Push for wealth fund to cash in on boom
Sydney Morning Herald
Friday February 18, 2011
SUPPORT is growing for the creation of a sovereign wealth fund to invest the proceeds of the mining boom.The Herald surveyed Australia's business leaders before BHP Billiton, the world's largest mining company, posted a half-year profit of $US10.6 billion on Wednesday.The chief executives of Lend Lease, Tabcorp, Mirvac, CSL, Foster's, Orica and Coca-Cola Amatil, and the chairman of Mirvac, Gloucester Coal and Pacific Brands all favour such a fund.They join the ranks of the chief executives of Commonwealth Bank and Boral, Ralph Norris and Mark Selway, the Amcor managing director, Ken MacKenzie, the chairman of Fairfax Media, Roger Corbett, and the Reserve Bank governor, Glenn Stevens.BHP's spectacular profit reignited debate about the mining tax amid revelations that the compromise deal with the mining companies meant the federal government would forgo $60 billion in revenue over 10 years. Sovereign wealth funds, or natural endowment funds, are used by resource-rich countries to invest proceeds from mining and resource sectors. They spread wealth across generations and protect the economy from resource price volatility.The Government Pension Fund in Norway, established in 1990, is one of the most successful funds. Its income derives from taxes on oil companies, exploration licence fees and interest and dividends from the state-owned Statoil. It is valued at more than $500 billion. In a population of 5 million, that is $100,000 each.In Australia, AXA Asia's chief executive, Andrew Penn, cautiously supports the idea. "It is very important to find a far more equitable way to share the benefits of Australia's natural resources for current and future generations," he said. "[But] how that is achieved, and through what mechanism, is really a matter for public debate."There is disagreement about the design of the fund and what its objectives should be. Some want a stabilisation fund, while others want it to be used for savings.The Orica chief executive, Graeme Liebelt, says a sovereign wealth fund could be used to increase the rate of saving after paying down our debt and reducing company tax rates.