About
Articles
Monographs
Working Papers
Reviews
Archive
Contact
 
 

When the Guano Runs Out

A RBA research paper obtained through FOI advocates an offshore sovereign wealth fund, although the story seems to contain some editorialising by Paul Cleary, who thinks Australia is just a bigger version of Timor Leste. Liberal MP Paul Fletcher seems to think Australia is just a bigger version of Naru:

More fundamentally, natural resources are finite. When they run out, the money will stop flowing. So we should make sure we put some of the money aside – rather than spending it all now.

In our own region, the micro-state of Nauru offers a sobering example of the folly of assuming that the good times will last forever. It used to have large reserves of guano, used to make fertiliser.  With only a few thousand people and a steady flow of mining royalties, it was in a fortunate position.

But the money was largely frittered away. Then the guano ran out – and Nauru had little to show for decades of mining.

Resources are not finite in any economically meaningful sense. The Coalition seems to think that SWFs are a great idea once government debt is paid off (they set up the Future Fund after all). I make the case against further use of SWFs in this op-ed. Governments that are not prepared to commit to binding fiscal responsibility legislation cannot be trusted with SWFs.

posted on 28 March 2011 by skirchner in Economics, Fiscal Policy

(0) Comments | Permalink | Main

| More

Next entry: John Edwards Tipped for the RBA Board

Previous entry: RBA Drags the Chain on Transparency

Follow insteconomics on Twitter