Australia reconstruction fund posts 7.7% return as it expands manufacturing bets

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Australia Fund posts 7.7% return

Highlights

Australia's National Reconstruction Fund posts a 7.7% return, with operating income rising from A$5mn last year to A$54.6mn.
The fund increased total investments to over A$2bn in 2024, including A$245mn for Austal and expanded support to quantum computing and aerospace companies.
Loans to Arnott’s (A$45mn) and Patties Food Group (A$36mn) drew criticism over foreign ownership, but the fund defends the investments as commercial and job-protective.

Investment expansion across strategic sectors

As reported by Financial Times, the fund was established in 2023 by Anthony Albanese’s Labor government to support companies commercialising manufacturing technology and to strengthen Australia’s industrial base. It invests in areas including defence, renewable energy, agriculture and mining, while also lending to businesses in sectors viewed as critical to economic resilience.

David Gall, the former banking executive leading the fund, says the return is lifted by the sale of part of its stake in lithium producer Liontown Resources, but adds that the figure should not be treated as a short-term benchmark. The fund backs 22 companies last year with A$1.7bn and Gall says that total investment rises to more than A$2bn this year, including A$245mn for Austal’s domestic shipbuilding operations.

Gall also highlights investments in quantum computing groups Diraq and Silicon Quantum Computing, as well as Queensland-based Gilmour Space Technologies in aerospace. He says NRF backing helps attract private and institutional investors as younger companies move closer to commercialising technology.

Returns, criticism and economic impact

Total operating income rises from A$5mn last year to A$54.6mn, making this the first annual report in which the fund details its rate of return. Gall also points to Alpha HPA, a listed producer of high-purity aluminium, as an example of where the fund can have a significant effect on domestic industrial capability.

The fund also faces criticism for using taxpayer money to support businesses that appear less strategically sensitive. Arnott’s, owned by KKR, receives a A$45mn loan last year, while Patties Food Group, owned by Hong Kong private equity fund PAG, receives A$36mn.

That prompts claims the vehicle is helping foreign owners of well-known Australian brands, but Gall rejects that argument. He says the loans are made at commercial rates and are intended to protect jobs while improving the export potential of Australian consumer brands.

In our earlier article on India’s disinvestment programme, we explained that most proceeds since FY2016 have come from market-linked routes such as ETFs, public issues and buybacks, while strategic sales contributed only a small share. We also noted how the planned IDBI Bank stake sale could materially lift receipts and potentially help the government meet its annual targets after repeated shortfalls.

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