Costello’s chance to set the investment record straight

The former treasurer, now Future Fund chairman, will face some tough questioning at a senate committee hearing tomorrow … but he can use the opportunity to score some political points.

The G20 carbon thrust has emboldened the Greens and, in a strange twist of fate, it will be former Treasurer Peter Costello who will first experience the new thrust.

And that new thrust will involve BHP and Australian investment strategies to maximise gains.

Peter Costello is chairman of the Future Fund and is set for a totally new experience when he meets the Senate Economic Committee tomorrow (Thursday, November 20).

Costello will almost certainly will be quizzed about the Future Fund’s links to tax havens, and in that questioning Costello will be on home ground. There are few who understand the tax system better than Peter Costello. Nevertheless, in the light of the G20, enterprises that use tax havens will need to be prepared to explain why they are used and whether Australian tax revenue is reduced. In some cases the tax havens are required to avoid double and triple taxes on overseas earnings because of bad international co-operation.

Costello might be on home ground on tax issues, but when the Greens on the committee ask him about the Future Fund’s investment in fossil fuel companies Costello will face a new challenge. There is currently an extreme Green/left wing campaign in universities in both Australia and the US to ban university-linked superannuation and investment funds from holding shares in fossil fuel companies. In Australia the campaign could leave trustees vulnerable to member writs (The class action risk for super funds dumping resources; October 31).

It is highly likely that campaign against investments in fossil fuel companies will be extended to the Future Fund by the Greens on the senate committee. The only significant Future Fund fossil fuel holding is BHP -- Australia’s second-largest listed company and one of our biggest taxpayers.

Costello will no doubt defend the Future Fund investment in BHP on the basis that fossil fuels are essential to the wellbeing of people of China and India, and that BHP is a company that is very flexible in terms of what it mines. Nevertheless, it will be a unique experience for the former treasurer to defend the ‘Big Australian’ as an investment. But, while he will undertake the task, Costello is the wrong person to be defending the activities of BHP. The BHP chairman, Jac Nasser, and CEO, Andrew Mackenzie, need to take up the challenge and explain to the community why BHP is good for the world, for Australia and for its shareholders.

The job of the Future Fund, as well as superannuation funds, is to maximise returns to their beneficiaries and the only reason not to hold BHP shares is if the Future Fund believes BHP is not a good investment. If individual beneficiaries of funds want to direct their investment away from fossil fuels, then that can be their choice. It’s not the job of fund trustees to invest on the basis of the views of particular members of funds or political parties.

Costello might also use his old talents and take the opportunity to remind the Greens on the committee of the great work that the Howard government did in linking Australia with an umbrella arrangement that enabled Australia to mould global climate agreements in a way that did not put Australia at a disadvantage.

That old umbrella agreement included the US and Canada, plus other industrialised countries. Bad government by the Gillard/Rudd group saw Australia fall out of that umbrella cluster and it now looks like China has replaced us in working with the US. Australia needs to work much more closely with the US, China and other countries or we could be asked to sign agreements that may be very unfair to Australia.

For example, Australia needs to exclude bush fires from carbon calculations. Both China and the US will mould the rules to suit their own situations, and we need to be part of that game -- that’s why getting back inside the tent is so important. Peter Costello probably won’t stray into that area, but he should. He can also defend the Abbott Government’s actions, which have been portrayed unfairly (How Hunt set Australia on the right climate path; November 5).