Recapping the Jim Chalmers ‘Controversy’
If you’ve read any finance news in the last month, chances are the ‘controversy’ over Treasurer Jim Chalmers’ essay has entered your purview. The essay, published in The Monthly, was discursive and ambitious, in some parts dealing with the biggest issues facing not only the Australian economy but the world: economic hangover from the pandemic, climate crisis, Russia-Ukraine.
As Treasurer, presiding over the national budget, Chalmers’ words should be studied carefully: not only are they potential indications of the direction of future Labor budgets, but of impact investing’s future in Australia. In fact, a quick glance shows rhetoric typical of social impact circles:
By reimagining and redesigning markets – seeking value and impact, strengthening safeguards and guardrails in areas of unchecked risk. And with coordination and co-investment – recognising that government, business, philanthropic and investor interests and objectives are increasingly aligned and intertwined. - Jim Chalmers, The Monthly, 1 February 2023
To return to the so-called controversy: Chalmers has attracted more than his fair share of critics. One conservative outlet declared that the essay confirmed Labor’s creation of a ‘meddling, bigger-spending, anti-capitalist nightmare.’ Hardly ‘anti-capitalist,’ Chalmers espouses cooperation between sectors in the existing system and a realignment of how the Australian Government invests its money.
When Chalmers concludes his essay with a vision of ‘a better capitalism, uniquely Australian,’ misleading characterisations like ‘meddling’ and ‘anti-capitalist nightmare’ obscure proper consideration of how Government will act in impact investing. It is not only poor reporting, but a show of ignorance of a fast-spreading critical lens through which investments are made globally.
In the Sydney Morning Herald, David Crowe suggests the turbulent landing of the essay has been largely propelled by ideological battles rather than real concerns in the private sector:
The front page of The Australian claimed on Tuesday that business chiefs “wake in fright” at Chalmers’ ideas. In fact, the mild response from corporate Australia was to ask for company tax cuts and a stronger focus on productivity – in other words, options A and B in their press release folder. In a kindergarten cartoon on Thursday, The Australian likened his ideas to communism. - David Crowe, Sydney Morning Herald, 3 February 2023
In some ways, this could be an over-correction; there are bound to be critics of Chalmers’ ideas as they feed into core economic disagreements over regulation and free markets. But, to lambast Government interest in impact investing as radical, no less as some brand of communism, is particularly ill-informed.
Indeed, this is hardly the first mention of impact investing at Parliament House. The lightest of research returns a cursory paper on Social Impact Investing produced in 2017 under Turnbull. One also finds the establishment of a Social Impact Investing Taskforce under Morrison in 2019, chaired by impact guru Michael Traill. After the interim report was released in January 2020, work appeared to understandably stall during the pandemic.
While Albanese remains supportive of the Taskforce, having reconvened in 2022, only murmurings of real action permeate the media. It appears the ‘big four’ banks caught wind of the rising stock in impact investing; in October 2022, the AFR reported a possible collaboration between NAB, Commonwealth Bank, ANZ and Westpac for a $400m initiative modelled after the UK’s Big Society Capital, but no formal commitment has been reported as yet.
The introduction of impact as a guiding force has been and will continue to be met cautiously, especially in the public sector. Traill recounts how he was struck by markedly different investment style in the social impact world to private equity when he left Macquarie Bank in 2002:
We saw a lot of what I came to call “spray and pray philanthropy” – small random grants provided without expectations of accountability or performance. [...]. In the area of government spending – representing so much of the sector – the impediments of short-term funding and excessive documentation with a focus on activities rather than outcomes seemed the default setting. Michael Traill, The Australian, 11 February 2023
When impact investing is all about generating a tangible impact, the pencil-pushing connotations of government bureaucracy does not make the two seem suitable partners. Indeed, no one should approach Government’s impact investments free of scepticism. If any remnants of what Traill called ‘spray and pray philanthropy’ find its way into Government’s investment model, let alone the ‘excessive documentation’ that is a staple of policymaking, there is right cause for concern.
The informed impact investor will probe beyond the polarising discourse around Chalmers and likely find he is trying to introduce increasingly popular metrics in private investing circles to the public, national level. No doubt it will be interesting to see over the coming months and years if and how Chalmers and the Albanese government integrate impact into Government investment on a more formalised level.