Chapter 4: Sustainable Government Finances

Public Sector Superannuation Advice

Future Fund

The commencement of the Future Fund Act 2006 (the Future Fund Act) on 3 April 2006 gave effect to the announcement made by the Coalition during the 2004 federal election campaign to establish a financial asset fund for the purpose of offsetting the government's unfunded superannuation liabilities. The legislation established the Future Fund, the Future Fund Board of Guardians and the Future Fund Management Agency.

During 2005-06 Finance played a significant role in the establishment of the Future Fund, including assisting the Department of the Treasury with the development of the legislation, the development of the Investment Mandate and facilitating the transfer of the initial seed capital of $18 billion to the Future Fund on 5 May 2006. With this transfer of seed capital, the Future Fund was founded and responsibility for it moved from the Treasury portfolio to the Finance and Administration portfolio.

On 26 April 2006 the department established the Future Fund Branch, to advise the Minister on matters relating to the Future Fund Act and the government's investment mandate for the Fund, including investment performance against the mandate. The branch will also advise the Minister on regulations and determinations to be made under the Future Fund Act, the appointment of members to the Future Fund Board of Guardians, transfers of amounts and financial assets to the Fund, the setting of target asset levels for the Fund and (in time) debits from Fund.

PSS and CSS Long Term Cost Report

During 2005-06 Finance, in conjunction with its contracted actuaries, undertook a full actuarial investigation of the long term costs of the Public Sector Superannuation Scheme (PSS) and the Commonwealth Superannuation Scheme (CSS). The main aim of the investigation, which is undertaken triennially, is to assess the long term cost of the PSS and CSS that will be charged to the Consolidated Revenue Fund.

The results of the investigation were set out in the 2005 PSS and CSS Long Term Cost Report, which was tabled in parliament on 14 June 2006. The PSS/CSS liability was estimated to be $64.4 billion as at 30 June 2005. The Australian Government's share of this liability is $61 billion (with the remainder being mainly attributable to the Australian Capital Territory and Northern Territory governments). The report, which for the first time incorporated the closure of the PSS, estimated that the unfunded liability will decline to 1.3 per cent of Gross Domestic Product (GDP) by 2045 compared to 5.7 per cent of GDP by 2042 that was estimated in the 2002 Long Term Cost Report.

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