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 public servants. The fund's investment decisions are made at arm's length from the executive.

The stated aim of the fund is to hold AUD $140 billion by 2020 [ [http://www.news.com.au/business/story/0,23636,21100970-462,00.html Future Fund gets time-out on Telstra stock] , "News.com.au" January 23rd, 2007.] ; this figure would free up AUD $7 billion in superannuation payments each year from the federal budget.

Purpose

The premise of which the fund was established 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 AUD $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. [ [http://www.theage.com.au/news/national/labor-seizes-on-libs-future-fund-backing/2007/03/26/1174761379941.html Labor seizes on Lib's Future Fund backing] , "theage.com.au" March 28th, 2007.]

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 [ [http://www.budget.gov.au/2008-09/content/speech/html/speech-06.htm Budget Speech 2008‑09 - Investing in the future] - "2008/9 Budget website"] :

*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.
*Health and Hospitals Fund - A health infrastructure fund to provide increased spending on hospitals, medical equipments etc. with an initial allocation of $10 billion.
*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.

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 of Guardians is David Murray. Other members are; Jeffrey Browne, Susan Doyle, John Mulcahy, Trevor Rowe and Brian Watson.

Timeline

*September 11, 2004:The Future Fund is announced by Treasurer Peter Costello in the lead up to the 2004 federal election. [ [http://www.newstext.com.au/docs/ADV/2004/get.jsp?docid=ADV-20040911-1-038-2085454V9@SA-METRO-2004-2003 ELECTION 2004 New fund for future super bills] , "newstext.com.au" September 11th, 2004.]

* March 23, 2006:The [http://www.austlii.edu.au/au/legis/cth/consol_act/ffa2006147/ Future Fund Act 2006] receives Royal Assent.

* May 5, 2006:AUD $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. [ [http://www.futurefund.gov.au/faqs Future Fund FAQs] ]

* February 28, 2007:The Australian Government transferred their remaining 17% stake in Telstra, valued at AUD $8.9 billion, into the fund. [ [http://www.news.com.au/business/story/0,23636,21301482-31037,00.html $9bn Telstra shares in Future Fund] , "News.com.au" February 28th, 2007.] This contribution, combined with other transfers, will push the fund to over AUD $50 billion by the end of the 2006-2007 financial year.

* May 22, 2007:It has been revealed that earlier in May 2007, the Chicago-based Northern Trust Corporation had won a competitive tender process to manage the AUD $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. [ [http://www.abc.net.au/worldtoday/content/2007/s1932238.htm The World Today - Northern Trust defends Enron connection ] ] Northern Trust, as a result, stands to collect AUD $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. [ [http://www.abc.net.au/news/indepth/featureitems/s1929545.htm Foreign bank to manage $51b Future Fund] - Australian Broadcasting Corporation]

* May 2007:The fund manager Northern Trust, was linked to the Enron scandal. [ [http://www.abc.net.au/worldtoday/content/2007/s1932238.htm The World Today - Northern Trust defends Enron connection ] ] 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". [ [http://www.theage.com.au/news/National/Future-Fund-unfazed-by-Enron-link/2007/05/23/1179601474328.html Future Fund unfazed by Enron link - Breaking News - National - Breaking News ] ]

* May 2008:The Australian Government adds the 2008 and 2009 budget surpluses, valued at AUD $41 billion, into the fund. [ [http://www.theaustralian.news.com.au/story/0,24897,23700919-601,00.html We won't raid $44bn fund pool, says PM Kevin Rudd] - "The Australian" May 15th, 2008] 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, bringing the total value of the Australian Government Future Fund assets to AUD $106.6 billion by the end of 2009-2010 financial year, with the three funds to be separate components.

References

External links

* http://www.futurefund.gov.au/