‘Disgraceful’ government neglect costs Indigenous funds $1b
Article by Ronald Mizen and Peter Ker for the Australian Financial Review
Indigenous Australians have been short-changed by up to $1 billion over15 years by the poor management of government funds designed to advance their economic and social interests.
Analysis by The Australian Financial Review of decades of financial returns of two major funds set up to benefit Indigenous people without native title rights show both were shackled by the investment equivalent of stuffing money under a mattress.
Prominent Indigenous leader Noel Pearson is calling on the federal government to top up the shortfall, which would make more funds available in future years to advance the economic and social interests of Indigenous people.

“The very least that should be done is compensating the land for the federal government’s mismanagement up to 2019,” Pearson said.
The Keating government created the then titled Land Fund in 1995 to pay for the acquisition of properties and businesses to benefit future generations of Indigenous Australians not covered by the High Court’s landmark Mabo decision, which rejected the idea of terra nullius – that no one owned the land before European settlement – and established native title.
As Paul Keating said when introducing native title legislation in 1993“despite its historic significance, the Mabo decision gives little more than a sense of justice to those Aboriginal communities whose native title has been extinguished or lost without consultation, negotiation or compensation”.
“Their dispossession has been total, their loss has been complete,” he said.
But as early as 1996 the government was being warned restrictions on the Land Fund’s investments risked lower returns and potentially depleting the now $2 billion capital base over the long term.
Despite the early warnings, however, it took until 2019 for the Land Fund,(officially, the Aboriginal and Torres Strait Islander Land and Sea Future Fund) to have its investment restrictions lifted when management was transferred to the Future Fund.
Land Fund restricted to term deposit investments
A review of financial statements going back 30 years showed the failure to overhaul the fund’s investment limitations sooner potentially cost the Indigenous Land and Sea Corporation, which receives annual payments from the Land Fund, tens of millions of dollars in annual payments, or hundreds of millions of dollars if the funds had been reinvested instead.
Between 2007 and 2019, the investments of the fund returned 4.2 per cent on average, with returns falling from 6.6 per cent to 0.9 per cent. By 2016,the portion of funds invested in low-yield term deposits was 100 per cent.
The Future Fund, which was created to cover the huge liability created by public service pensions, returned about 8.5 per cent on average over the same time frame.
If the Land Fund had been allowed to pursue a more balanced investment strategy targeting a return of CPI plus 2.5 per cent (its current target under the Future Fund) from 2007, it might have returned $210 million more by 2019 and a further $132 million by 2023 (based on actual returns achieved under the Future Fund’s management but off a higher capital base).
If it had beat its target by just 1.3 per cent, as the Future Fund did, returns could have been collectively $800 million higher.
Pearson, who was an inaugural Land Fund board member in the 1990s, said the fund had lost out on years of better returns, labelling the outcome “a disgrace”, particularly after the Future Fund was established in 2006 and showed what was achievable.
Joe Morrison, group chief executive of the corporation, said that while topping up the fund was a question for government, the organisation welcomed any considerations about funding to better deliver Indigenous benefit.
“Australia has grappled with the impacts of inflation over the past couple of years,” Morrison said. “The [Land Fund] has not been immune to the changing economic environment and how this impacts the way we deliver for our stakeholders and meet their expectations.”
NT fund limited to bank deposits
The second major fund was the Aboriginals Benefit Account, established in 1978 to manage royalties from mining on Indigenous land in the Northern Territory.
However, this account continues to face the same investment limitations as the Land Fund. Since 2012, 100 per cent of its funds under management have been stashed in bank account term deposits to comply with the Financial Management and Accountability Act.
As of June 2023, the Aboriginals Benefit Account had $1.4 billion invested solely in Australian bank deposits, which returned about $45 million interest, a return of just 3 per cent. With inflation running at 6 per cent in the year to June 30, the value of the investments went backwards in real
terms.
Unlike the Land Fund, which does not receive any additional money each year, the Aboriginals Benefit Account receives hundreds of millions of dollars in mining royalties that help mask its poor investment performance.
If the Aboriginals Benefit Account had been allowed to pursue a more balanced investment strategy targeting a return of inflation plus 2.5 per cent between 2013-14 and 2018-19 and then made the same returns as the Land Fund under the Future Fund’s management, it could have made $173 million more by June 30 last year.
If it had beat its target by just 1.3 per cent, as the Future Fund did, returns could have been collectively $220 million higher.
In response to growing anger at lack of consultation with Indigenous communities about the fund management and disbursements, former Coalition Indigenous affairs minister Ken Wyatt in 2021 agreed to transfer $500 million to a new management body, the Northern Territory Aboriginal Investments Corporation, which will be overseen by Indigenous people.
The corporation had until May this year to table a strategic investment plan in parliament, which would trigger the transfer of the money.
Concerns raised by Indigenous leaders in 1996
While trying to build an accurate counterfactual for investment returns is an imprecise exercise, concerns about the investment strategy of the Land Fund were raised as far back as 1996, when its Indigenous advisory body warned the finance minister about “the continuing restrictive nature of the investments allowed” under the fund’s governing legislation.
“The low real rate of return available from investments allowed under [the governing legislation] has been subject of considerable concern to members of the consultative forum since the first meeting in 1994-95,” the 1996 annual report of the Aboriginal and Torres Strait Islander
Commission says.