Internal government documents named Peter Costello as top likely critic of Future Fund changes
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The news: The federal government was preparing itself for potential criticisms over its changes to the $230 billion Future Fund’s investment mandate from former chairs Peter Costello and David Murray, new documents show.
The information, published on Christmas Eve by the Department of Finance on its Freedom of Information disclosure log, also reveals meetings were held to debate the finer points of amending the mandate as early as August 2024.
The brief for a meeting between Treasury secretary Stephen Kennedy and Future Fund chair Greg Combet shows that in earlier drafts the government originally sought to require the Future Fund to consider national priorities when investing by saying the Future Fund Board “must” do so. The agency said it would prefer the wording of “should” consider national priorities. The initial draft suggested it must have regard to national priorities but this requirement “does not apply to the extent that it would require the Board to act inconsistently” with the Act, including risk and return provisions. The final wording in the mandate "requires the Board to have regard to" national priorities.
The Future Fund also sought to have specific sectors of focus as national priorities, rather than “Future Made in Australia streams”.
The context: Details about the new investment mandate and statement of expectation for the Future Fund were made public on 21 November 2024. It includes a focus on improving housing supply, assisting the energy transition towards net zero and delivering improved infrastructure.
The government and the Future Fund board maintain it will not affect the risk or return profile. However, several high profile economists have criticised this claim noting that if the investments could deliver as strong returns as alternatives they would have already been part of the portfolio.
Costello responded to the announcement by warning the Future Fund risks losing money when governments direct savings to particular areas and warned superannuation could be the next target.
What they said: “Requiring the Board to have regard to national priorities may draw criticism that the government is interfering with the Board’s independence,” the ministerial submission said.
“Previous chairs of the Board, Mr David Murray AO and the Hon Peter Costello AC, have both publicly stated that the government should resist calls to direct the Board in relation to its investment function.”
The source: Department of Finance FOI documents
