Others, however, played down how much difference the changes will really make. They pointed out, as did Chalmers, the government was not changing the fund’s core objective: to make 4 per cent more than inflation through its investments.
In truth, it’s very hard to know how much change the new mandate will cause.
The government says the changes will mean we get “more investment where we need it most but not at the expense of returns” – but others argue convincingly that there won’t be much real difference all.
That’s because if the housing or renewable energy investment opportunities are attractive, there’s every chance the fund would have backed them regardless.
But the question that came repeatedly when I was speaking to economists and other experts for this article was this: If these changes won’t make a big difference to how the fund operates, then why make them?
The most persuasive answer came from independent economist Saul Eslake, who said he was “not a great fan” of the Future Fund mandate change, but also not hugely worked up about it.
Eslake compared the Future Fund change to a different policy that also involves a fund, the $10 billion Housing Australia Future Fund. This is a pool of money that pays a minimum $500 million annual disbursement to support new social homes and affordable homes.
Eslake says that in practice, there’s not much difference between simply paying that sum from the budget every year, rather than setting up a fund, except that a $10 billion fund sounds much more impressive.
“In the same way perhaps … I interpret it as this government being able to say to a particular cohort of voters: ‘Hey, look, you know, we’re telling the Future Fund to invest more in social housing and renewable energy and infrastructure.’”
“Whether they actually do or not is something that voters aren’t really going to know about.”
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Eslake suggested the Future Fund mandate change even had some similarities to “virtue signalling” – even though that phrase is usually used in a different way, to describe the act of showing your moral values.
Independent economist Chris Richardson also argued this change wouldn’t really make much difference to what the Future Fund invested in – it was about “the announceable.”
“I don’t think it’s going to massively change what the Future Fund does,” he said.
As an example, Richardson and Eslake both pointed out that asking the Future Fund to invest more in housing will do very little to address the country’s housing woes. This is partly because housing is not particularly attractive to institutional investors, and partly because a lack of investment is not the main problem with housing in this country.
Of course, this is hardly the first time a government has sought to convey the impression it’s taking action on tricky problems that are actually very hard to resolve.
So, what got the critics so worked up about this particular change?
Economist Saul Eslake said he was “not a great fan” of the Future Fund mandate change, but also not hugely worked up about it.Credit: Amy Brown
Well, there’s the politics: the Future Fund was formed by a Coalition government with funds from budget surpluses, after all.
But aside from the politics, another concern is that this new mandate muddies the waters about the fund’s main goals.
Even if the fund’s “primary objective” will be to continue to maximise returns with a benchmark between 4 and 5 per cent above the inflation rate, asking the fund to also consider the national interest does make its objectives a bit less clear. It also sets a precedent that might tempt other governments in the future.
These changes might appear innocuous, but they’ve been hugely divisive.
Labor’s asked the fund to consider financing housing, renewable energy and infrastructure, which are all pretty sensible areas to invest. But what if a future government were to nudge it towards more dubious investments such as inland rail?
As UNSW economics professor Richard Holden puts it: “Once it becomes a political football, I worry a lot about what that means.”
None of this is to suggest governments shouldn’t back “nation building” projects where the benefits of the projects stack up against the costs.
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But I can’t help but think these latest changes to the Future Fund are more about symbolism than substance. It’s not clear to me how these tweaks in the wording will actually lead to more nation-building projects, or how we’ll ever know if they’ve really made much difference.
Ross Gittins is on leave.
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