Former ANU economics professor and now Federal Labor MP Andrew Leigh spoke yesterday on the arguments for and against a Sovereign Wealth Fund for Australia (Wrong time for a Sovereign Wealth Fund). Andrew concluded:
…in the current economic environment it is hardly a high priority. If you are concerned about future generations, let us focus on the top priorities: a price on carbon pollution, shifting from the outdated mineral royalties scheme to a profits-based mining tax, and investing in skills. These are the sorts of long-term investments that future generations will thank us for. In my view, the notion of a sovereign wealth fund can go in the safety deposit box for now.
I agree it is not a priority. It is actually a bit silly we’re having this debate given the Commonwealth Government hasn’t run a budget surplus since 2007-08. While a modest surplus of $1.5 billion is expected next financial year, it will take a number of large surpluses over several financial years to pay down the forecast stock of debt at the end of 2011-12 ($253 billion) to the level necessary to keep the bond market liquid (possibly around $60-75 billion).