BUSINESS leaders canvassed by the Herald are solidly in favour of creating a sovereign wealth fund to bolster Australia's future, but they differ on its design and purpose.
Executives from Lend Lease, Tabcorp, Foster's, Mirvac, CSL and Coca-Cola Amatil have joined the Fairfax Media chairman, Roger Corbett, and the Commonwealth Bank chief executive, Ralph Norris, in calling for a sovereign wealth fund to better manage the nation's legacy from the resources boom.
They are concerned about the long-term cost to the economy of high commodity prices and high terms of trade, and believe the nation should take advantage of the boom while it lasts.
But there is little agreement as to the design of a fund, with some calling for a stabilisation fund and others saying the fund should be used for savings.
"I see two major benefits arising from the formation of a fund,'' Mirvac's chairman, James MacKenzie, said. ''The first is that it would assist in spreading the benefits of the minerals boom over many generations, rather than risk blowing the resulting wealth over just a decade or two.
"Second, there is some prospect that a fund with an appropriate investment mandate … could play a role in moderating the value of the Australian dollar, thereby assisting in maintaining the competitiveness of non-resource industries."
Others are concerned whether the fund should be financed by a new tax on "extraction companies" or created from the existing tax take.
"The other question is who should manage the fund, with the Future Fund model offering the most ready opportunity," the Foster's chief executive, Ian Johnston, said.
The Future Fund is not a sovereign wealth fund but was set up to manage the superannuation of public servants.
As the issue of a mining tax heats up following this week's record $US10.6 billion half-year profit from BHP, and record profits also from Xstrata and Rio Tinto, economists have called for calm.
HSBC's chief economist, Paul Bloxham, said the issue of high commodity prices was too politicised at the moment and needed to be discussed rationally.
"How much better does it need to get before we start thinking we should be doing this in time for the next disaster, or the next time there's a cycle?" Mr Bloxham said.
"There should be some serious thought going on right now about exactly how we will structure a fund, and the best way to do so, with some serious consideration for introducing one."
The issue has come to the fore in recent weeks with Mr Norris breaking ranks with the banking fraternity to call for a Norwegian-style sovereign wealth fund.
''We need to look [at] what Norway has done with regard to its oil resources and setting up a fund - which is well insulated for the future when it no longer has any oil to draw upon - to make sure their economy continues to provide the support for its population that it does today,'' Mr Norris said.
The comments added to calls by Mr Corbett for the government to lock up proceeds from resource exports for the benefit of the future.
The Business Council of Australia said the mining boom would continue to pose supply-side problems, and such a fund could be used to aid structural adjustment. But it cautioned against introducing the fund too quickly. ''One means of sensibly handling the proceeds of a resources boom may be the concept of a stabilisation fund," a council spokesman, Scott Thompson, said.
The most popular candidate to manage the fund is the Future Fund's board of guardians, but its chairman, David Murray, declined to comment.
Source: http://www.smh.com.au
Executives from Lend Lease, Tabcorp, Foster's, Mirvac, CSL and Coca-Cola Amatil have joined the Fairfax Media chairman, Roger Corbett, and the Commonwealth Bank chief executive, Ralph Norris, in calling for a sovereign wealth fund to better manage the nation's legacy from the resources boom.
They are concerned about the long-term cost to the economy of high commodity prices and high terms of trade, and believe the nation should take advantage of the boom while it lasts.
But there is little agreement as to the design of a fund, with some calling for a stabilisation fund and others saying the fund should be used for savings.
"I see two major benefits arising from the formation of a fund,'' Mirvac's chairman, James MacKenzie, said. ''The first is that it would assist in spreading the benefits of the minerals boom over many generations, rather than risk blowing the resulting wealth over just a decade or two.
"Second, there is some prospect that a fund with an appropriate investment mandate … could play a role in moderating the value of the Australian dollar, thereby assisting in maintaining the competitiveness of non-resource industries."
Others are concerned whether the fund should be financed by a new tax on "extraction companies" or created from the existing tax take.
"The other question is who should manage the fund, with the Future Fund model offering the most ready opportunity," the Foster's chief executive, Ian Johnston, said.
The Future Fund is not a sovereign wealth fund but was set up to manage the superannuation of public servants.
As the issue of a mining tax heats up following this week's record $US10.6 billion half-year profit from BHP, and record profits also from Xstrata and Rio Tinto, economists have called for calm.
HSBC's chief economist, Paul Bloxham, said the issue of high commodity prices was too politicised at the moment and needed to be discussed rationally.
"How much better does it need to get before we start thinking we should be doing this in time for the next disaster, or the next time there's a cycle?" Mr Bloxham said.
"There should be some serious thought going on right now about exactly how we will structure a fund, and the best way to do so, with some serious consideration for introducing one."
The issue has come to the fore in recent weeks with Mr Norris breaking ranks with the banking fraternity to call for a Norwegian-style sovereign wealth fund.
''We need to look [at] what Norway has done with regard to its oil resources and setting up a fund - which is well insulated for the future when it no longer has any oil to draw upon - to make sure their economy continues to provide the support for its population that it does today,'' Mr Norris said.
The comments added to calls by Mr Corbett for the government to lock up proceeds from resource exports for the benefit of the future.
The Business Council of Australia said the mining boom would continue to pose supply-side problems, and such a fund could be used to aid structural adjustment. But it cautioned against introducing the fund too quickly. ''One means of sensibly handling the proceeds of a resources boom may be the concept of a stabilisation fund," a council spokesman, Scott Thompson, said.
The most popular candidate to manage the fund is the Future Fund's board of guardians, but its chairman, David Murray, declined to comment.
Source: http://www.smh.com.au
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