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Legislative Council - Fifty-Second Parliament, First Session (52-1)
2011-05-18 Daily Xml
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SOVEREIGN WEALTH FUND

The Hon. M. PARNELL (17:03): I move:

That this council calls on the state government to—

1. Responsibly plan for a future time when our state's non –renewable mineral resources run out; and

2. Investigate models for the creation of a sovereign wealth fund to ensure our long-term prosperity.

The Greens firmly believe that we need to more wisely and prudently manage the current and future windfall from the rapid extraction of our mineral wealth. The resources boom is generating enormous wealth, and all Australians should reap the benefits of this now and in the future. However, currently, governments, both state and federal, are using this current mineral windfall to meet ongoing daily expenses. Instead, the Greens believe that we need to be saving, metaphorically, for the lean years, putting money aside now for a future time when these non-renewable resources will inevitably run out.

The mineral wealth that is in our care is just that: it is our wealth; it is not our income. Yet, in the same way that it would be short-term and economically reckless to live off capital rather than income, that is exactly what we are doing when we are spending mining royalties to meet current government expenditure. It does not make sense for a household budget to behave like that, and it does not make sense for our state and national budget, either.

We need to prudently and wisely plan ahead, but we also need to have a stronger debate on who actually owns these resources. Commonwealth Bank head, Ralph Norris, speaking in support of an Australian sovereign wealth fund said:

Mining companies are recovering resources that are the natural endowment of Australians, and therefore Australia...should look to get some return.

The Greens believe that we all collectively own these mineral resources, not just the current government and most certainly not the mining companies. They are, as Ralph Norris says, our endowment, and we do not want this wealth to be frittered away. We also recognise that this wealth belongs to current and future generations. Have we the right to spend it all now and leave none for our grandchildren?

Overseas examples here are illuminating, in particular, the different treatment of North Sea oil royalties by the United Kingdom and Norway. The United Kingdom spent the proceeds from the sale of their share of the North Sea oil as soon as they were received. Now that the returns are in long-term decline, there is very little to show for it. Norway, on the other hand, recognised two decades ago that the oil would inevitably run out and that they needed to ensure the wellbeing of future generations, so they took a different approach.

They followed the lead of some Arab states and created a sovereign wealth fund, commonly known as 'the oil fund', and they poured money from the sale of their share of the North Sea oil into that fund, from which profits are returned to the state—and they are not alone. Approximately 36 countries around the world have sovereign wealth funds, which currently manage more than $4.2 trillion worth of assets globally.

Recently, the International Monetary Fund called on Australia to establish a sovereign wealth fund to protect the economy from shock falls in commodity prices and to save revenue to ensure a more equitable distribution of its benefits across generations and reduce long-term fiscal vulnerabilities from an ageing population and rising health care costs. That is why Greens leader Bob Brown is moving at a federal level to put the idea of a sovereign wealth fund firmly on the national agenda. The Greens think that we should also have a debate on this issue here in South Australia.

The issue has a particular resonance here in South Australia as both state and federal governments are now considering the approval of the largest mineral extraction in Australia's history, the Olympic Dam mega open pit. We will shortly be debating in this place a bill to amend the South Australian mining royalty regime.

In calling for this debate, we recognise that the current carve-up of GST revenue between states and the reconciliation of state mineral revenue by the grants commission means that a simple replica of the Norway sovereign wealth fund model would not work at a state level. However, we are calling on South Australia to be deeply involved in the national debate and to investigate models that may allow South Australia to preserve some of our current mineral bounty for the future.

We urgently need to future-proof our economy. We need to consider the welfare of both present and future generations. We also need to ensure that we can pay for an ageing society with ever-growing health needs. A sovereign wealth fund could help in this, as well as underpinning long-term transformational investment in essential infrastructure such as light rail, smart electricity grids and high speed rail. It is common sense, it is prudent, it is sensible economic management and I commend this motion to the house.

Debate adjourned on motion of Hon. T.J. Stephens.

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