What is the Future Fund and how does it work?

Font Size:

In 2006, the Australian government created the Future Fund as an independently managed sovereign wealth fund with the aim of strengthening the government’s long-term financial position.

Sovereign wealth funds are special purpose investment funds owned by government.

Sovereign wealth funds hold, manage, or administer assets to achieve financial objectives, and employ a set of investment strategies which include investing in foreign financial assets.

At 31 March 2020, it was valued at $162 billion, losing $6 billion in the three months from 31 December 2020.

For the first time since the fund was created, withdrawals were allowed from 1 July 2020, despite the government having indicated in 2017 that it intended to allow the fund to accumulate until at least 2026/27 before making withdrawals.

Funds can be withdrawn from the Future Fund to cover the annual unfunded Commonwealth superannuation liabilities.

The Commonwealth’s unfunded liabilities are currently being paid out of consolidated revenue. By helping to meet these liabilities, the Future Fund will ease pressure on the government’s budget at a time when an ageing population is likely to place significant pressure on its finances.

From 1 July 2017, the fund’s Investment Mandate was to achieve an average annual return of at least the Consumer Price Index plus 4 to 5 per cent per annum over the long term, with an acceptable but not excessive level of risk.

The fund has received contributions from a combination of budget surpluses, proceeds from the sale of the government’s holding of Telstra and the transfer of remaining Telstra shares.

Has it worked?
The goal of the Future Fund was to grow at a rate faster than the growth in unfunded liabilities, so the impost on future budgets could be reduced.

According to RiceWarner, over the 10 years to June 2019, the Future Fund earned an impressive 10.4 per cent a year. The assets held against unfunded liabilities were now $163 billion. However, the unfunded liabilities were over $400 billion, so the gap has widened considerably!

However, it is expected that if the Future Fund continues to deliver strong returns (no certainty given the current economic climate) and public sector wages don’t inflate more than expected, the gap will narrow in future years.

Do you think the Future Fund has been a success? Or has it robbed the government of the chance to spend on important projects and infrastructure?

If you enjoy our content, don’t keep it to yourself. Share our free eNews with your friends and encourage them to sign up.


What COVID-19 taught us about investing for retirement income

The ‘Bears' are up against the ‘Goldilocks' to see whose savings perform the best.

Is deflation good news for your living costs?

A pandemic, a recession and deflation … what does it all mean for retirees?

Millennials shine in survey, while boomers appear self-absorbed?

Survey shines a light on the differences between the generations as pandemic rages.

Written by Ben


Sign-up to the YourLifeChoices Enewsletter

continue reading


Ambulance costs around Australia

There should be no hesitation when you have to call an ambulance in an emergency situation, but some people rushed...


Four tell-tale signs that you may have a blood clot

A blood clot is a clump of cells and protein in your blood. Blood clots form to slow down bleeding...

Finance News

How much you can save on electricity in your home state

As we prepare to head into the colder winter months, there is good news for those worried about heating costs...


What is thrombocytopenia, and why did it stop the AstraZeneca jab?

Anthony Zulli, Victoria University; Maja Husaric, Victoria University; Maximilian de Courten, Victoria University, and Vasso Apostolopoulos, Victoria University Australia's medical...


Ways to manage death anxiety

Winston Churchill once said: "Any man who says he is not afraid of death is a liar." But while it's...

Food and Recipes

Rick Stein's Autumn Vegie Soup

"One of the rather pathetic realities of the fact that so many of the restaurants in France are disappointing these...


Australians give big thumbs down to the public service

Only 27 per cent of Australians believe the public service acts in the public interest and only 22 per cent...

Brain health

Normal tension glaucoma linked to cognitive impairment

Australian researchers say they have established a link between the eye condition glaucoma and cognitive impairment, the state that often...