Nation-building Funds

The Nation-building Funds (NBF) were established on 1 January 2009 by the Nation-building Funds Act 2008 (NBF Act). The purpose of the NBF is to provide financing to critical areas of infrastructure. The NBF includes;

  • the Building Australia Fund (BAF) which support the creation or development of infrastructure in the areas of transport, communications, eligible national broadband network matters, energy and water; and
  • the Education Investment Fund (EIF) facilitates the creation or development of infrastructure in the areas of higher education, research, vocational education and training, and other eligible education.

The NBF previously included the Health and Hospitals Fund (HHF). The HHF was closed on 29 October 2015 and the uncommitted balance of the HHF was transferred to the Medical Research Future Fund.

The Building Australia Fund was closed on 1 September 2019 and its balance transferred to the Future Drought Fund.

On 17 September 2019, the Emergency Response Fund Bill 2019 passed the Parliament. Upon commencement, the legislation will close the Education Investment Fund and transfer its balance to the Emergency Response Fund.

Legislation

The NBF Act gives effect to the following:

  • Investment Mandate: the responsible Ministers are required to issue an Investment Mandate (detailed below).
  • Crediting amounts to the NBF: the responsible Ministers may make credits to the NBF. For information on the credits, refer to the Investment Performance and Financials.
  • Debiting amounts from the NBF: the Finance Minister, can authorise disbursements (debits) from the NBF, on the recommendation of the relevant portfolio Minister. For a list of commitments, refer to projects.

Investment Mandates

The responsible Ministers provided the Future Fund Board of Guardians (Future Fund Board) with strategic investment guidance through a written direction for each of the NBF. These are a legislative instrument that is not subject to disallowance.

The Building Australia Fund Investment Mandate Directions 2009 and the Education Investment Fund Investment Mandate Directions 2009 came into effect on 29 July 2009. It requires the Future Fund Board to adopt a benchmark return of the “Australian three-month bank bill swap rate +0.3 per cent per annum, calculated on a rolling 12-month basis (net of fees)”. In targeting this benchmark return, the Board must minimise the probability of capital losses over a 12-month horizon.

Investment Performance and Financials

The Future Fund Board of Guardians (Future Fund Board) publicly discloses the investment returns in its quarterly portfolio updates

Financials since inception to 30 September 2019

(Equals) Uncommitted Balance 0 3,968 3,968
  $ 'millions1 $ 'millions1 $ 'millions1
  Building Australia Fund Education Investment Fund Total
Total Credits 10,935 6,484 17,418
(Plus) Net Actual Earnings2 2,202 1,683 3,884
(Equals) Total Credits and Earnings 13,136 8,166 21,303
(Less) Cash Debits (Withdrawals) 9,168 4,198 13,366
(Equals) Cash Balance 0 3,968 3,968
(Less) Remaining commitments 0 0 0

Notes:
1. Data may not sum due to rounding.
2. Earnings are after investment and administration fees incurred by the Future Fund.

Quarterly performance result to 30 September 2019

For the quarter ending on 31 March 2019

Nominal Return
(Per cent per annum)

Benchmark Rate1
(Per cent per annum)

One year return to date Building Australia Fund 2.2 2.1
Education Investment Fund 2.1 2.0

Notes:
1. The quoted benchmark rate of return follows the relevant investment mandate direction.
2. The BAF nominal and benchmark rates reflect 12 month figures to 31 August 2019.

Annual performance results

Year

Nominal Returns
(Per cent per annum)

Benchmark Rate1
(Per cent per annum)

Cash Balance of Fund as at 30 June
($ 'millions)

Nominal Returns
(Per cent per annum)

Benchmark Rate1 
(Per cent per annum)

Cash Balance of Fund as at 30 June
($ 'millions)

  Building Australia Fund Education Investment Fund
2008-092 3.5 - 9,950 3.5 - 6,490
2009-10 4.6 4.2 9,763 4.6 4.2 5,516
2010-11 5.6 5.3 8,200 5.6 5.3 4,904
2011-12 5.3 5.0 5,878 5.3 5.0 4,298
2012-13 4.2 3.6 4,755 4.2 3.6 3,920
2013-14 3.2 3.0 3,692 3.1 3.0 3,798
2014-15 2.9 2.9 3,614 2.9 2.9 3,686
2015-16 2.5 2.5 3,697 2.5 2.5 3,721
2016-17 2.4 2.1 3,786 2.4 2.1 3,787
2017-18 2.1 2.1 3,866 2.1 2.1 3,864
2018-19 2.3 2.3 3,957 2.3 2.3 3,952

Notes:
1. The quoted benchmark rate of return follows the relevant investment mandate direction.
2. Investment mandate was issued after the reporting period on 14 July 2009.

Transfers (Credits) to the Nation-building Funds

The following table provides a history of financial transfers to the Nation-building Funds, with links to the associated documentation.

Total Transfers 
10,935
 
Summary of Transfers - Building Australia Fund
Date
Source of Funds
Amount 
($A m)
Documentation
1 January 2009 The investments of the Communications Fund were credited to the BAF. 2,468 Section 16 of Nation-building Funds Act 2008
7 January 2009 The residual balance of the Communications Fund was credited to the BAF. 0.05 Section 16 of Nation-building Funds Act 2008 
12 June 2009 2007-08 budget surplus. 7,500 Building Australia Fund (Initial Credit) Determination 2009 
26 June 2009 Monies from the Telstra Sale Special Account were credited to the BAF. 966 Building Australia Fund (Credit of Telstra Sale Special Account Balance) Determination 2009 
17 May 2010 Unspent monies from the Commonwealth's contribution for the pre-construction works for the West Metro project, was re-credited to the BAF, following the New South Wales Government's decision not to proceed with the project. 80a Building Australia Fund (Subsequent Credit) Determination 2010 
22 December 2010 Residual of unspent monies from the Commonwealth's contribution towards pre-construction works for the West Metro project, was re-credited to the BAF, following the completion of the audit by the New South Wales Auditor-General. 3a Building Australia Fund (Subsequent Credit) Determination 2010 (No.2) 

Notes:
a) These amounts are returned funds rather than new credits to the Building Australia Fund.

Total Transfers 
6,484
 
Summary of Transfers - Education Investment Fund
Date
Source of Funds
Amount 
($A m)
Documentation
1 January 2009 The balance of the Higher Education Endowment Fund was credited to the EIF. 6,484 Section 135 of Nation-building Funds Act 2008

 

Disbursements (Debits) from the Nation-building Funds

Information on the disbursements from the Nation-building Funds can be found on Nation-building Funds Project webpage. 

Projects

A list of approved Nation-building Funds projects can be found in the following documents. Queries regarding approved projects from any of the Nation-building Funds should be directed to the relevant portfolio agency.

Building Australia Fund

Education Investment Fund

Health and Hospitals Fund


Did you find this content useful?