Interview with Ali Moore, ABC Melbourne Drive

21 November 2024

ALI MOORE: Critics say the government is misusing the fund to fund their own pet projects, and the opposition says if it wins government, it will overturn the changes. Jane Hume is a shadow minister for finance and, of course, a senator for Victoria. Jane Hume Welcome back to drive.

JANE HUME: Good to be with you, Ali.

ALI MOORE: The fund was set up to cover future liabilities of government, wasn't it?

JANE HUME: It was set up in 2006, and it was at a time when a Coalition government had returned the budget to sustainable surpluses. Debt was paid down. Telstra was sold off, and the proceeds from surpluses and from Telstra were then put into this sovereign wealth fund that was specifically there to pay for the unfunded liabilities of the future. So you're right. I heard your introduction. It was for the benefit of future taxpayers. It was so that the burden on those future taxpayers, the next generations, was lessened because of those unfunded liabilities of public service pensions.

ALI MOORE: But I guess, just superannuation. I mean, I remember at the time it was broader than that, wasn't it? It wasn't just about public service pensions.

JANE HUME: Well, this component of the Future Fund is. Now there's more components of the Future Fund. There's things like the Medical Research Future Fund is run by the Future Fund as well. So the remit of the organisation has expanded. But that pool of funds, which hasn't been touched since 2006, remains for unfunded public liabilities of public service, public servant retirements. And look, the good thing is because the Future Fund has performed so well, because it's got this investment mandate that has remained independent, it's performed exceptionally well, and now we've been able to say, well, we can push out actually paying those public service liabilities for a number of years. That's a good thing. It should actually cover the whole lot, and the taxpayer will not have to cover that in the future.

ALI MOORE: So just if this is really a question, because I'm yet to understand this, the other funds that are within the future fund, as you said, there's a medical research fund. There's a couple of other ones as well. Have they been drawn on the core Future Fund has never been drawn on by any government, but have these other funds been drawn on to follow particular policy areas, as their names would suggest?

JANE HUME: Yes, they have. That's what they've been set up to do. But the investment mandate is very similar for both. So the Future Fund essentially employs other fund managers to manage the money. But making those decisions about how that money is managed, that's always been an independent Future Fund that's done that. And that's why it's run by a board, not a board of directors, but a board of guardians. And the reason why we call them guardians is because it's actually protecting that money from future governments that get a little voracious, start eyeing off this big pool of money saying, hey, what can we repurpose this to? And you probably recall back in 2007, Kevin Rudd tried to do just that. He wanted the Future Fund to pay for the NBN. Well, thank goodness he didn't have his way because otherwise it wouldn't be anything like the amount of money it is now. And it was in fact Julia Gillard that then changed the rules to prevent that happening. But now we see Jim Chalmers and Katy Gallagher coming out saying, oh, we're just going to change the investment mandate so that the fund has to consider all these priorities that are, in fact government priorities, political priorities, not necessarily commercial investments. And that's a real problem because maintaining the independence…

ALI MOORE: But that's not what he's said though, is it? I mean, he's said that he, says there should be these priority areas. But those priority areas are secondary to the requirement to get a commercial return.

JANE HUME: Well, this is the thing. The Future Fund already has investments in infrastructure. It already has investments in the energy transition assets. But it's made those decisions because there were commercial returns, not because Jim Chalmers and Anthony Albanese told them too. The Government can't have it both ways either. This is going to make no difference, of course you just keep on making returns or in which case these changes are deeply unnecessary, or the intervention puts into question the future fund's independence. So if it's going to push the Future Fund to invest in particular assets at the expense of commercial returns, that is a problem. Either way, Australians and their national sovereign assets lose. So we have said a coalition government will immediately restore the independence of the Future Fund because the Future Fund is there for all Australians. It's not there for the priorities of any one government.

ALI MOORE: I am curious, though, about the, you know, the commentary from the coalition that it's about funnelling money into government pet policy areas because how will it benefit this government? I mean, they have given a commitment not to draw down on the fund until at least 2032. That's a long way away. Big question mark whether they will be the government in power at the time of the first drawdown. So they might want to direct the money, but how can you see it as benefiting government pet policies if they're not actually ever going to be able to access it?

JANE HUME: So the drawdowns will remain to deal with the public liability. It's the investment pool that's being directed. Essentially, the investment professionals are being told to invest money in these particular areas in order to make money to fund the public liability.

ALI MOORE: But where's the interest in that for the government, except for what they must believe is the good? Where's the political benefit to them in that if it's all about pet policy?

