The recent Federal Budget announced some of the boldest moves yet by a Commonwealth government to build the Australian impact investing market and renew focus on tackling disadvantage.
A total government package of $199.8 million over six years from 2023-24 includes a range of initiatives that incorporate Australia’s largest outcomes fund, place-based programs, working with philanthropy, data-gathering and analysis, and support to grow social enterprises.
The news reflects the seriousness with which governments are approaching the possibilities of impact investing to help alleviate community disadvantage. As a key adviser to the Social Impact Investing Taskforce, Social Ventures Australia (SVA) was deeply involved in helping develop many of the ideas that are set to become reality.
“We’re encouraged by these announcements – it’s definitely a step in the right direction for the market more broadly,” says Rebecca Thomas, Executive Director of Impact Investing at SVA. “But there’s still a lot to be done that could really supercharge the social impact investing market.”
Focusing on outcomes benefits everyone
One of the biggest highlights is the $100 million Outcomes Fund, which aims to make contractual payments to states, territories and service providers for specific projects with agreed outcomes.
“We firmly believe that outcomes funding can drive improvements, not just in terms of savings to governments, but in terms of the benefits those programs can deliver for individuals,” Thomas says.
“We’re excited to see the scaling up of ambition from the government and we’re looking forward to helping with the design of this program.”
Glimmers of hope for capital-hungry social enterprises
One of the biggest challenges for social enterprises in Australia is being able to scale up to the point where they can take on fully risk-rated capital. The $11.6 million Social Enterprises Fund is a small but welcome start in addressing this gap.
“We’re yet to see how this new Social Enterprise Fund will be designed and delivered,” Thomas says. “But we know there’s a gap in investing in the capability of social enterprises to scale up so they can unlock larger pools of capital. So we’re optimistic about the impact the fund could make.
“Where it does fall short, however, is that significant pools of appropriately structured, early stage capital will still be needed by social enterprises.”
Strong stance on building better places to live
Treasurer Jim Chalmers has been a big champion of the Stronger Places, Stronger People (SPSP) program. Over six years, $64 million will be delivered in 10 local government areas to support place-based initiatives for disadvantaged children and their families.
“We’ve seen how place-based programs in the UK and the US can really make a difference to areas that have entrenched poverty, and we’re really pleased to see that this announcement is focused on early intervention,” Thomas says. “The key will be in how you empower communities as well.
“SVA is already working in a number of the SPSP communities – with our partners in the Restacking the Odds project and through our Young Children Thriving programs – to help children and families get the right combination of high-quality, evidence-based services and support to set them up to thrive.”
There are other measures announced in this budget that begin to address some structural drivers of poverty and disadvantage, including changes to eligibility for parenting payments and a small increase in Jobseeker as well as new housing measures.
“It’s great to see a debate about breaking cycles of disadvantage front and centre. This budget is a good start, but there’s lots more to do,” Thomas says.
“Impact investing is about using private capital to achieve positive social outcomes. To be effective we all need to understand the levers we can use to reduce disadvantage, to ensure we’re getting the greatest impact for every dollar invested, whether from government or private investors.”
Connecting the dots is critical for success
The budget also saw some useful measures to develop the government’s access to high-quality data and insights, including $10 million to build evaluation capability in Treasury and $16.4 million for the Australian Bureau of Statistics to capture insights for long-term policy responses to intergenerational disadvantage.
However, big opportunities to capitalise on the momentum towards outcomes-oriented policies were missed, Thomas says.
Chief among these was a central Office for Social Impact Investing in either the Treasury or the Department of Prime Minister and Cabinet, which would ensure rigorous evaluation and oversight of programs to help steer future decisions. It’s a concept that already exists in the NSW Government and was examined extensively by the Social Impact Investing Taskforce recommendation.
“Getting these things right is critical,” Thomas says. “When we can measure and demonstrate the success of any program, you can scale it to benefit a wider group of people.”
Missing too was another taskforce recommendation to create a wholesale fund to drive and catalyse private capital.
“We understand that governments don’t have unlimited funding – a wholesale fund could help unlock private capital and bring in those investment dollars that help organisations scale for real impact,” Thomas says.
“We’ve already seen huge growth in environmentally focused impact investing. I think these new budget measures will provide some welcome opportunities for investors and pique the interest of those who are keen to understand how it could work in social investments.”
Looking forward to working together
To address the real and growing structural barriers to a thriving Australia, Thomas believes we have to be prepared to think innovatively about how to support individuals and communities in sustainable ways that actually work.
“Overall, these budget announcements indicate that Canberra is finally open for business when it comes to social impact investing,” she says.