Outgoing Future Fund chairman Peter Costello believes that the sovereign wealth fund should continue to grow for another 10 to 20 years before considering the distribution of cash dividends to the federal government. Costello, who will be stepping down as chairman in February, asserts that the fund should accumulate returns to offset the growing Commonwealth debt and other unfunded government liabilities resulting from the aging population.
Reflecting on the establishment of the fund in 2006, Costello expressed his regret at not trademarking the Future Fund name. He shared satisfaction in seeing the name being adopted by various organizations around the world. The Future Fund serves as a model for regions and entities such as Victoria, Queensland, Western Australia, the Australian Football League, Hong Kong Monetary Authority, Thailand, and the Malaysian state of Sarawak, which have set up their own “future funds.”
The creation of the fund was initially driven by the government’s desire to eliminate debt and address unfunded superannuation liabilities for public servants. Started with $60.5 billion of budget surpluses and proceeds from the Telstra privatization, the fund has steadily grown to $206.1 billion since May 2006, with an average annual return of 7.7 percent.
Costello views the fund as a crucial asset for the Commonwealth, as it buttresses the government’s credit rating and reduces debt servicing. While there have been calls for the liquidation of the Future Fund to reduce gross debt, Costello argues that this would result in $200 billion in forgone returns over the next decade. Instead, he suggests that in 10 to 20 years, the fund may become self-sustaining, allowing for the annual earnings to be returned to the government’s consolidated revenue while preserving the capital.
As Costello’s tenure comes to an end, Treasurer Jim Chalmers and Finance Minister Katy Gallagher are considering potential candidates to fill the role of Future Fund chairman. The fund’s continued growth and potential dividends in the future indicate the importance of long-term financial planning and sustainable investment strategies for governments around the world.
FAQ
1. What is the Future Fund?
The Future Fund is a sovereign wealth fund established by the Australian government in 2006 to help eliminate debt, address unfunded superannuation liabilities, and strengthen the country’s long-term financial position.
2. How much has the Future Fund grown since its establishment?
Since May 2006, the fund has grown to $206.1 billion, with an average annual return of 7.7 percent.
3. Why does Peter Costello believe the fund should continue to grow?
Peter Costello, the outgoing chairman of the Future Fund, argues that the fund should continue accumulating returns to offset the growing Commonwealth debt and other unfunded government liabilities resulting from the aging population.
4. What is the potential future plan for the Future Fund’s earnings?
Costello suggests that in 10 to 20 years, the fund could become self-sustaining, allowing for the annual earnings to be returned to the government’s consolidated revenue while preserving the capital.
5. Are there any organizations around the world that have adopted the “future fund” model?
Yes, several organizations and regions, such as Victoria, Queensland, Western Australia, the Australian Football League, Hong Kong Monetary Authority, Thailand, and the Malaysian state of Sarawak, have set up their own “future funds” based on the Future Fund model.