SYDNEY, May 25 (Reuters) - The Australian government said on Thursday it has lowered the investment return target for its sovereign wealth manager Future Fund by 0.5 percentage points citing difficult global market conditions.

The new mandate is to achieve returns of 4-5 percent above inflation, from July 1, Treasurer Scott Morrison and Finance Minister Mathias Cormann said in a joint statement. Headline inflation stood at 2.1 percent in the first quarter of the year but key measures of core inflation is still below the central bank’s 2 to 3 percent target band.

“Actuarial analysis indicates global investment market conditions may make it increasingly difficult for the Future Fund Board of Guardians to achieve current returns without taking on excessive risk,” the ministers said.

“The revised mandate which will now be tabled in Parliament, reflects changed global investment market conditions and outlook.”

Future Fund has returned 7.7 percent per year since the fund started in 2006 - above its target of 6.9 percent.

However, Chairman Peter Costello had in recent months warned of possible lower returns ahead. Last year, the fund posted its first quarterly decline in assets since 2012 amid market volatility and low interest rates.

The Future Fund was set up with contributions of A$60.5 billion to cover pension liabilities for public servants and now stands at A$130 billion ($97.45 billion).

Last year, the fund was part of a consortium which won a A$9.7 billion bid to purchase Australia’s busiest port. China Investment Corp and Canada’s Ontario Municipal Employees Retirement System were also part of the winning group. ($1 = 1.3340 Australian dollars) (Reporting by Swati Pandey; Editing by Simon Cameron-Moore)