NO.107

TRANSFER OF 2005-06 BUDGET SURPLUS TO THE FUTURE FUND

The Government will transfer $13.638 billion to the Future Fund during 2006-07.

This is the second significant contribution by the Government to the Future Fund to help meet the Government’s superannuation liabilities. 

By addressing superannuation liabilities — currently valued at almost $100 billion and the largest liability on the Government’s balance sheet — the Future Fund will strengthen the Government’s financial position and help reduce pressures on the budget at a time when the Government will be facing the spending challenges of an ageing population.

In May 2006 the Government established the Future Fund with capital of $18 billion and stated that further contributions would be sourced from future budget surpluses once final budget outcomes were known.  The transfer amount of $13.638 billion represents the cash available from the 2005‑06 realised budget surplus after other financing commitments have been met.  This will bring the Government’s contributions to the Future Fund to over $30 billion.

The $13.638 billion will be transferred to the Future Fund in two instalments, with $10 billion to be transferred in January 2007 and the remainder in April 2007.  This timing is designed to ensure that the Government can make these payments while still continuing to meet its within-year cash management requirements without short term borrowing.

Amounts invested in the Future Fund are expected to earn a real return of at least 4.5 to 5.5 per cent over the long term.  The Government believes that the Future Fund will provide a better return on these surpluses than the current alternatives available to the Government.

MELBOURNE

29 September 2006

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