The guests who are sitting next to me. We have Jennifer Westacott. Jennifer is the Chair of Future Generation Global. She was formerly the CEO of the Business Council of Australia, a director of Wesfarmers, and she's currently the Chancellor of the University of Western Sydney. She's also the director of the governance board at the RBA. We've also got Phil Lowe, Dr. Phil Lowe. He is the Chair of Future Generation Australia. You probably know him as the former RBA Governor. He's on the board of Barrenjoey and Victor Chang, and he's on the ASX advisory group of corporate governance for the ASX. This is a great opportunity to hear from both the chairs. We've had quite a lot of questions that have come through already, and I've tried to categorize them. If you do have questions, please submit them, as I can see many people are doing through the website, and we will try and get to those. Before we start, I would just draw your attention to the disclaimer, which is on the screen, which essentially says that anything the three of us say today is general in nature. It's not personal advice. For that, you'd need to see a licensed financial professional. Maybe I'll just give a quick update on Future Generation. As you know, the way that we operate is we operate fund of funds. We have two listed investment companies, Future Generation Global and Future Generation Australia. They invest with what we think are the best fund managers we can find in Australia and from around the world. Those fund managers very generously work for us for free. Because they're working for free, we're able to save a significant amount of fees for our shareholders. We've saved AUD 175 million so far. That means we've been able to donate 1% of assets each year to some great causes. We've donated AUD 100 million so far. The difference between the saving and what we've donated, of course, remains within the listed investment companies. It's for the benefit of shareholders in terms of income and the capital growth that we achieve. If you look at the fund managers that we invest with, as I said, we think these are some of the best fund managers in Australia. They're also very diversified. What we're trying to achieve with Future Generation is great returns, but with much lower volatility than the market. The way we do that is through diversification. The managers on the screen, they are what we think are the best managers, but they're also highly diversified in the terms of the way that they invest. We have long-short managers, long-only managers, systematic managers, and our first layer of diversification is by manager, and that helps us to achieve the lower volatility returns that we've been able to achieve. If you look underneath the hood to what those fund managers are investing in, you can see that the portfolio is very diversified. We have a slight bias in Future Generation Australia towards small and medium-sized companies, but we're significantly underweight the larger companies in Australia. The top 10 companies in Australia make up nearly half the value of the index, and the best way for us to achieve lower volatility returns is to diversify away from those. You can see that we have a very nicely spread portfolio. For Future Generation Global, it is a similar story. Global markets have become increasingly concentrated. The top 10 companies in the MSCI made up about 10% of its value 10 years ago. Now, nearly a third, mostly tech companies. We are typically underweight those large tech companies. Our fund managers find opportunities elsewhere. Again, we are overweight at the small, medium-size companies, and we have a bias a little bit less than the market in terms of our exposure to the U.S. We are a bit overweight Europe. The stability that those investment portfolios create enables the boards to generate and announce a growing stream of fully franked dividends. In the case of Future Generation Australia, fully franked dividends have been increased every year for the last 10 years. The dividend yield, if you include franking credits for Future Generation Australia, is over 7.5%, and we have got a strong profit reserve, which gives us confidence in the sustainability of that dividend. Future Generation Global, likewise, has been increasing its dividend steadily. We announced a special dividend, AUD 0.03 per share, fully franked earlier this year, which gets paid tomorrow. Again, a very strong dividend yield of over 9% and strong profits reserve, which gives us the confidence that that dividend is sustainable as well. Our first objective, to deliver low volatility returns to our shareholders and generate great income, we think we have been achieving that. Of course, our second objective is to make a significant contribution to society, and in particular, to support young Australians. Last year, we cracked through AUD 100 million that we had donated to those great causes. We are very proud of that number, we are hoping that that will continue to grow into the future. The not-for-profits that we support are very broad. There are more details on each of those on our website. Future Generation Australia, supporting youth at risk or vulnerable children. Future Generation Global, particularly supporting mental health initiatives for young people. Final thing before we move on to the Q&A is that if you do decide to buy Future Generation shares, you do that through CommSec, they are good enough to rebate that brokerage, it is a free transaction for you. That is a quick update on Future Generation's investment portfolios. There are some questions that we have had through which I will address in due course. The bulk of the questions that we have had have focused around productivity. I read back over the last time you both did these webinars a couple of years ago. Jennifer, you made the comment that you feared Australia might sleepwalk into lower living standards, which I thought was a great comment. Before maybe we get an update from you on how you think about that, Phil, would you mind talking to us about productivity, why it is important, and your perspective on where we are? Thanks, Lee. It's great to be with you. Productivity is the amount that on average we produce per hour of work in the country. It's a pretty fundamental concept, and advances in productivity are the key to advances in living standards. Since around 2018, we've had no advance in productivity in Australia. The amount on average that's produced per hour of work today is the same as it was in 2018. Yeah. Wow. Since 2018, living standards in Australia have stagnated. Average real income per head is the same as it was back in 2018, and that's because we've had zero productivity growth. That follows a period of 25 years where productivity growth was almost 1.5% a year. If we'd had, say, 1% or 1.5% productivity growth since 2018, the economic pie in Australia would be 10% bigger than it is. That means people's real wages would be 10% bigger, profits would be 10% bigger, government revenue would be 10% bigger. Everything would be 10% bigger. If everything was 10% bigger, we wouldn't be talking about a cost of living crisis. We'd be talking about how to manage prosperity, as we were for much of the previous few decades. The fact that we're not getting any productivity growth today means our living standards have stagnated. Unless we can turn this around, we're going to continue to have a high standard of living in Australia, but it's not going to advance and we're stagnating. Really, this is why people are talking about productivity growth. We've entered into a world of stagnation in living standards, and we're on a path for that stagnation to continue. I don't think we're going to go backwards, but we're not going to go forward. Yeah, pretty worrying for a young person. Incredibly important. Yeah, it's incredibly important. Yeah. Jennifer, Phil suggests that we haven't yet woken up. Yeah. Is that your perspective as well? Well, I think so. I think we might even be going a bit faster than sleepwalking. You think the last decade has been the lowest rate in the last six decades of GDP per capita growth. That tells you our living standards are falling away. We talk about a cost of living crisis when we're heading into a standard of living problem. To Phil's point, it's not that we're going to go backwards, it's just that we're not going to go forwards, and we're certainly not going to travel at the same pace as countries like the U.S., which is I think on average about 4x more productive than we are. I think what we've got to remember is what does it mean? A lot of people I think want to misrepresent productivity as a claim by business to work harder for less, versus we want to get more value out of the inputs we produce. That's about technology, machinery, skills, training, energy input costs, and so on. It ultimately results in higher wages and a bigger pie. That means more money for government to spend on things that people need, more money in people's pockets. That's the best way of really alleviating the cost of living crisis over time, is to actually kind of make those structural changes that make us more productive, and actually pour sustainable long-term money into people's pockets. Maybe just to sort of follow on from that point, what is that? What sort of reforms do you think would be the obvious ones to make- Yeah to achieve that? Well, you've got to be on all fronts, but everything really matters. If I think about we've got to really take the skilling of Australians more seriously. We've got to get our skills system up to date. Energy costs, which have really increased over the years, is a major kind of contributor to a decline in productivity. If I had to pick one, Lee, I would pick tax reform, because productivity is a creature of investment and incentives. We do not have that climate in Australia at the moment. One of the highest corporate tax rates in the world, very high income tax rates, taxes like stamp duty, which I think I've not seen any economist that says stamp duty isn't anything other than the worst tax in Australia from a productivity point of view. I would always nominate comprehensive tax reform, not piecemeal tax reform, nobody's naive enough to say that's easy to do. We've had economic opportunities where it would've been easier to do than now. Nevertheless, unless we're willing to confront the fact that our tax system is neither going to produce the revenues that we need, we can see that coming out of the commentary on the budget, more importantly, it's not going to create the incentives for businesses to invest in those bits of equipment and skilling and technology that allows them to be more productive, expand and grow and pay people more, then I just don't believe we can actually kind of turn the corner in the way that Phil's suggesting. Phil, would you agree tax reform would be the most prominent lever to pull for productivity? Well, it's certainly kind of one of the very important ones. There's no single thing that we can do here. To my mind, what we've got to do is to make Australia a great place to invest, expand, innovate, and hire people. Mm. Mm. That should be our mindset. At the moment, too much political discourse is focused on how we cut the pie- rather than grow the pie. We grow the pie by investing, innovating, building new businesses, and hiring people with good skills. If that's your mindset, then the approach should be to tackle everything that feeds into that. That would be industrial relations, I think taxation. We tax innovation and entrepreneurship too heavily and consumption too lightly. The way we tax land is all screwed up, as Jennifer said. It's too hard to establish new businesses. There's too much regulation. The cost of energy's too high, and our university system isn't working to the full advantage of the people. We've got to make Australia a great place to invest, innovate, expand, and hire people. That would be my overarching thing, if that's your frame of reference, then a lot of things fall into it, and we've covered some of those. If we don't do that, then we're stagnating. It's good. The standard of living is good here. Yeah. On average, Australians are lucky enough to enjoy one of the highest standards of living in the world. In a way, it's fantastic. We've stagnated, I think we've rested on our laurels for too long, we need to take some hard choices, otherwise our kids will not have a better standard of living than us, because the future generation funds are very focused on our kids. Unless we do something on the economic front, our kids are not going to have a better standard of living than us, and possibly worse. As a parent, it's challenging. We'll come back to some of those topics, the sort of more recent news on the budget and a few other things. AI, there's a lot of questions that have come through on AI, I'll talk about the portfolio in a second. Is AI a kind of silver bullet that could support productivity growth and maybe be a competitive advantage for Australia to ease that problem? Either of you? Well, possibly. Yeah. We don't know. Yeah. It's a huge advance in technology, and with unpredictable effects. I think we all know of examples where tasks are being made more effective. Yeah. Exactly. Coding software, writing reports. Yes preparing slide decks. Those tasks are being made much more effective. Yeah. That's going to help, but that's not going to shift the dial. I think what could shift the dial is whole new business models that we can't even dream about at the moment. One of the benefits of AI is it's reducing barriers to entry. You no longer need to cover a big hardware and software stack, you can use the AI tools. Barriers to entry are lower, and we know when barriers to entry are lower, and you've got the fundamentals right, new businesses emerge. I'm hopeful. I don't know what they are, but new business models will emerge that will help with productivity. There are some downsides as well. I worry a lot about the use of AI by bad actors. We've seen the Anthropic. Yes Mythos kind of discussion recently. We're going to have to invest more in cybersecurity, and that's a dead-weight loss. I also worry about the income distribution effects of AI and the erosion of our tax base. Exactly. There are positives, but there are negatives, and it's unpredictable. We do know through the broad sweep of time that advances in technology make more things possible, and human ingenuity takes advantage of those possibilities and builds new businesses. Yeah. Got to keep our fingers crossed. Keep positive on that. Yeah. The corporate Australia kind of view of the adoption. Well, I think just to field this point, I think the task change thing is kind of like the first sweep of AI, and we're seeing that now, and there's no doubt that that's going to have a productivity dividend. I think you've got to see AI alongside other technologies, robotics, digitization. I think the challenge is how do we give Australians agency in AI? Because if we don't do that, we won't get those business model changes. How do we get the regulatory environment to allow that big innovation, particularly in that business model change, in that whole kind of creating new forms of value? If we don't do that, we won't get the big dividend. We will need some guardrails. The question is getting that balance right, because my big nervousness is two things. One, that we haven't got enough equity in access to the skills to use it, and that we're not getting the skill system aligned enough, fast enough to give people those skills that they need to run, not just to survive in an AI world, but to take advantage of it. This is all about critical thinking, computational analysis, otherwise AI just becomes potentially just on the process side. I do worry about AI combined with social media, if those guardrails aren't there because of the extraterritorial nature of those technologies, and sort of this whole question of how people are going to get information uncurated. Where I see businesses going with this, I think most businesses are looking at it from three lenses. The first is everything around the customer. What can we do to improve our customer service, to know more about our customers, to get more stickiness with our customers, to extend our value proposition to our customers, to give them new services that create greater value? The second thing, though, that's the more complex bit, but actually the bit that you can create tremendous value is the business model bit. What are we thinking about in our business model? How does this allow us to kind of rethink our business model? The third is process, which I think everyone's kind of very comfortable to start on, process data, analytics, those repetitive tasks. I think the bit that is harder is the customer bit, because of all of the things people are concerned about, but that's where tremendous value will be created. My big nervousness, though, Lee, is I just don't think we're paying enough attention to pockets of the economy where people are not going to have the agency. I'm very concerned about the SME sector. To assume everybody is going to have the same level of capability, I think is naive, and I think government needs to kind of really think through with business, not on its own. Some kind of sense in which, what is the standard of agency that we want for all Australians, or what are the particular pockets of agency like SMEs where we really need to make sure that people understand the technology, are using the technology, are confident with the technology, and are able to do it in a way that improves their value. This might be a good point for me to head off. We've had a lot of questions coming in on the kind of portfolio aspect. Richard's asked, "Will Future Generation use AI models?" We're a smallish business, the answer is yes, we are using AI. We're trying to figure out the best ways of using it. At the moment, we're finding it's a great tool to do searches for us to aggregate information. We're not using it for our investment decisions, but to create reports, to aggregate information, to search for investment opportunities, it's been great. Several people, Pete, Casey, Paul, others have asked about essentially AI valuations, how invested the portfolios are in AI. It's a really difficult question to answer. The sort of simple but not very good answer is that we're underweight those very large AI-related technology companies because they have become, A, very expensive. These decisions are all taken by our fund managers I should say, not by the investment committee. The fund managers we've selected are typically underweight those large names. The reason is valuations are quite high for some of those. The markets are very concentrated, it's becoming more difficult to add value. That's a very simplistic answer because where AI starts and finishes is really difficult to measure. Many of the fund managers are involved, are invested in the second derivative. For example, the data centers that are being built in Australia and elsewhere, the power transmission that's required, the adoption that is going through corporates around the world. Other opportunities that are coming up, like you may have heard about the Software as a Service, the SaaS apocalypse that happened earlier in the year, presenting valuation opportunities as people figure out what the impact of AI is. The answer to all of those questions is, the fund managers who we speak to and are invested with are constantly looking at AI. I'd be very surprised if there's any conversation they're having with a company that doesn't involve a discussion about how they're using AI. Certainly when we're talking to fund managers, we're interested in what kind of exposures they're getting. It's a very broad question to answer that. Maybe now is a good time to come on to the sort of next step of productivity reform, the more immediate point around the budget. We've had a lot of questions on that as well. Matthew Cranston, who's a journalist at The Australian, very well-regarded, has asked one for you, Phil. "What does Dr. Lowe think about the major tax changes being legislated? Are they more likely to increase or decrease productivity, investment, and housing supply or not? There's some good here and some bad. Yeah. Let me start with the good. I support the changes to negative gearing and the capital gains tax treatment on residential property. Partly I say that because when the value of a property goes up, it's largely because the value of the land goes up. You as the owner of the property normally don't do things to make the value of the land goes up. It goes up because of inflation or zoning or kind of growth in the city. I could never understand why we taxed concession the increases in the value of land. Removing that discount there and removing negative gearing, I 100% support that. I think it's a mistake, though, to extend the changes, the capital gains tax to risk-bearing assets. As I said before, what we want to do is to make Australia a great place to invest, expand, innovate, and hire people. Increasing capital gains taxes on assets whose value rises because of enterprise works against that. I was disappointed that the government extended the capital gains tax treatment to non-residential assets. I think that will be to our detriment that they've done that. On the tax changes on housing, I don't think that's going to make a difference to supply, which is the fundamental issue. Yeah. They need to work simultaneously on increasing supply, which the governments right across the country have fallen way short of those targets they announced. The first order of action, I think, is to achieve the targets that they set out before. From a tax design perspective, I think the changes in negative gearing and the capital gains tax on residential property are sensible, the other changes will end up hurting living standards here. Jennifer, would you agree with that analysis? Yeah, I think that's correct. I think if you sort of want to take the housing question just as a specific, what I think we keep doing in Australia is forgetting that housing is a complex system. We try and do one thing, then we find that we do a lot of stuff on the demand side. First homeowners grants, stamp duty concessions. There's nothing in and of themselves wrong with that if you're kind of corresponding on supply. We haven't done enough on supply. That's more than just zoning land. That's actually a lot of complexity now about reducing the cost of production, which is why I'm a big supporter of modern manufactured construction methodology to see if we can reduce the cost of the actual construction of the house. When at the moment in Sydney, it's not feasible, particularly in Western Sydney, to build medium density housing because of the cost. We've got to do something on the cost side. We've got to do something on the innovation side. We've got to do something on stuff that other countries have done in Europe, particularly around what they call the third sector, the housing association sector, where people have long-term secure rentals through sort of like a build-to-rent model, where the housing association is not running necessarily public housing, but it's charging affordable rentals. In Canada, they call it attainable housing. You've got to get the planning system right, which we haven't talked about, where the time taken to get a place approved or getting a major subdivision approved or a major residential facility or commercial building approved is just too long. This is where AI, in my view, could be very effective by taking the noise out of the planning system and really focusing on the things that are more contentious. I think the first mistake is always, and to be fair, there's a lot of stuff in the budget around some of these things. There's some money for fast-tracking approvals. There's a lot of money in the budget, I think it's AUD 10.2 billion on productivity and deregulation agendas, which is good. The question I think, Lee, is when you look at all of the budget figures, the figure I always look at is the growth figure. I get nervous when I see a growth figure of 1.75%. You sort of say, "Well, what are going to be the tools that drive that bigger pie that Phil's talking about?" I think that's where the jury's out. Are there enough kind of tools in that budget? Then if you go to kind of the tax on enterprise, to drive productivity, you need dynamism in the economy. You need people taking risks. You need people starting businesses, selling businesses. That's where the U.S. is an incredibly dynamic economy, and it's more productive as a result. The question is will these tax changes drive or stifle that level of dynamism? That to me is sort of like something we should be thinking about. I just come back to, we need a big growth agenda in Australia. If we don't get that growth agenda, we're not going to see those living standards rise. Maybe we should turn to reasons to be optimistic about the Australian economy before we get too bearish about the sort of current politics and so on. Obviously, Australia's got through a number of economic shocks over the last sort of couple of decades and navigated them much better than a lot of other countries. Are there some things that are specific to Australia that are a strength to us to navigate some of these changes that we're facing, notwithstanding sort of structural policy reform, but the population- Yeah. I mean, I've always been optimistic about our economic prospects, and that optimism was really built on a certain set of fundamentals. They would include our fantastic natural resources base, a growing population where people come from all around the world to want to live here and to prosper and to work and build better lives for themselves. Good public policy institutions. We've got a credible central bank. We've got a decent fiscal setup, and we've got a flexible exchange rate, which means that when we get hit by external shocks, there's a lot of shock absorption there. We've got a talented industrial entrepreneurial workforce, and historically, we had cheap and reliable energy. There are a set of fundamentals there that not many other countries have. I think another of the positive fundamentals, our strong trade link with Asia. Most of our exports go to Asia, we've got very strong trade links there. You put all that together, and we've got all the fundamentals to be successful. My concern is that we're now resting on our laurels. We had 35 years of good economic growth, arguably the highest standard of living in the world, and we've lost the drive to keep innovating, to growing, and to prosper. We don't have a growth agenda. We now have a redistribution agenda. Got a big pie and we're arguing over how we redistribute rather than make a bigger pie. I feel like we're losing our way. We can find it again because we've got the good fundamentals. I think the other source of optimism I have is really kind of a political one that over the long sweep of time, our politicians end up making the right decisions. We go through periods where we're all kind of saying, "Well, this is not so good," but the political system does tend to deliver, ultimately, politicians who make the right decisions. You think kind of both the Labor government under Hawke and Keating, and then the Coalition under Howard and Costello. they made difficult decisions, somehow our political system can find a way to build on those fundamentals, even though at times you think, "Well, the future looks bleak." Still think we can do that. Yeah. Yeah. That's good to hear. Jennifer, your optimistic- No, I agree. I still think the fundamentals are here. Where would you rather be but here, right? Our incredible endowments, our resources, our people, our population. I think all of the things that Phil raised I think are crucial, and they're a great comparative advantage. I think two things that I'd highlight. One is agility. We have been a pretty agile country. We haven't had the same dynamism in the business community that, say, the U.S. has had, but we have been really agile. I think Australians are very good at adjustment. You sort of see people in COVID, we just did not have the same issues in COVID that many other countries had. A, because we had a strong budget position going in, but B, because people are very kind of like, they're very cooperative. They understand the country comes first, I think that agility to kind of change and adapt as circumstances happen around us, I think is a real advantage. I think the other thing is that our proximity to Southeast Asia, our proximity to countries that are growing with fives in front of their GDP numbers is a real advantage. The challenge, I think, is to harness all of those advantages to drive that innovation and productivity, that diversification without subsidization of the economy. I agree. I think over the long- term, people have taken the right sets of decisions. We understand the decisions that need to be taken. At the moment, to Phil's point, I think the question is, are we pursuing the policy agendas that really drive that growth agenda? Some of them, yes. Some of them, no. That I think, we've got to make sure we've always got that mind to the future generation, because we don't want to leave future generations with either stagnating living standards or relative declining living standards. I don't want to be the first generation that left the next generation with lower living standards when we had all the policy tools in front of us that we could've used in a way that says to our grandchildren and our children, we've actually left things in better shape. Yeah. You mentioned Australia's position within the world. I know you do work in Indonesia and Asia as well. Are there trends in that connectivity that you think? That Australia is well positioned to benefit from? Yeah Corporate Australia's embracing? I think there's no doubt that the world is going through a very, very substantial economic adjustment. A lot of countries wanting to re-industrialize their economies, focused on industrial self-sufficiency. A lot of the historic trade blocks or multilateral agreements, I think, are being challenged. Australia, I think if we want to carve out our own destiny, we obviously have to play to our strengths and play to the region that's growing very rapidly with this incredibly dynamic economy. As the government's business champion to Indonesia, I spend a lot of time there leading trade missions, driving awareness. It's a country that's got a lot of complexity to it. It's not without risk, but nor is anywhere in the world, really. My university set up a campus in Surabaya, in Indonesia. It took us two years to do that campus from start to finish. If I tried to do a whole university campus in Australia in two years, it just wouldn't happen. That would be astonishing. Indonesia is not the Indonesia of the 1990s. It's a dynamic, modern, interesting economy, growing with a five in front of its GDP, experiencing some challenges now around its stock markets valuations. Government, to be fair, acting when they see problems, acting decisively. The way I think about Asia, and Indonesia in particular, is not to think about Indonesia as a country with a market of 280 million people, but as a platform to reach markets of 1 billion people. I think the other final point is, when I sit down with the ministers in Indonesia, there is a real openness and willingness to have Australian investment come into Indonesia, and an interest in coming and investing here as well. The challenge is can we get the regulatory settings right? Can we get the licenses right? Can we get the visas right? Can we get the export quotas right? We're currently reviewing the cooperation agreement. I think Asia's a tremendous opportunity, hence Nicholas Moore's report into Southeast Asia, and we're doing much better. We cannot afford to not see that incredible market as a massive opportunity. Frankly, we cannot afford to allow non-benign competitors to come into those markets and crowd us out over the next 20 years. Yeah. We've had a couple of questions from John Coombe, who's a big supporter of Future Generation. He's on all the investment committees, so I feel compelled to ask these ones. Thank you for the questions, John. John's asked about the energy sector and whether we see that, or you see that, as a big positive into the future, solar gas and so on. Is that an advantage for Australia? Similar question from David and others. I'm not sure. Potentially, it is. We're making huge investments here. The direction of change is clear. We need to move to clean, renewable energy, we're making investments to be able to do that. We're going through a period of adjustment where we're seeing the costs of that. Eventually, once we've put in place all that infrastructure, we should be well placed to provide the clean energy that we need here, and perhaps countries in Southeast Asia need as well, and the products that come from clean energy. It's another one of these things where we're going through a difficult transition. If we get it right, I think we do have opportunity here. Yeah. We've got to get the other things we talked about right as well. We've got to get taxation, industrial relations, planning, the skills right. If you don't get those fundamentals right, then this investment's going to be wasted. That's why I'm always encouraging the government and others to think about what do we do to make Australia a great place to invest, expand, innovate, and hire people. If we don't do that, then this is all going to be for naught. Yeah. I think that's spot on. I would just add, I think we've got to get the conversation back to transition, and what is an orderly transition look like, so that we can go to those new technologies, those new forms of energy, that new energy mix in a way that allows us to remain competitive, allows us to expand and grow and innovate. We also have to, I think, be willing to open the door to new technologies like nuclear. We've got to be energy agnostic, I think, in order to be really successful here. I think part of the problem with our debate is that we've sort of lost a little bit of focus on the goal here, which is to reduce emissions, decarbonize the economy in an orderly way. I think if we could get that conversation reset to what does that orderly transition look like, and what is the opportunity for us to become that kind of global energy superpower, then I think that would be a useful way of framing the debate. David's question actually was partly more about how the portfolio's looking at the energy required to power artificial intelligence, and are we looking at energy opportunities such as uranium and others? Again, David, the portfolio managers are making the decisions about which companies they invest in. I can tell you from the conversations we have from them, and when we look through the portfolio as to what they own, things like power transmission and power generation are where a lot of the opportunities have been emerging. Whilst there are the big first derivative kind of opportunities in the chip makers and the large language model providers, it's those second derivative opportunities where a lot of the investment seems to be going, a lot of the opportunities seem to have been made. Another question here. This will be for you, Phil, is expectations on the inflation outlook for Australia over the next year. Sorry. I know those questions are sometimes a bit painful, there it is. Let's hope inflation starts coming down. Yeah. I think it will. The challenge facing the RBA is that underlying inflation has been too high for too long. It's been above the midpoint of the target range for probably roughly five years. That's bordering on too long. They need to be able to chart a credible path back to inflation of 2.5%, at the moment we're still not there, I fear. The underlying cost pressures that businesses are facing are probably rising at more than 2.5% a year, ultimately higher costs get fed through to higher prices. The RBA is going to need to do, and I'm sure it will do, what's necessary to bring inflation back down to 2.5%. I think it's going to require a period of adjustment to get cost growth in the economy back to 2.5%. It's not at the moment. If you look at growth in unit labor costs, which is wage growth, less productivity, back to productivity, the last four or five years have been way too high. We've got the higher energy costs feeding through the system. We've got the higher cost of fuel feeding through the system. There's still quite a lot of cost pressures to come through the system, which I think unfortunately is going to keep inflation high, which means that the Reserve Bank, I think, will have to keep interest rates high until we can get inflation back to 2.5%. It's not in our interest for inflation to stay high for too much longer, otherwise people start believing inflation will stay high. Once they start doing that, they start behaving as if inflation's going to stay high, that means they put up their prices more readily. They're in a difficult position, as we've seen this year, they've raised interest rates and they're doing what's necessary. It's going to take time, it can't take too much time. Great. Quite an interesting question I think for you, Jennifer, is obviously your exposure from the BCA and boards has been across corporate Australia. For those who don't know, BCA, the Business Council of Australia, effectively is the peak body for chief executives in Australia in terms of policy reform and so on. You've met a lot of companies. Are there features of companies you think that make them likely to be more successful, or areas that you've identified that make those companies look like they are or will do well? Yeah, look, I think the companies that do really well are the companies that, depending on what industry they're in, but I think companies that do really well are the companies that are absolutely unrelentingly focused on their customer, focused on the innovation that is going to actually improve service levels, improve value. I think the companies that are successful are the companies that really drive innovation is not invention. Innovation is a lot of process improvement. Innovation is training your people differently so they can do things differently to create more value, sometimes using technology, sometimes not. I think those companies are the ones that if you look back in history, they've succeeded. If you look at our mining companies, we talk about we're sort of overweight as an economy in the mining and resources sector, but our companies are the most productive in the world because they've invested in that innovation, that technology, that capability building, and they've been globally phenomenally successful. Most of our banks, you think about a lot of the innovations in banking have come from Australian banks, driving that focus on customer, focus on service delivery. I think finally, the companies that succeed are the companies that focus on what matters. The companies that don't get distracted, and they double down on their customers, double down on their value proposition, and think about that long-term shareholder value creation that comes from a combination of things, including good corporate citizenship, good reputation, good governance, solid governance. Those are the companies that when you look back at the last 20 or 30 years at companies that were incredibly successful, and I was on the board of one of them, ResMed, an incredible company. Financially disciplined, totally focused on its customers, driving innovation, taking proportionate risks, a sense of that logical incrementalism that they drive their portfolio. Those companies have added incredible value to their shareholders and incredible value to the economy. I might ask you both a little bit about Future Generation Australia now because we're very fortunate to have both of you working with us and on a pro bono basis, both chairs. You've both been in the hot seat now for a couple of years. Be interested to know what you're proud of over those couple of years that Future Generation Australia's achieved and why you're good enough to help out. Well, what are we proud of? I think I'll start with the financial returns. The Future Generation Australia has delivered a higher return than the ASX 200, and it's done that with less risk. In finance, we like higher returns and less volatility, and that's what we've been able to deliver. We've also delivered a steady stream of rising dividends, which people value as well. From a purely investment product perspective, it's very attractive. I'm not allowed to give financial advice. No. In finance, we like higher return, less risk, and steady, predictable dividends. Yeah. That's good. I hope people think about that. On the other side of the equation is the social impact. Last year, we did a review of the not-for-profits we support. For the first 10 years of Future Generation Australia, we support a group of not-for-profits. The whole model is we support them long-term, and it's untied funding, because we think that the not-for-profits know how to use their money rather than us. After 10 years, we thought it was appropriate that we review the portfolio of not-for-profits we support, so we did that last year. We had more than 300 people apply. We went through all those applications, and we were very focused on finding not-for-profits to support kids at risk. One of the lessons from the research that I've been exposed to since I took this role is that if you have an adverse event early in your life, maybe in the first 10 years, the effects of that can stay with you your whole life. I was struck by the unfairness of that. Something that happens to you before you're 10, maybe it's a period of homelessness or domestic abuse, or one of the parent goes to jail, or he kind of disappears, or you have some adverse health thing. You have absolutely no control of you. Stays with you for the rest of your life. It's wrong, isn't it? Yeah. It's unfair. I grew up in a loving, caring family in regional New South Wales. We didn't have money, but we had everything else. I thought I was so lucky. I see these other kids who aren't so lucky, and it's so unfair. The charities that we're supporting are helping kids at high risk of an adverse event, or that have had an adverse event so that that doesn't follow them for the rest of their life. I'm really proud of the 11 charities that we've been able to support because they're really helping these kids who through no fault of their own are at an adverse event or a high risk of an adverse event. Yeah. I get a lot out of being involved in that, and I know the funds managers who support us get a lot out of it as well. Yeah. I used to get frustrated at the RBA that people in the finance sector were viewed as these evil, money-hungry people who take the money out of your pocket. That's not what I saw. Yeah. What I saw were people who care a lot about the community in which they operate. The funds managers that support Future Generation Australia are very much of that mindset. They understand we're helping these kids. I hope the shareholders also get some value in addition to the high returns, less risk, and increasing dividends. from knowing that they're doing good helping kids who are at risk. Overcoming that inherent unfairness. I think that's such a good point, Phil, I'll ask the same question of you, Jennifer, in a second, but you gave me an opportunity to give an unscripted plug, which is that the shareholder returns for both Future Generations over the last 12 months have been really strong because the discount to NTA has obviously narrowed, great dividends, and great franking credits. Future Generation Australia's total shareholder return when you add all those ups, over 18%, and for Future Generation Global over 26%. 