No Future in Future Funds
I have an op-ed in today’s Australian arguing that improved fiscal responsibility legislation is a better approach to managing the fiscal consequences of terms of trade cycles than sovereign wealth funds such as the existing Future Fund:
a sovereign wealth fund provides no guarantee current revenue will be spent more wisely in the future than it is today.
If governments are unwilling to commit to binding fiscal responsibility legislation that improves on the existing Charter of Budget Honesty, there is no reason to believe greater use of a sovereign wealth fund will lead to better long-term fiscal management.
Part of the op-ed that hit the cutting room floor noted that Australia is not like Norway, Timor Leste or Nauru, dependent on a single export commodity. Australia’s resource endowment and overall economy is much more diversified, making Australia less vulnerable to some of the macroeconomic and other problems associated with dependence on a single commodity export.
posted on 14 July 2010 by skirchner in Economics, Financial Markets, Fiscal Policy
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