The trillion dollar opportunity Australia has bungled for taxpayers – but is it too late?
Australian prime minister Anthony Albanese has so far balked at the idea of Australians getting more direct benefit from resource extraction.
- NVDA
- 2330.TW
- MSFT
The Norwegian sovereign wealth fund made headlines around the globe after reporting a massive first half profit of $259 billion this month. That took the total balance for the national fund to a whopping $3.23 trillion (US$2.3 trillion).
The windfall was heavily driven by its holdings of stocks in tech and semiconductor companies across the globe, including Nvidia, TSMC, Microsoft and a long list of others. No doubt the country’s taxpayers would be smiling.
The idea of a genuine sovereign wealth fund in Australia is never far away from public debate. In recent times, independent Senator David Pocock of the ACT has proposed that the federal government create an Australian sovereign wealth fund modelled on the Norwegian approach, to be funded using inflows from a proposed additional tax on offshore LNG and gas export revenue earnings.
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The Pocock proposal raises interesting questions about Australia’s approach in this area.
Australia’s patchwork of small wealth funds
While its based on a very different model, Australia does actually already have a sovereign wealth fund, the ‘Future Fund’.
As of the latest snapshot from the Future Fund, which covers up to the end of the March quarter, it currently possesses assets of $269.1 billion.
There are also a number of other Future Fund’s under management, which includes: Medical Research Future Fund, ATSILS Fund, Future Drought Fund, Disaster Ready Fund, Disability Care Australia Fund and the Housing Australia Future Fund.
Across these various funds, the total additional assets under management comes to an extra $68.1 billion to a total of $337.2 billion across the various Australian government sovereign wealth funds.
But Australia’s Future Fund is quite a bit different to the sovereign wealth funds of nations like Norway.
The Future Fund was designed to address the looming problem of the government’s highly generous defined benefit superannuation scheme and the past promises made to politicians and public servants to keep them highly paid in retirement.
The Norway approach
The Norwegian approach to its sovereign wealth fund is significantly broader in scope and intent.
It has been stated by the managers of the fund that its purpose effectively rests upon two pillars:
Using the fund as a means of intergenerational wealth transfer, ensuring that the benefits of gas and oil production, both finite resources are to the benefit of future generations, not just the current population during periods of extraction.
