JOB cuts in the steel industry, blamed on the high dollar, have reignited calls for a sovereign wealth fund to rein in the exchange rate.   

After BlueScope Steel yesterday said it would shed more than more 1000 jobs, on top of 400 retrenchments from OneSteel last week, a national fund to save more of the mining boom received backing from the Greens, the Australian Industry Group, and prominent HSBC economist Paul Bloxham.   

A sovereign wealth fund is a national savings pool used in commodity-rich countries, such as Norway or Chile, to save a resources boom windfall or to soften the blow from a sudden fall in commodity prices.


Mr Bloxham, a former Reserve Bank economist, said a sovereign fund could help take some of the pressure off the dollar, but would probably require higher taxation of mining.   

''If you held that [extra revenue] in a sovereign fund you would be slowing the pace of structural change in the economy and potentially put downward pressure on the exchange rate,'' Mr Bloxham said.

''We are well into this mining investment boom now. What would have helped is if we had had a larger mining tax, it would have discouraged some of this investment from happening so rapidly. We could probably all do with a little less structural economic change.''

Heather Ridout, the chief executive of Ai Group, said Norway was able to offset some of the pain of a high exchange rate by investing the funds' assets overseas.

''We need a longer-term strategy to deal with the dollar and its impacts,'' Mrs Ridout said. ''This needs to be articulated and advocated and may include the establishment of a sovereign wealth fund that stabilises the economy without the need for interest rate rises.''

The leader of the Greens, Bob Brown, said he would approach the government's tax summit in October proposing a sovereign fund, to be funded by a higher mining tax.   

A sovereign fund is also supported by Common- wealth Bank chief executive Ralph Norris, Liberal MP Malcolm Turnbull and the International Monetary Fund.

What mining tax?

When is there even going to be one?

longweekend58 wrote on Aug 23^rd, 2011 at 9:21am:



The damage is already being done - because predominantly-multinational free enterprise is running amok and profiting disproportionately at our collective expense!

Seriously, where is the benefit in mining as much of our finite natural resources as quickly as possible and flogging them off overseas at prices which do not reflect the real value of these raw materials to humanity in the medium-long term - whilst at the same time creating severe and inflationary economic capacity constraints and associated socio-economic issues for the Australian people!?

We need to be mindful that short-term unbridled market forces do not properly value finite natural resources to humanity over the longer-term.  Minerals parasites are aware that their ready access to exploit these national assets may be cut off at any time - when Governments (and their citizens) start to wake up to the reality that these resources are being rapidly extracted and flogged off at prices which are way below the true value...

Why not take stock of our finite natural resources - and our nation's overall position in the world - and start strategically-planning for the sustained benefit of ourselves and our descendants through the steady rationed extraction of those increasingly-precious resources (at corresponding sale prices) over the next 100-500 years!?