I’ve been wanting to write about this for sometime and now seems like an appropriate one with Australians looking like they’re about to elect an anti-science government determined to dig up every last speck of coal they can find. George Monbiot, who has come up with the term “Abbottalypse“, describes this strategy as a “21st-Century nation (is) returning to a 19th-Century economy“.
The problem with resource-dependent economies is that when countries dig natural resources out of the ground and sell them, they are taking away the future wealth of the country because natural resources are finite. Or, as Angela Cummine puts it, for these countries their “dominant source of prosperity is finite”. Many nations recognize this and have established Sovereign Wealth Funds (SWF) which are state-owned investments, funded by the export of natural resources. More than 50 countries around the world possess a SWF with most of these having been established after the year 2000. Governments of these countries have prudently decided to save and invest these resource windfalls from boom times for use during times of need such as for projected savings shortfalls, currency fluctuations and infrastructure investment targets. One of these countries, Alaska, even goes as far as to distribute these profits to national citizens.
Australia is the world’s largest exporter of coal but paradoxically, has no SWF. Malcolm Turnbull has been arguing for a SWF for years, but so far, nothing has come of it. Why not? One reason for this is that people think Australia needs to get its budget in surplus before this is even considered. But Angela Cummine thinks that this argument is invalid because it assumes the capital gained from the export of resources is an income, a flow of money, when in actual fact it is a stock or wealth. She says this wealth can be used for both present needs and also long-term challenges if the fund is designed correctly. She writes,
Indeed, a fund that draws its revenue from resources that no one created and that are finite arguably should benefit both present and future generations.
Malcolm Turnbull‘s view is that we should start setting up a fund right away and spend the years prior to surplus getting the design right.
The cash will probably continue to pour in, he says, and rather than waiting until Australia is debt free to make up our minds we should decide now that it is the right thing to do and spend the intervening years getting the fund’s design right.
The question that arises with talk of a SWF fund is who owns the resources that are finite and that no-one actually makes? The answer seems pretty clear to me, the people own them. Australians own Australia’s natural resources. Not Gina Rinehart and not Clive Palmer.