26 I think it is. That's some pretty good returns. There's more information about all of the not-for-profits that we support on our website, and my colleague Bonnie has started filming and distributing a few short vignette videos about some stories of what they're doing. You're right, it's incredibly powerful. It is. We're very fortunate to be sitting here. Yeah. You mentioned the discount because a year ago the board of Future Generation Australia, and I think Global as well. Yeah really focused on this. Yeah. We said, "Look," I kept on asking, "Why is it can you buy a dollar's worth of assets for AUD 0.85? It's not right. Under Lee's leadership, we set about trying to narrow that discount, and it's basically closed now. Yeah. That's the benefit of the shareholders, but it's a tribute to Lee and his team to doing what's necessary to close that discount, and our intention would be to continue doing those things that would keep the discount narrow or nonexistent. Exactly. Yes. Exactly. Jennifer? I was saying, look, I'm really proud of the work you and the team have done on narrowing. Well, in our case, we're now trading at a premium, which is great. When I took over, we were very worried about that discount, and I know our shareholders were as well. I think that hard work of patient, careful, balanced portfolio, a focus on sustainable increasing dividends, I think these things are all of the kind of great attributes of the model we're trying to run, which is not a model of high volatility, high risk, super returns. It's a model of strong returns, better than market returns, predictable and increasing dividends, strong profit pool. I was really proud that we were able to do that one-off capital allocation this year, that one-off extra dividend, which I think really gave a lot of our shareholders a lot of confidence in what we're doing. I think we're always really focused on making sure that the fund performs and that we're outperforming where we can. On the other side, what I call the double dividend, the satisfactory returns to shareholders, but at the same time using those funds to deploy into important things. I mean, our focus on mental health is super important. I think people forget on youth mental health, and I chaired Mental Health Australia for many years. The data, the research shows that people can recover, that you can prevent it, and therefore the youth focus is absolutely critical. I think about BackTrack, one of the organizations that we support. Many kids, they get disengaged, they've got major mental health problems, some of them to do with the sort of life circumstances that Phil's talking about. They drop out of school. They can't get work. This is a practical kind of reengaging young people, giving them life skills, teaching them how to look after a dog, for example. Which people kind of think, well, what's the value of that? It's about care, responsibility, and making sure that you've got this structure in your life to look after something. Also learning to drive, learning some of those kind of technical skills. Those people are going off into work, and work is still, in my view, the greatest advantage you can have to overcoming most of life's challenges, is to have a good job. I think, to Phil's point, I didn't grow up in a loving and caring family. I grew up in a very difficult one, so I know what those very challenging circumstances mean for people. Unless someone comes along and kind of helps you out, as they did in my case, life is pretty difficult. It's that great unfairness. Why does someone's life circumstances depend on something that happened when they were growing up that nobody in society seems capable of turning around? I lived that. I had it turned around by relatives and going to university, and I want that for other kids. I want that for every kid in Australia. That's why the kind of dual focus of what we're doing to me, that's what motivates me. Yeah. That's, I think, what sets Future Generation apart is the dual dividend. Yeah However you want to put it. Just to kind of reinforce that point, we can do the good work because the people in the finance sector. Yeah, exactly. that support us. The money that we save in management fees, some of that goes to help these not-for-profits. Some of it, as you said at the outset, stays in the fund. The shareholders benefit from the generosity of the people in the finance sector as well. Exactly. That's part of the reason why we can outperform the market over long periods of time. Exactly. Yeah. It's a fantastic combination of good returns, low risk, and helping kids. Exactly. We're very fortunate. That's why I'm kind of involved. I think Jennifer has the same reason. That's it. We can do it because people give up their time and their effort, and the fund managers, their expertise, to help kids. Exactly. Yeah. To make Australia a better place. Exactly. Yeah. That feels like a fantastic place to wind up. We're super fortunate because we obviously have the benefit of you both, the boards who work on a pro bono basis, the investment committees, the fund managers. There's probably 35, 40 fund managers who all work for us. A lot who would like to work with us. We're in this very fortunate position of accepting all that goodwill. I'd like to say thanks to both of you for sharing your- Thank you thoughts today. It's very much appreciated. Fascinating to talk about. If you do have questions, and I think there are probably a couple that came in a bit late, which I couldn't quite manage to get into the segments we were talking about, then we'll try and follow through with those. If you have other questions, though, please call through and ask us. There's a lot more information on our website. Please feel free to call any time, and thank you for your attention. Thank you very much