JANE HUME: Because let's say there's a housing project that the government would like the Future Fund to invest in. Now, that housing project might not have the risk or return framework, the risk or return characteristics that the Future Fund need in order to maximise returns. But if the Government pushes them in that direction, says, ‘oh no, this is exactly the kind of thing we want you to invest in’. Well, that comes at the detriment of the balance of the fund, of the return of the fund. And that's no good. And look, and here's the nub of it, Ali, this is the first time that the Future Fund has been politicised, and that changes everything. So let's just say what happens next. Let's say there's a hung parliament and the next parliament, in order to govern, Labor have to get into bed with the Greens. Well then, are the Greens going to say, well, we want you to change the Future Fund mandate again. We want you to divest from things. We want you to divest from gas or divest from businesses and countries they don't like. So this is, you can see how this has changed, it's an unprecedented intervention. We want the investment professionals to make decisions about what's going to deliver the best returns. We don't want that, the waters muddied by them having to look at projects that the government of the day wants to deliver.

ALI MOORE: You're listening to Jane Hume, Shadow Minister for Finance. I do want to hear from you about the Future Fund and whether you think an investment mandate is appropriate or not. 13082774. Jane Hume If you look around the world at other sovereign wealth funds, and I guess Norway is the one that many people pick up, and Norway, for example, they've got a huge amount of money that they've put aside from, their oil wealth, but they are directed to invest, I think it's up to 2% of that sovereign wealth fund in renewable infrastructure. So other sovereign wealth funds do have prescriptive investment strategies. Why is it so wrong?

JANE HUME: And if renewable infrastructure stacks up commercially, well, the Future Fund will invest in it. In fact, it already does. It invests in a company called Tilt Renewables, which is one of the largest operators and developers of green energy infrastructure in Australia, wind and solar and battery storage projects. It does a lot. It also invests in public infrastructure. So it invests in the third runway at Melbourne Airport. That's a $3 billion investment. It's got another 3 billion in a terminal and runway at Perth Airport. So it's already doing these things, but only when it stacks up. And what the Government have done, have sort of just indicated that even if these things don't stack up…

ALI MOORE: But that's not what they've indicated at all. With due respect. They've said it is secondary to the need to get a return.

JANE HUME: Well then why do you need it?

ALI MOORE: Well, I guess you could argue, could you not at the same time that let's say you've got three projects, they're all offering exactly the same return. They're all offering exactly the same risk factor. And one is in defence or and one is in, you know, residential housing. Is it so wrong for a government to suggest that maybe the residential housing one, which would, you know, help to fix a need in the community now, should be the priority providing all other things are equal?

JANE HUME: I love your example, but the problem is that's just simply not how fund managers work. An investment, you know, in defence and an investment in housing simply do not have the same risk and return profile.

ALI MOORE: It was very much a hypothetical, but you take my point.

JANE HUME: But this is the thing. Every single individual investment has its individual risk and return profile. It's up to the fund manager to make a decision as to what's going to benefit the return of the fund, you know, at a given risk. And so the idea that you would be sort of shoved in a particular direction, even nudged in a particular direction, removes the independence of the fund manager to make decisions with, let's face it, what is a national asset to make the best decisions? That's just wrong. It politicises it for the first time. It is a very bad decision. It's a very bad precedent.

ALI MOORE: Jane Hume if I can just put two texts to you. Paolo from Preston says if not to put a roof over our collective heads, then what is a Future Fund for? And Mal says, so aren't we in the future? If not, when is the future?

JANE HUME: Well, again, the Future Fund is there to fund unfunded liabilities, which are from public service, public servants superannuation. We agree putting a roof over people's heads is really important. That's why we announced a $5 billion investment into that enabling infrastructure that's one of the roadblocks of more housing in the future. That's what we're hearing from developers. That's what we're hearing from local councils that state governments have been unable to make those investments. That's why the Federal Government step in. That's what the Coalition have announced. But we are doing that from within the budget envelope. We're not doing it with this pool of money that sits outside the budget, that has been quarantined and ring fenced for a different purpose for a very long time, and has done so really successfully. What the Government's essentially done here is picked three policy areas in which its own policies have failed and said, ‘aha, we can get some additional investment from another source’. That's just wrong.

ALI MOORE: Jane Hume, good to talk to you again. Thank you for joining us.

JANE HUME: Great to be with you, Ali.

ALI MOORE: Jane Hume there, Shadow Minister for finance. Tell me what you think. Where do you sit? You've heard the argument from Jane Hume about why it is politicising a fund that to date has not had an investment mandate beyond make good returns and grow the future fund.