SYDNEY May 6 Australia will delay tapping its
$130 billion Future Fund, the world's seventh-largest sovereign
fund, for at least six years to ensure it has sufficient assets
to cover mounting public service pension liabilities, a
newspaper said on Saturday.
Federal Treasurer Scott Morrison will extend the maturity
date for drawing down on the fund from July 1, 2020, to at least
2026, The Australian said.
By doing so, the fund would generate sufficient assets to
cover unfunded superannuation liabilities for federal public
servants, who enjoy generous defined benefit pension schemes
that guarantee as much as 80 per cent of their final salary for
According to The Australian, public service pension
liabilities under the schemes, which have been closed to new
members, will peak in 2049-50 at $20 billion. Liabilities are
not expected to expire until 2100.
Morrison told the newspaper it made no sense to draw down on
the Future Fund while it was earning 7 per cent per annum when
governments could borrow to pay the pensions at 2.8 per cent.
"Ten or 15 years down the track, the unfunded
super-liability problem would still be there," he was quoted as
saying. "We want the Future Fund to be able to do the job for
which it was set up."
He also said the additional debt would be incurred at a time
when the economy was returning to surplus and net debt was in
The Future Fund is Australia's biggest investor. The move to
delay drawing down on the fund, which The Australian said would
be a centerpiece of the federal budget due to be released on
Tuesday, would force the government to use further borrowings
over the medium term to fund state pension payouts.
Former Treasurer Peter Costello told the newspaper that
delaying the draw-down could see total assets rise to $300
billion by 2030 and lift the taxpayers' burden permanently.
"It will cover the cost of all unfunded liabilities and save
the budget tens of billion of dollars a year," he said.
The government is expected to reveal a faster narrowing of
the yawning deficit next week in a federal budget that will also
seek to appease the electorate over rising housing
Keeping a tight leash on expenses and encouraged by an
unexpected late windfall from higher commodity prices, the
government is targeting a surplus by 2021 amid lingering
concerns about Australia's prized triple-A credit rating.
(Reporting by Peter Gosnell and Jane Wardell; Editing by Nick