PETER Costello’s Future Fund does two important things — arguably, it should also do a third.

The first, biggest and most important thing it does is to make money for the federal government and so for you. Just let that sink in. It is actually something extraordinary, profound and really quite unique.

We actually have an arm of government that makes money. It starts the year with ‘X’ and finishes the year with ‘X-plus’. It started 12 years ago with $60 billion and now has $146 billion. That’s to say, the collective you, has $146 billion.

Contrast that with what government normally does — a complicated mix of for good and for bad: take money from you and give it to ‘somebody else’.

That can often include giving it back to you — some of it back, after wasting some on the way through.

Since we last had a treasurer, not exactly coincidentally named Costello, it’s been taking somewhat less than it’s been handing back. That gap is what’s called a ‘Budget deficit’.

The second, less obvious thing, the FF does is to provide an investment guide to all and sundry. You’d do far worse than to simply ape its spread of investments, which have so successfully delivered above-target returns and with minimal risk. As opposed to, for instance, just doing more and more (heavily) negatively geared speculative property: that has been high return, we might be about to see that it is also high-risk.

But all this points to the third thing the FF should arguably now do. As a private investor you simply cannot ape the FF portfolio.

Yes, you can buy local equities (or ETFs and other index-linked offerings). You can buy other developed country equities, albeit not quite as easily; and it gets much harder if you want to buy emerging market equities.

But the FF has nearly half its money — over $60 billion in ‘private equity’, ‘property’, ‘infrastructure and timberland’ and ‘alternative assets’. As a private investor all those are forbidden territory.

The only way you can invest in those spaces is through a funds manager: the simple question is why not allow you to choose the FF as that funds manager?

Even if we hadn’t had the revelations this year from the royal commission about just how poorly almost all wealth management is, for want of a better word, managed, I would not willingly want to entrust my savings in those spaces. After the revelations, forget it.

But I would be very comfortable in entrusting them to the FF — both in terms of the way it has operated and the results it has produced. The really critical element is the way it has managed risk.

Now the FF is supposed to self-destruct. Originally, it was going to start paying off (some of) the near $300 billion of unfunded federal public sector superannuation from 2020, until it basically wound down to zero. At that point, there would still be a big lump of unfunded super to be paid.

Costello as FF chairman persuaded the Coalition government to postpone the start date for taking money out of the FF to 2026. It is still intended to self-destruct, but over a longer period and paying off more and perhaps all of the unfunded super.

Because the federal Budget is in deficit, the delay will mean the money for the super will have to be borrowed. But that is actually a clear plus — for the government and for you.

The FF has earned 7.9 per cent a year on average since it was set up. It earned 10.4 per cent a year over the last five years, including a slightly lower 9.3 per cent in the last year.

As long as that earning rate is above the government’s 10-year bond rate, it makes more sense to borrow the money than to run down the FF. The bond rate is just 2.56 per cent.

In a crude but reasonable indication, the $146 billion in the FF means the Budget is at the moment actually better off by around $9 billion every year.

I would argue for keeping the FF permanently — that’s to say to have it never start paying for the super. A halfway house would be to have it pay, say, half its earnings each year into the Budget and to begin taking private investor money as well.

Now none of this huge benefit to the federal Budget — and so to you — would have existed but for Costello.

The Costello who, first, generated 10 Budget surpluses and sold Telstra (imagine if, in the world of Netflix, Google, Amazon and the rest, Telstra was still government owned); and then kept the grubby hands of his cabinet colleagues off the money by freezing it in the FF.

Let’s ‘unfreeze’ the FF by giving it a, well, permanent future.

VIRGIN VERGING ON SUCCESS
THE two key things to understand about the Virgin result is that it was actually a good operating profit — the best since 2008 — and that coincided with a similarly strong result from Qantas.

Why is this important? Because it suggests we may actually, finally, have a viable two-airline future.

For most of the past 10 years Virgin has existed essentially as a strategic loss-leader for a collection of foreign airlines, to match Qantas’s (and its One World partners) linkage between international and domestic.

Ever since Ansett went down in 2001, we have basically teetered on the edge of a one-airline future. We only avoided it because of the need for Singapore and AirNZ to compete with Qantas and for Etihad to go head to head with Emirates.

For complex reasons that had started to fade, Virgin really needed to build its own independent domestic dynamic. Long-time CEO John Borghetti might be getting there.