The Federal Government has appointed Peter Costello to oversee the $97 billion Future Fund which the former treasurer created in 1996.

The Government says Mr Costello's appointment is for five years and believes he will provide strong leadership for the fund in a period of economic and fiscal difficulty.

"Peter Costello has the skills and experiences to provide a great contribution as he leads the Future Fund through the challenges and opportunities ahead," Finance Minister Mathias Cormann said.

"Australia again faces a significant budget challenge, so it's very important in these times that we have strong leadership in important government organisations such as the Future Fund."

In a statement, Mr Costello said he was "privileged" to be appointed to the position and paid tribute to his two predecessors - David Murray and David Gonski.

Mr Costello says he will represent the fund abroad later this week, during a meeting with global investors hosted by UK prime minister David Cameron at Downing Street.

The former treasurer says he will also be calling on the governor of the Bank of England during his visit to London.

Sorry, this video has expired Watch: Mathias Cormann announces appointment of Peter Costello as new chair

Mr Costello established the fund with an initial $60 billion to help the Commonwealth meet its superannuation obligations to retired public servants.

Labor first appointed Mr Costello to the board in 2009.

He has been acting chair of the Future Fund since January following David Gonski's switch to ANZ bank.

Mr Gonski was appointed Future Fund chairman in April 2012, but his selection was mired in a political fight.

Reports at the time suggested Mr Gonski had advised Labor that the Future Fund board wanted Mr Costello named chair.

Former treasurer Wayne Swan and former finance minister Penny Wong said Mr Gonski's advice was not a formal recommendation to government and argued Mr Gonski, and not Mr Costello, was the best man for the job.

The Coalition accused the Government of playing petty politics with the decision to overlook Mr Costello.

Labor backbencher Jim Chalmers, who served as Mr Swan's chief of staff for three years until 2010, has appeared to attack the Government's decision to appoint Mr Costello in a tweet published shortly after the decision was made public: