How best to harness mining boom windfall

THE gulf between rhetoric and action is a jarring feature of our political landscape. There is a surplus of talk about putting the nation's long-term interests to the fore, yet short-term partisan considerations often dominate. Politicians naturally have an eye to the next election, but their primary concern ought to be policies that benefit coming generations, not just the existing pool of voters.

There is a lesson to be drawn from the crucible of democracy, ancient Greece. In Homer's Odyssey, the heroic but flawed Odysseus has his men tie him to the mast in anticipation of the overwhelming desire he knows will strike him when he hears the Sirens sing. The Age has long argued the mast to which our lawmakers should strap themselves is a sovereign wealth fund. It would safeguard the yield of the mining boom to create the intergenerational assets necessary for a growing population's prosperity. Other resource-rich exporting nations harness the proceeds in this way. With a quarter of our population, Norway has amassed some $600 billion in the 20 years since its fund began.

Singapore and South Korea, too, have sovereign wealth funds. Both were mentioned last week by New South Wales Liberal senator Arthur Sinodinos, who, inter alia, used his first speech to support the establishment of such a fund in Australia "when it is affordable". The mining boom, which is set to generate billions of extra taxation revenue a community windfall that will be augmented by the freshly minted minerals resource rent tax makes it not only affordable, but imperative. Senator Sinodinos' words carry more weight than those of most new parliamentarians as chief of staff to then prime minister John Howard from 1997 to 2006, he spent almost a decade close to the pinnacle of political and policy power. He said of the mooted fund: "It could acquire stakes in individual companies to increase our exposure to the newly growing emerging markets and economies to reinforce our influence in the global economy and thereby strengthen our national security. Such a fund could also kick-start a genuine venture capital market, still stalled after all these years, so that more Australian inventions and innovations can be commercialised here rather than abroad."

This adds to growing support for a wealth fund. One of Mr Howard's successors at the head of the Liberal Party, Malcolm Turnbull, who might still return to the leadership, is a backer, as are many economists and a key business lobby, the Australian Industry Group.

The precedents are not only offshore. The Howard government set up the Future Fund to cover public service superannuation. That was followed by education and health funds, which are overseen by the Future Fund Board. But these merely provide cornerstones for a true sovereign wealth fund the edifice remains to be constructed.

The chairman of the Future Fund, former Commonwealth Bank chief executive David Murray, has perhaps helped provide some motivation. Late last week he lambasted the Gillard government for borrowing funds to buy votes and for complacency in the face of the risk that the European debt crisis will cause another global financial crisis.

His warning was buttressed by comments from his successor at the Commonwealth Bank, Ralph Norris, who argued that global financial markets "effectively froze" last week after Germany, even with the lure of an unusually elevated interest rate, was unable to entice investors to buy the ?6 billion of debt it needed to sell.

A sovereign wealth fund is a form of insurance against economic difficulties it is too late to use it against any imminent crisis, but over the longer term it would provide a buffer. It is overdue and merits bipartisan support. There is an evident way to establish the fund what is required is political will.