As soon as the Prime Minister was caught on the back-foot during an interview on Radio National about the slow progress in getting the National Reconstruction Fund ready to invest, you could be sure that the tempo would accelerate.
So here we are two weeks later, and the government has with little fanfare – and certainly no press conference – announced Ivan Power as the National Reconstruction Fund (NRF) Corporation’s inaugural chief executive officer.
The appointment of Mr Power, a former Macquarie Group senior global executive, puts an end to speculation that the NRF Corporation’s Board had been split between appointing a CEO candidate with deep industry background or appointing a CEO with deep financial background.
In the end, for the management of the $15 billion NRF, they went with the finance guy.
Just like the NRF Board appointments, the unveiling of the NRF Corporation CEO has been closely watched for the signal it sends. And that signal is all about finance.
As Professor Roy Green told the launch of The Capability Papers at Old Parliament House last year, the NRF “is a financing mechanism, not an industry policy.”
In which case, the Ivan Power appointment makes perfect sense, particularly if his chief role is to turn the taxpayers’ $15 billion fund into $60 billion by attracting private co-investors into NRF target projects.
But the government has painted the NRF as being about much more than that, and so the CEO appointment deserves more scrutiny.
In its marching orders to the NRF Board, the government told directors that it wants the fund to transform Australia’s industry and economy; to improve industrial capacity; to pursue value-adding opportunities; and to support the long-term improvement of the nation’s economic diversity.
So, if you are going to transform something, you need to do things differently.
But the combination of this NRF Board – with its bias toward finance skills – and this CEO from a finance background looks like business as usual.
If the NRF board is stacked with people with a finance/VC/private equity background, then it would have made more sense to have gone with a CEO with experience in building industrial capability in at least one of the NRF priority areas.
And this is the reason why.
Under the NRF structure, the board makes the investment decisions. The CEO makes investment recommendations.
If the board’s skills bias is toward financing, then it would make sense that the CEO bring to that investment decision-making process an industrial background (or vice versa).
None of this is commentary on Ivan Power. There is no-one that I spoke to on Thursday who did not think Mr Power is clearly a selection of the highest calibre.
But clearly a philosophical question that is understood to have been debated by the board has now been answered: Do we bring in financial experience of the highest calibre or do we bring in industrial capability-building experience of the highest calibre?
Mr Power’s formidable experience in finance aligns more closely with the core existing expertise of the board members than it does with the stated objectives of the NRF.
Clearly the NRF Corporation CEO will build a team of industrial advisers around him to build investment recommendations that will be put to the board. But that puts the industry expertise at two steps removed from the investment decision-makers.
The creation of the NRF is a watershed moment for Australian industry, and it is great to see it grind toward action, and that it now has a CEO.
But Mr Power belled the cat in an interview with the AFR in which he said one of his tasks would be to spread the word about Australia’s “world class” industrial capability – before somehow going on to compare the Australian economy with Germany’s.
As if the 30-year decline in Australian industrial capability were a communications problem, rather than an actual and increasingly dangerous problem based on entrenched structural shortcomings.
It remains somewhat extraordinary that the NRF – a relatively modest Australian initiative by world standards – has not been joined by more ambitious industrial policy reform, from the direct research funding mechanisms to tax policy.
The Australian government has not responded to the impact of the massive subsidy programs in the US under the Inflation Reduction Act. And for all of the highfalutin language used to describe the NRF ambition, that single financing mechanism is not going to transform the economy.
The heavy lifting of industrial policy reform has not yet been done. That’s not to say the government isn’t working on it, but right now they’re awfully quiet.
Below is a back-of-an-envelope list of the National Reconstruction Fund directors and their core competencies. It’s subjective, but the process was worth it just for argument’s sake. Katharine Giles stands out here for hands-on industrial capability building in one of the NRF’s priority industries.
- Martijn Wilder (chair) – Climate investment and policy entities
- Ahmed Fahour – Banking, financial services, public services
- Dr Katharine Giles – MedTech leader, venture capital
- Kelly O’Dwyer – Economic policy, government process
- Daniel Petre – Venture capital, finance, investment
- Kathryn Presser – Governance, investment
- Karen Smith-Pomeroy – Investment, infrastructure, capital
- Daniel Walton – Union, workplace relations, policy
- Glenn Thompson – Union, manufacturing policy, superannuation
