The head of the Abbott government’s landmark National Commission of Audit, Tony Shepherd, has issued a strong warning that the Future Fund set up to cover Commonwealth public service superannuation costs could be down to a just third of what is needed to cover unfunded liabilities.

Speaking on the ABC’s Lateline program on Monday night, Mr Shepherd said that the Commission’s projections of potential ratios of government debt to gross domestic product ‑  which the Commission of Audit has estimated could go to 17 per cent, did not include unfunded superannuation liability.

The flagging of the issue is significant because the size of the unfunded liability will ultimately have to be addressed by either selling off public assets, reducing entitlements for new entrants or renegotiating how expensive legacy products like defined benefits schemes are ultimately paid out.

The Howard government established the independently run Future Fund in 2006 with the aim of creating an appreciating pool of money to cover Commonwealth superannuation liabilities and take thus relieve Budget pressure.

Mr Shepherd told the ABC that future unfunded superannuation liability for the government would act to “increase that dramatically over the 17 per cent” debt to GDP figure outline in the Commission’s report.

Asked directly whether the Future Fund should be covering the unfunded liability Mr Shepherd said “yeah, and the Future Fund doesn’t really cover it.”

“It’s probably half of what’s required – even less than half, maybe a third. So we are still got a huge unfunded superannuation liability on top of our net debt,” Mr Shepherd said.

The big headache for the government is that even with drastic public service cuts, the problem of a ballooning superannuation liability will not go away.

“It’s going up and there’s no chance of it coming down. That’s the issue,” Mr Shepherd said.

“I mean, unless we get remarkable growth that we haven’t seen, unless we get remarkable improvement in productivity which we’ve never seen, we are constantly going backwards, bit by bit by bit by bit going backwards.”

Mr Shepherds comments are likely to set the stage for a push for a fresh round of sell offs of government assets in the same way the Howard government liquidated its residual stake in Telstra to create initial seed funding for the Future Fund.

However a big issue the government faces is whether there is sufficient family silver left in the chest to create a decent cash injection to bolster the superannuation warchest.

While the Australian Rail and Track Corporation and a host of other assets have been listed as potential sales targets, the big elephant in the asset disposal hall remains Australia Post which Treasurer Joe Hockey has indicated he wants to see combined with the department of Human Services.

Mr Shepherd’s comments and recommendations to sell Post contained in the Commission of Audit suggest that there is still strong pressure from so called ‘hard heads’ in the Liberals powerful right faction to dispose of the mail monopoly before it starts to generate big losses that will deliver more unwanted red ink to the government balance sheet.