After Peter Costello conducted a fire sale of our assets while stashing away surpluses from the mining boom, he put aside over $60 billion of our money to establish the Future Fund. This has now grown to $130 billion.
We are told the purpose of this fund is to pay for “unfunded Commonwealth superannuation liabilities.”
As all employers, including the government, are required to pay the superannuation guarantee into their employees’ super funds, how can there be an unfunded liability? There is a continuous stream of income into superannuation funds.
As a sovereign currency issuing nation, it is impossible for us to be unable to meet this obligation.
Along with the Future Fund, Costello’s crowd are responsible for investing the DisabilityCare Australia Fund, the Medical Research Future Fund, the Building Australia Fund and the Education Investment Fund – a further $18 billion.
So what are they doing with this $148 billion?
The following are the returns achieved in 2015-16 and the current balance as at March 31, 2017:
FUTURE FUND 4.8% A$129.6bn
MEDICAL RESEARCH FUTURE FUND 2.1% A$4.6bn
DISABILITYCARE AUSTRALIA FUND 2.5% A$6.2bn
BUILDING AUSTRALIA FUND 2.5% A$3.8bn
EDUCATION INVESTMENT FUND 2.6% A$3.8bn
Not only are the returns woeful, the expenses for running this fund are exorbitant.
In the year ended 30 June 2016, expenses for wages, management fees, performance bonuses, brokerage fees and the like were over $288 million, down from $316 million in 2015.
The Australian reported that three Future Fund employees earned salaries ranging from $1.058m to $1.235m last year, while more than $10m was paid out in performance bonuses to Future Fund staff in 2015-16.
“All permanently employed staff at the Agency at the reporting date are eligible to receive an entitlement to a performance related payment as approved by the Board. Employees who receive an entitlement may elect to have the entitlement converted to cash and paid to them. Alternatively, they may defer part or all of the payment for an initial two year period and receive a commitment from the Agency to pay them a future amount which will be dependent on the performance of the Fund over this two year period.”
As the majority of fund investments are in other countries, they also paid $62 million in tax to foreign governments in 2015-16. In 2015 they lost $2.7 billion on foreign currency exchanges.
As at June 30, 2016, 21.7% of the funds assets were held in cash.
In the budget it was revealed that the $20 billion Medical Research Future Fund the government promised would find a cure for cancer won’t deliver the $1 billion promised for medical research by 2020 because of poor earnings.
Research Australia says while the government has banked $4.6 billion in health savings in the scheme it has so far released just $125 million in research funding.
Also in the budget was the government commitment to delay drawing down from the Future Fund until at least 2027 rather than 2020 as originally legislated allowing it to build to a projected $300 billion by 2027-28.
Whilst Peter Costello sits on this huge pile of money like a broody hen, the total face value of CGS on issue (gross debt) is projected to rise from $537 billion in 2017-18 to $725 billion by 2027-28. The Government’s total interest payments in 2017-18 are estimated to be $16.6 billion rising to over $20 billion in 2020-21.
Surely this money could be better invested.
House prices in Sydney grew by 19% and in Melbourne by 16% over the year ending March 2017. Couldn’t we use several billion to buy or build some affordable housing? The government would benefit from income tax returns from those employed in construction, maintenance and management. The Future Fund would benefit from rents and capital gains. The citizens would benefit from having somewhere affordable to live with the security of long term leases and regulated prices.
The dollar return on investment in education, health and research is way beyond the paltry returns the funds are currently achieving.
Instead of investing overseas, losing money on foreign exchange rates and paying tax to other governments (they are exempt from tax here), they could be building Australian infrastructure like the High Speed Rail and an NBN that actually works. They could be the ones to invest in our air and sea ports and electricity grids. They could have bought the Kidman farm rather than giving it to the Chinese via Gina. Instead of paying hundreds of millions to middlemen brokers, they could be investing in profitable assets.
Speaking at the Australian Shareholders Association Conference in Melbourne on Tuesday, Peter Costello welcomed the Turnbull government’s decision to lower the funds’ targets in line with a low-return investment environment.
Rather than accepting this misappropriation and mismanagement of our money, we should be putting it to work to benefit current and future generations.
Help Support The AIMN
Please consider making a donation to support The AIMN and independent journalism.