Robert Doyle, interest rates, Budget – Interview with Neil Mitchell, 3AW
May 4, 2006Budget, Victorian Liberal Leadership – Interview with Laurie Oakes, Sunday Programme, Channel Nine
May 7, 2006
NO.029
Joint Press Release
Treasurer
and
Minister for Finance and Administration
FUTURE FUND SEED CAPITAL AND INVESTMENT MANDATE
The Government has today transferred $18 billion to the Future Fund.
This seed capital will be invested in financial assets by the Future Fund Board of Guardians with the aim of meeting the Government’s unfunded superannuation liabilities. These liabilities are expected to grow to around $140 billion by 2020.
The transfer of $18 billion from surpluses accumulated at the Reserve Bank to the Fund makes a significant initial contribution to the Board’s ability to offset these unfunded superannuation liabilities and thereby relieve some of the expected pressure on future budgets arising from the ageing of the population.
The Government will seek to make further contributions to the Fund from future budget surpluses and asset sales once final budget outcomes are known.
Following consultation with the Board in accordance with section 19 of the Future Fund Act 2006, we have also now issued an investment mandate for the Fund. This mandate provides the Board with guidance on the Government’s expectations regarding the investment of the Fund.
The Government has taken the approach that the Board should be subject to minimal restrictions and has only imposed limitations where there are public policy or national interest reasons to do so.
The investment mandate directs that the Board:
- Adopt a long-term benchmark of an average return of at least 4.5 to 5.5 per cent real per annum but recognises that the Fund may have returns lower than this while the Board develops and implements its investment strategy;
- Determine an acceptable but not excessive level of risk for the Fund;
- Establish an internal limit on holdings of any listed company in order to ensure that it does not trigger the takeover provisions under the Corporations Act 2001 or hold a stake of more than 20 per cent in any foreign publicly listed company;
- Only acquire a direct equity holding in Telstra if shares are transferred to the Fund by the Government or gifted to the Fund with the approval of the Government;
- Act in a manner that minimises the potential to cause any abnormal change in the volatility or efficient operation of Australian financial markets or adversely affect the Government’s reputation in these markets; and
- Have regard to international best practice for institutional investment in determining its approach to corporate governance principles.
A copy of the investment mandate is available at
CANBERRA
5 May 2006
Contact:
David Alexander
Treasurer’s Office
02 6277 7340
Matthew Doman
Finance Minister’s Office
02 6277 7400