The Albanese government’s move to steer Australia’s sovereign wealth fund towards housing, infrastructure, and renewable energy has sparked debate among experts.
On Nov. 21, Labor Treasurer Jim Chalmers announced the new target “considerations” while mandating the investments must maintain the fund’s strong returns.
The $230 billion (US$150 billion) Future Fund, established to finance the government’s superannuation obligations and reduce reliance on taxpayers, will see not withdrawals from it until 2032–33 to ensure mid-term stability.
Graham Young, executive director of the Australian Institute for Progress, questioned the need to tap the Future Fund when the commercial sector was avoiding the government’s priority areas.
“It is because the funds are not available from commercial sources. That means investors have decided either the return, or the risk [in those areas], or both, are unacceptable,” he told The Epoch Times.
Renewables and Infrastructure Not Unfamiliar Territory
However, independent economist Saul Eslake said Chalmer’s announcement did align with the Future Fund’s existing strategy.
“The Future Fund already has 9.9 percent of its assets in infrastructure,” Eslake told The Epoch Times.
He added that renewables and infrastructure are widely seen as growth areas for the Australian economy, particularly under the nation’s net-zero emissions commitments.
According to Eslake, the fund has earned an 11.9 percent return over the 12 months to Sept. 30, even while considering renewable energy investments.
Housing a Less Attractive Option
However, Eslake said housing was a trickier issue.On affordable housing, he said the area often delivered below-market rents, which would not satisfy the Future Fund’s investment benchmark of 4-5 percent.
“The way states levy land tax at progressive rates on large landholdings, is a major disincentive for institutional investment in rental housing,” Eslake also noted.
This tax structure, combined with the need for subsidies to bridge the gap between the market and below-market rents, complicates the Future Fund’s ability to commit to affordable housing.
The economist clarified that the government’s directive does not force the Future Fund to invest in affordable housing, but merely asks it to “consider” such projects.
“If the government were to direct the Future Fund to invest a specified proportion of its assets into affordable housing despite these obstacles, then I’d be concerned. But they’re not doing that,” he said.
Young echoed Eslake’s point, saying large investors were ill-suited for rental housing, which is typically dominated by private landlords.
He did, however, acknowledge potential returns in green investments due to current government subsidies.
