral
The Future Fund Board welcomed the government’s decision to postpone drawdowns until 2032-33.
Chair Greg Combet stated that this deferral gives the Fund confidence to allocate more resources to national priority areas.
Combet, a former Labor climate minister, was appointed as the Fund’s chair earlier this year.
He announced plans to appoint an Executive Director for Energy Transition to support these efforts.
“We are also developing strategies for increased investment in housing and infrastructure,” he added.
Opposition and Greens Weigh In
Opposition Deputy Leader Sussan Ley criticized the government for using the Future Fund for their projects, calling the move inappropriate.
She questioned why the government would change the Fund’s mandate when it is performing well and generating good returns.
The Greens supported the government’s decision, calling for a ban on investments in coal, oil, and gas to address the climate crisis.
Senator Barbara Pocock compared fossil fuels to tobacco and emphasized the need to stop investing in them.
“Fossil fuels are the new tobacco,” Pocock stated.
