Cormann confirms Future Fund quarantine

Finance Minister Mathias Cormann has confirmed the $130 billion Future Fund will be quarantined until 2026.

The fund, set-up by former Liberal treasurer Peter Costello in 2006 to cover future unfunded public servant superannuation liabilities, was available for drawdown in 2020/21 under its legislation.

"Given that the outstanding unfunded public sector liability hasn't been fully covered yet ... we should continue to preserve the fund in full," Senator Cormann told Sky News on Sunday.

Tuesday's federal budget will include the 2020/21 financial year for the first time in its forward estimates, so a decision had to be made now.

Senator Cormann said it makes sense to keep the fund running when it is earning an investment return of seven per cent a year on average.

An analysis by the independent Parliamentary Budget Office earlier this year warned the fund would be exhausted by 2052/53 if drawdowns start as initially envisaged in 2020.

It calculates delaying drawdowns until 2024/25, the fund would maintain an ongoing positive balance until the unfunded superannuation liability arising from the now-closed civilian and military schemes are largely extinguished in about 2100.

Mr Costello, now chairman of the fund, told The Weekend Australian he backed the decision.

He had also previously warned against draining an asset on the books of the commonwealth.

Drawdowns of $8 billion to $9 billion would quickly exhaust the fund and weaken the nation's balance sheet, he said.