Business Leaders Support New Oz SWF

Ashby Monk

I’m a little tired of writing about the on-again, off-again Australian SWF for the country’s looming mineral bounty. And yet, Gareth Hutchens has produced a series of articles this morning that merit our attention. Hutchens reports the findings of an ‘elite survey’ of Australia’s business leaders that asks whether or not the country should use mining revenues to set up a commodity fund. And, significantly, Hutchens reports that the consensus among these business leaders is that the fund should in fact be created:

“Support is growing for the creation of a sovereign wealth fund to invest the proceeds of the mining boom…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.”

You’ve got to admit, that’s a pretty powerful group of backers. For a bit more detail, here are a few quotes from these big shots (from here, here and here):

  • Commonwealth Bank Chief Executive Ralph Norris: “Mining companies are recovering resources that are the natural endowment of Australians, and therefore Australia…should look to get some return…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.”
  • Mirvac Chairman James MacKenzie: “I see two major benefits arising from the formation of a fund…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.”
  • HSBC Chief Economist Paul Bloxham: “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? 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.”
  • AXA Asia’s Chief Executive Andrew Penn: ”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.”

Those are some strong endorsements. The question, then, is whether the government will back away from its position against a stabilization or saving fund; recall that Treasurer Wayne Swan nixed the idea last year (as did the Henry Tax Review). Or will Swan cave to the growing number of critics? Since I have no sense for Australian politics, I asked our resident Australian: Gordon Clark. Here’s what he told me:

“In the end, its up to the political parties to make clear their views.  However, with a fragile government dependent upon just two independents for power, a prime minister struggling to make an impact in the media, and an opposition more concerned to wait out the current government rather than set the agenda for the future, we might have to wait for some time before there are significant moves in the direction of establishing a fund.  Readers of the blog might remember, though, that the logic of the Future Fund was based upon a commitment to the well-being of future generations, something that reappears in current commentary on the virtues of a new fund.  Surely, this is a vital ingredient in establishing any resources-based fund: so, holding the government to account on the future might be one way of clarifying the current impasse we seem to have reached.”

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This website is a project of Professor Gordon L. Clark and Dr. Ashby Monk of the School of Geography and the Environment at the University of Oxford. Their research on sovereign wealth funds is funded by the Leverhulme Trust and The Rotman International Centre for Pension Management.

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