For Australia to remain competitive as the world shifts to a low-carbon economy, it must invest adequately in new industry development. 

The return mandates for Australia’s specialist investment vehicles (SIVs) – like the Clean Energy Finance Corporation and National Reconstruction Fund – currently push them towards safe bets and guaranteed commercial returns. This means that there is billions in government spending directed toward the types of projects that private capital is already willing to fund, rather than catalysing new industries and innovation, which should be their key goal.

A key barrier to reform has been a concern that lowering the return mandate and raising the risk appetite of SIVs could leave the government fiscally worse off. This report demonstrates that such reform could in fact improve some measures of Australia’s fiscal position, and set us up for long-term prosperity.

The report concludes that the Australian Government should play a key role in supporting the development of early stage, first-of-a-kind projects that the private sector is unwilling or incapable of funding itself.

Key findings

• Australian economic resilience requires changing SIV investment mandates.
• SIV investments make positive returns.
• Budget accounting rules obscure long-term benefits of equity investments.
• More risk makes higher returns possible.