Debate over Australia’s Sovereign Wealth Fund: Experts Consider Returns versus New Priorities
Experts are warning against potential deviation from the Future Fund’s primary goal of delivering strong financial returns amidst the Albanese government’s push towards housing, infrastructure, and renewable energy.
Treasurer Jim Chalmers announced on Nov. 21 the government’s initiative to address Australia’s housing crisis and climate commitments while maintaining the fund’s profitability mandate.
The $230 billion (US$150 billion) Future Fund, established for superannuation obligations, will now not withdraw funds until 2032–33 for medium-term stability.
The government assures that investments in housing, infrastructure, and the green transition will only be pursued if aligned with the Fund’s profit goals.
Graham Young, executive director of the Australian Institute for Progress, expressed concerns about the announcement, questioning why the government felt the need to guide the Future Fund towards housing or green energy.
Renewables and Infrastructure: Familiar Territory
Renowned economist Saul Eslake supported the government’s decision, noting that it aligns with the Future Fund’s current strategy, which already includes 9.9 percent of assets in infrastructure.
He emphasized that renewables and infrastructure are growth areas for the Australian economy, particularly under net-zero emissions commitments.
Eslake highlighted the fund’s 11.9 percent return over the 12 months to Sept. 30 even with renewable energy investments, stating that these sectors align with the Fund’s goals.
While infrastructure and renewables are within the Fund’s comfort zone, investments in housing pose a more complex challenge.
Housing: A Complex Challenge
Eslake outlined challenges around affordable housing, mentioning obstacles like progressive land tax rates and the need for subsidies to bridge market and below-market rents.
He clarified that the government’s directive does not mandate the Future Fund to invest in affordable housing but rather asks it to “consider” such projects.
Young echoed concerns about large investors in rental housing and acknowledged potential returns in green investments due to government support.
