Tuesday Aug 15, 2023

A Future Without Future Funds by Dimitri Burshtein

A Future Without Future Funds by 

In 1984, Milton Friedman reminded us that “there is nothing so permanent as a temporary Government program”. And so it has come to pass that the Future Fund, which was envisaged to have a finite life, is now seeking immortality.   

The Future Fund is an uniquely Australian creation.  Often — and arguably erroneously — described as a sovereign wealth fund, it has been given near-mythical credence.  Its board is not comprised of mere directors but rather ‘Guardians’.  The Future Fund’s existence has attained such an exalted economic status in Australia that despite its recent questionable economic contribution, it has spawned several new ‘children of Future Fund’ established at the Commonwealth and State levels. 

Approaching 18 years of age, however, it is now time to consider the future of the Future Funds because as Nobel laureate Paul Samuelson once quipped: “When the facts change, I change my mind”.  And when it comes to the Future Fund, the facts have changed significantly since it was established in 2006.  The economic case for its continuing existence has since eroded.   

In Australia’s current economic straits, the most economically responsible action for a government to take is to liquidate, in an orderly manner, the holdings of the Future Funds and pay down debt. With every additional dollar of Commonwealth debt accumulated and every interest rate increase, the case for closing and retiring the Future Funds becomes ever more compelling.  

Importantly also, once all Future Fund investments have been liquidated, the Future Fund entity should be permanently shut down to reduce the political incentives for the establishment of ‘grandchildren of Future Fund’ . 

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