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The latest portfolio update from the Future Fund confirmed that the average annual return on its investments has been 7.7 percent since it was established in May 2006.
Former Treasurer Peter Costello, who is the Chair of the Future Fund Board of Guardians, judged this return to be good to the point where he claimed that it was successful in “exceeding the return objective”.
That is an expansive claim.
In the media release – that included details of the fund return up to June 30, 2016 – there was a table that showed the 7.7 percent annual return that Costello referred to. It also noted that the ‘target return’ or objective for the Future Fund since inception was 6.9 per cent, which no doubt leads Costello to his conclusion that the 7.7 percent was larger and had exceeded the objective.
Alas, that target return for the Future Fund in its own media release is misleading. According to the Future Fund Act 2006, the investment objective or target return is at “least the rate of inflation (measured by the change in the CPI) plus 4.5 to 5.5 percent”.
This return was designed to be achieved “over the long term” which is prudent and sensible given the inherent short-term volatility and variability in many market values.
The real reason young Aussies are struggling to get on the property ladder
I thought kids stopped screaming and being blindingly selfish when they turned 3 or maybe 4. I was wrong. It could be that 30 is the new 3.
Having witnessed, first hand, some of the froth and bubble surrounding the issue of consumption patterns of millennials, that they prefer spending money on lattes and smashed avocado on toast rather than a dwelling, there is an irrational, self centered discussion that blames anyone and everyone for their inability to get into the housing market.
If Twitter and some of media articles are anything to go by, a bevvy of millennials have explicitly expressed their overwhelming desire to spend their money on avocado, ubers, the latest phones and travel rather than saving to buy a house. I have noted, ad nauseam, that this is fair enough – it’s their money, spending it whichever way floats your boat is a fundamental tenet of economics. It is all part of that basic choice we all have about where we wish to spend our money.
Rather than leaving it there, the millennial group then unrelentingly complain about their perceived in ability to tap into the housing market. This is incongruous given they have just said they are no longer looking to buy a house. Why would anyone care about the price of a Brett Whitely painting, for example, when you aren’t looking to buy one? But the millennials are vocal about their insistence of unapologetically wanting to spend their money on lattes, pulled pork and a mascarpone pancake stack whilst still moaning about their inability to buy a house.
It’s this juxtaposition that leaves me wondering what the fuss is about.