Labor calls on the Turnbull Government to ensure that decisions on drawdowns from the Future Fund are made in the long-term interests of Australia.

The Future Fund was established to strengthen Australia’s long-term financial position by accumulating assets to offset the unfunded superannuation liabilities of Commonwealth employees, which will place significant pressure on the nation’s finances.

In the upcoming budget, the Government has some critical decisions to make in relation to the management of the Fund, particularly around drawdowns from 2020.

The 2016-17 MYEFO is based on the assumption that the Fund will be drawn down to the maximum extent possible from 1 July 2020.

However Parliamentary Budget Office analysis shows that if the Fund is drawn down to the maximum extent possible from 1 July 2020, it could be completely exhausted by 2052-53 and still leave an unfunded liability of $249 billion.

The PBO found that if drawdowns were delayed for four years, the entire unfunded liability may be covered.

Given how critical this decision is to the future of the Commonwealth’s finances, Labor calls on the Government to ensure its decision meets the following criteria:

• An initial drawdown schedule should be designed in a way that maximises the Commonwealth’s net financial worth, based on reasonable assumptions about future returns and the value of the liability;
• An initial drawdown schedule should not require the Future Fund to exit its long-term capital investments which may not be mature; and
• To provide certainty to the Future Fund, an initial drawdown profile should be set with regular updates provided in rolling announcements.

The Government should also publish sensitivity analysis in relation to the impact of lower returns on the future value of the Fund and the liability.

Ensuring the health of Australia’s sovereign wealth fund is above politics, which is why both the Government and Opposition need to work together to secure its longevity and viability into the future.