Media Releases
Scrap the government’s piggy-bank
It is better to grow the Australian economy faster today by spending on productivity-enhancing infrastructure and establishing a lower tax burden than for the government to hoard financial and other assets in a sovereign wealth fund, according to a new report released by The Centre for Independent Studies.
According to Future Funds or Future Eaters? the Future Fund should be wound up and its assets transferred to existing public sector superannuation schemes.
CIS researchers Robert Carling and Stephen Kirchner argue the Future Fund, and any other kind of sovereign wealth fund, is unnecessary and may actually weaken the incentives for responsible government spending in the long-term.
‘Public saving via a sovereign wealth fund is just deferred government spending. There is no reason to believe that future governments will spend more wisely than the governments we have actually had,’ said Carling and Kirchner.
‘There are no guarantees as to how the resources that are freed up by the Future Fund will be spent.’
The Future Fund is not an additional source of national saving. Public saving via the Future Fund reduces private saving and partly removes the private sector from saving and investment decisions.
‘The return on the assets in the Future Fund is likely to be poor compensation for the opportunity cost of not using these funds today.’
‘However, the assets that have already been accumulated in the Future Fund should be transferred to the existing public sector superannuation schemes in accordance with the liabilities they have accrued.’
‘A sovereign wealth fund is not necessary to manage future budget surpluses. Fiscal policy rules that impose limits on government spending, taxing and debt are a more effective way of ensuring fiscal responsibility than a sovereign wealth fund.’
‘Politicians who are unwilling to be bound by fiscal policy rules cannot be trusted with a sovereign wealth fund,’ said Carling and Kirchner.
Robert Carling is a Senior Fellow and Dr Stephen Kirchner is a Research Fellow at The Centre for Independent Studies. They both are available for interviews.
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