Australian Government Future Fund
The Australian Government Future Fund is an independently managed investment fund into which the Australian Government deposits its budget surplus. The purpose of the fund is to meet the government's future liabilities for the payment of superannuation to retired civil servants of the Australian Public Service. The fund's investment decisions are made at arm's length from the executive.
The stated aim of the fund is to hold A$140 billion by 2020;[1] this figure would free up A$7 billion in superannuation payments each year from the federal budget.
Purpose
The purpose of the Australian Government Future Fund is to fully fund the future superannuation payments of public servants, which currently come from the federal budget.
In March 2007 the opposition Labor party announced it would withdraw A$2.7 billion from the future fund to finance a broadband initiative across Australia if it won the 2007 election; this proposal prompted government ministers to proclaim that Labor intended to "raid" the future fund for their own means.[2]
The ALP later indicated that the use of any funds from the future fund towards a national high speed broadband network will have to comply and meet all requirements of any commercial investment. This will include producing a commercial rate of return on the invested funds, with all profits being returned back into the Future Fund allowing further investment.
In the 2008/9 Australian Government Budget, it was announced that the Future Fund Board of Guardians will be managing the three new funds announced by the Government[3]:
- Building Australia Fund - An infrastructure fund to improve and create major infrastructure projects (including road, rail, ports and broadband) with an initial allocation of $20 billion. At 30 September 2011, it was valued at A$7.9 billion, an increase of $2.5 billion on the previous's value. [4]
- Health and Hospitals Fund - A health infrastructure fund to provide increased spending on hospitals, medical equipments etc. with an initial allocation of $10 billion. At 30 September 2011, it was valued at A$4.31 billion.[4]
- Education Investment Fund - A fund to provide capital investment in higher education and vocational education and training, with an initial allocation of around $11 billion; including $6 billion from the Higher Education Endowment Fund, of which it absorbs. At 30 September 2011, it was valued at A$4.89 billion.[4]
Governance
The Future Fund is overseen by an independent Board of Guardians selected on the basis of their expertise in investment management and corporate governance. The Chairman of the Board is David Murray. Other members are Peter Costello, Jeffrey Browne, Susan Doyle, John Mulcahy, John Paterson, Trevor Rowe and Brian Watson.
Timeline
- The Future Fund is announced by Treasurer Peter Costello in the lead up to the 2004 federal election.[5]
- The Future Fund Act 2006 receives Royal Assent.
- A$18 billion in seed capital, derived from government surpluses and income from the sale of a third of Telstra in its ongoing privatisation, was deposited into the fund.[6]
- The Australian Government transferred their remaining 17% stake in Telstra, valued at A$8.9 billion, into the fund.[7] This contribution, combined with other transfers, will push the fund to over A$50 billion by the end of the 2006-2007 financial year.
- It has been revealed that earlier in May 2007, the Chicago-based Northern Trust Corporation had won a competitive tender process to manage the A$51 billion Future Fund. President and Chief Operating Officer of Northern Trust Rick Waddell indicated that Australian companies did not have the expertise to manage the Future Fund.[8] Northern Trust, as a result, stands to collect A$30 million in annual fees. Controversies arose when it was realised that the fund will be managed by a foreign bank with no base in Australia. National secretary of the Finance Sector Union Paul Schroder estimated that around 100 jobs will be lost when the US company starts managing the fund from Singapore using staff from India.[9]
- The fund manager Northern Trust, was linked to the Enron scandal.[8] General Manager of the Future Fund Management Agency, Paul Costello told a Senate estimates committee hearing that "We were not concerned that this represented a risk to us in terms of the arrangements that we were seeking to put in place with Northern Trust".[10]
- There was a budget deficit of $27 and $57 billion in 2008 and 2009 respectively, yet during these years the Australian Government added a further A$41 billion into the fund.[11] The 2008 federal budget created a $20 billion Building Australia Fund to invest in roads, rail, ports and broadband, an $11 billion Education Investment Fund, which absorbs a similar $6 billion fund set up by the previous government, and a $10 billion health and hospital fund. These new funds will be administered by the Australian Government Future Fund on behalf of the government.
- The Future Fund is criticized on the front page of The Age newspaper for investing $135.4 million in 15 foreign-owned companies involved in the manufacture of nuclear weapons for the United States, Britain, France and India.[12] Information about the investments was obtained through a freedom of information request by the International Campaign to Abolish Nuclear Weapons.[13]
| Date |
Total funds (billions) |
| Dec 2008 |
$66.1 |
| Dec 2009 |
$87.23 |
| Sept 2010 |
$89.03 |
| Dec 2010 |
$90.51 |
| May 2011 |
$93.15 |
| Sept 2011 |
$90.28[14] |
See also
References
External links