Peter Costello’s Future not at the Fund

There is a list as long as your arm to show why any sensible person would never consider Peter Costello as a candidate to head up the Future Fund.

One important item on that list is his judgment.

The head of the Future Fund takes responsibility for investment decisions and the asset allocation of the $73 billion portfolio. 

Based on Mr Costello’s recent comments, he would no doubt convert his words to actions and sell a large proportion of the Fund’s current holdings of Australian assets.  

Consider what Mr Costello said in January:

• Australia will end up in the same economic position as Europe if the government doesn't start to curb spending, says former Liberal treasurer Peter Costello.   "Europe at the moment is suffering under a mountain of debt that it can't service," he told Macquarie Radio on Tuesday.  Australia's longest-serving treasurer warned Labor to heed the lessons implicit in Europe's demise, saying the government could only spend money it doesn't have "for a while" before it will end up using all of its income to service its debt.  "This is what I have been warning about here in Australia for some time," he said.

• "If the journey keeps continuing at the rate in the years ahead that it did in the last three or four years it won't be too long before we start experiencing European-type problems."

With that view, of Australia about to experience "European-type problems", any fund manager including the Future Fund, should massively downsize its Australian denominated assets.  But would it be wise for the Australian sovereign wealth fund to be selling its Australian assets in such a way?

If it did, it would create unimaginable ructions in Australian financial markets and go against what just about every other fund manager in the world is thinking right now with a massive overweight position in Australia.  And if that view is wrong, it would cost the Fund and hence the tax payer a huge amount of wealth.

I am also reminded of Paul Keating's assessment of Peter Costello when goodie two-shoes Prime Minister Rudd had a warped good samaritan experience and appointed Costello to the Future Fund's Board of Guardians:

Keating said in late 2009:

• Mr Keating accused Mr Costello of presiding over the growth of Australian debt abroad from $129 billion in 1996, to $705 billion in 2007.

• ‘‘The Future Fund is all about national savings, yet, during Costello’s period as treasurer, national savings were so depleted,’’ he said.

• ‘‘Costello was a policy bum of the first order who squandered 11 years of economic opportunity.’’

That may be a slight exaggeration, but the sentiment is spot on.