On October 31, the Future Fund released its latest Portfolio update.
As at 30 September 2016 the balances (and returns over the last twelve months) were:
Future Fund A$124.650bn (5.8%)
Medical Research Fund $4.532bn (3.5%)
DisabilityCare Australia Fund A$6.134bn (2.8%)
Education Investment Fund A$3.739bn (2.6%)
Building Australia Fund A$3.722bn (2.6%)
Of this more than $142 billion, for some unknown reason, almost $30 billion is held in cash.
The government (read us) has contributed $60.537bn to the Future Fund: $18 billion initial seed capital in May 2006, about $16 billion from the budget surpluses in 05-06 and 06-07, and about $27 billion coming from the sale of Telstra.
This is our money, sitting their mouldering away earning comparatively pitiful returns, so politicians and public servants can be assured of their retirement incomes. As we all know, this is a complete furphy as a sovereign currency issuing nation has no impediments to paying people what they are due, and the fund can’t actually keep up with public servant liabilities anyway which, in March this year, were about $167 billion and increasing with the aging population.
The fund (which holds assets in equities, cash, debt securities, et cetera) has the majority of its equity investments outside Australia. This does nothing to help ‘jobs and growth’ in Australia.
Their choices of investments have also been questionable. It was only 2013 when, after public pressure, the Future Fund announced plans to divest its tobacco shares but they still have significant involvement in fossil fuels which, according to 350.org, has cost us billions.
A new tool has determined that global investors lost billions of dollars over the past three years by remaining invested in fossil fuel companies. Of the two Australian investors analysed, Australia’s Sovereign Wealth Fund – the Future Fund – lost $1.5 billion over the past 3 years and the Australian National University lost over $53 million dollars. Of the 14 funds analysed, the results showed that carbon-intensive investments may have cost them $22 billion in reduced returns.
Even more concerning, were reports in the Indian press about the Future Fund possibly being used to finance the Adani coal mine.
“Finance ministry officials said that they were hopeful that [Finance Minister] Jaitley’s meeting with Cormann and Costello – two of Australia’s most influential men – would provide a much needed boost to Adani’s stalled coal project….
Jaitley is likely to push for easy funding for Adani’s project. The stage for the funding push has been set on the last leg of Jaitley’s tour when he meets Peter Costello on April 1. Costello is the head of Australia’s sovereign wealth fund called Future Fund. As the head of $117 billion fund, Costello wields considerable influence in making available easy funds for Adani’s project. Costello, like Australia’s finance minister Mathias Cormann has been an advocate of coal-based power generation in Australia. Costello has said in the past that as head of Australia’s sovereign wealth fund, he would be open to investing in coal based projects despite reservations of environmental groups against such a move.”
Peter Costello chose to sell Telstra but did not reinvest the money back into Australia. In 2016, Telstra’s net profit after tax increased 35.9 per cent to $5.8 billion, and earnings per share increased 37.4 per cent to 47.4 cents. The total dividend for the financial year was 31.0 cents per share, up 1.6 per cent on the prior year, distributing $3.8 billion to shareholders. The wealth and ongoing income that was once ours is now in the pockets of private investors while Telstra holds us to ransom with NBN contracts.
Costello also sold Sydney Airport in 2002 for $5.6 billion and gave the purchaser, Macquarie Bank, the option for monopoly control of a second airport, decisions Nick Xenophon describes as “a disaster for Sydney and the nation.”
“Sydney Airport Corporation pays little or no tax to the federal government. According to Mr West—a very experienced business journalist—Sydney Airport did not pay any tax in its first 10 years but has delivered more than $1 billion in fees to advisers and financiers. Because it is a monopoly, it can afford to carry huge debts and it claims interest on that debt as a tax deduction. That effectively cancels out any profits. The real profits are soaked up in hundreds of millions of dollars in fees to its bankers and financiers, each year. It is a nice little earner.
This monopoly privatised corporate entity generates about $700 million in financing costs soaked up on Macquarie Bank clients, bankers, advisers and security holders.
Max Moore-Wilton left his job as secretary of the Department of Prime Minister and Cabinet to take up the helm of Sydney Airport Corporation and is now the chair of Sydney Airport Holdings, which owns 84 per cent of Sydney Airport. He now has the unprecedented opportunity to create a privately owned multisite airport monopoly in Sydney.”
Costello sold many of our profitable assets (including our gold at rock bottom prices just before the price skyrocketed), not to reinvest in more productive ones, but for bragging rights so he could be the man who “paid off the mortgage”. Pity he had to sell to his wealthy mates the furniture, jewellery, the business and half the house to do it.
Why are we allowing Costello to sit on this huge pile of our money while the government attacks the most vulnerable in our community? That money invested in education, health and infrastructure would bring a far greater return and be a much better investment for our future than coal mines. Hell, it would get a better return if he just invested it in real estate.
But then again, it isn’t our future that he is thinking of.