As a citizen of resource rich Australia this story of foresight and self-determination in a nation just about makes me weep.
Mining activity is 10% of Australia's GDP. Mineral land rights in Australia are property of the government so why do overseas and private-domestic operators get to make all the profit? When Norway's example shows us that a publicly funded and owned industry was possible!
Too late now though - the last attempt to extract more value out of a booming industry led to the downfall of the government: https://en.wikipedia.org/wiki/Minerals_Resource_Rent_Tax.
This is demonstrably false: https://data.oecd.org/chart/6tTs
Compared to Norway's SWF:
- Fees are 20x larger as a proportion of AUM ($30 billion a year, nearly as much as the military budget, and 2x what the country spends on electricity)
- The assets are overwhelmingly owned by people who are already rich (Norway's SWF shares the wealth equally)
- Super has totally failed to prevent retirement poverty (elderly single women are the most impoverished demographic in Australia).
Obviously being given free oil money is better than needing to save.
OK, let me explain it. Yes, the assets owned by both funds are financial assets that are comparable. They both own bonds and corporate shares, etc. But the issue is not what assets are in the funds.
When you are given lots of money, this reduces poverty much more than when an individual gets a tax break on saving their own money. Norway has trillions in oil reserves to support a small population. I am not sure why I need to explain this, but having a trillion dollar windfall reduces poverty much more effectively than subsidizing the savings of each individual.
Moreover, when you save each pay period you have to make lots of small little asset purchases, as opposed to making huge purchases in a SWF fund in which the money comes from selling oil, so transaction costs are higher in a 401K style system than when you are sitting on an ocean of free oil.
That is what I am saying - If the $3 trillion in super were shared equally, poverty would be a lot lower. Keating himself says that he could have set the system up this way, but didn't because he wanted it to be a privatized system of individual ownership.
> Norway has trillions in oil reserves to support a small population.
Norway has $1 trillion in retirement savings to support a small population. Australia has $3 trillion in retirement savings to support a small population. What's the difference? Why does what asset class the money originally came from matter?
> I am not sure why I need to explain this, but having a trillion dollar windfall reduces poverty much more effectively than subsidizing the savings of each individual.
Once again, both countries have trillions in assets, that can be distributed in many possible ways. You can either distribute them equally and reduce inequality (Norway), or individually and make it worse (Australia).
> Moreover, when you save each pay period you have to make lots of small little asset purchases, as opposed to making huge purchases in a SWF fund in which the money comes from selling oil, so transaction costs are higher in a 401K style system than when you are sitting on an ocean of free oil.
That is not how super funds work (they don't make small asset purchases each time you make a deposit, they run a combined asset pool and just keep track of your allocation) and not why super fees are high. They are high because there are so many small funds which spend money advertising against each other and duplicating admin costs, instead of simply having one big fund like Norway does.
Uhh, this is private property, the result of individual households setting aside a portion of their own wages to save for the future. It is not politically feasible for the government to seize private savings it had said were previously for your retirement.
What you want is a defined benefit federal savings program (like social security), but that needs to be funded by taxing incomes, not by seizing existing private retirement savings. Some nations have that and others don't, but it's not a sovereign wealth fund. Please don't confuse the two issues being discussed.
The first issue is whether the government should tax the economy and pay out fixed retirement benefits for everyone, or whether it should promote individuals saving for their own retirement, or some hybrid of the two. This decision has nothing to do with SWFs. Australia has a hybrid system, where households are expected to save for retirement but there are also welfare programs for low income people. Most nations follow this model because it is what the public supports politically and it makes a lot of economic sense.
SWFs, OTOH, are created when a nation gets some unexpected windfall that is short lived, and it wants to smooth the life of that windfall into the future. That is why you invest. Otherwise when the oil runs out, Norway will face a shock. This way, by transforming the oil into investments, Norway can provide a stream of benefits that lasts longer than the oil. That question of transforming benefits across time for the government has nothing to do with whether the government provides defined benefit retirement plans or not for households. This is because even though every household has to plan for retirement when it earns no income, governments do not need to plan for a future when they earn no tax revenue. It is only when you get these predictable revenue bumps, such as discovering you are sitting on a pot of oil, that create a need for the government to smooth revenue across time.
Now Australia does have mineral resources and it even taxes the extraction of those resources just as Norway taxes the extraction of oil. But in Australia, the extraction of coal and iron results in a much smaller surplus spread over a much larger population, and so Australia's mineral wealth, while large in absolute terms, does not support the same level of surplus income per person as Norway's oil wealth - which is not to say that Australia's economy is less dependent on extraction than Norway's. Australia is very much dependent on all the jobs that mining creates, but that is not surplus income, it is income that has to be earned with labor. Therefore when Australia's coal and iron run out, it will be a big shock, but there is nothing Australia can do to smooth that income out, since it's not surplus income. This is why Australia does not put the fees obtained from mining into a SWF - they wont help!
Therefore Australia uses the proceeds from taxing mineral extraction for general revenue, it does not put the money into a special SWF pot, whereas Norway does. Just as Canada doesn't put the money it obtains from selling trees or rocks into a special pot. That decision to not stretch the revenue across time has nothing to do with whether the government has a defined benefit retirement system for households.
Yes - and that was a terrible decision. Australia could have put super contributions into a collective pool, and used the money to increase equality and fund above-poverty-line universal pensions, but it didn't. Instead they put it in individually owned accounts - inequality and poverty is much higher in Australia as a consequence. Elderly women are the most impoverished demographic in the country.
> What you want is a defined benefit federal savings program (like social security), but that needs to be funded by taxing incomes, not by seizing existing private retirement savings.
No, what you want is a collective fund like Norway's - you are talking like this doesn't exist. It would be very straightforward to tax super balances (particularly large ones) and move money into a collective pool.
> Some nations have that and others don't, but it's not a sovereign wealth fund. Please don't confuse the two issues being discussed.
Norway's SWF is literally a pension fund, and explicitly has the goal of creating equally shared wealth.
> SWFs, OTOH, are created when a nation gets some unexpected windfall that is short lived, and it wants to smooth the life of that windfall into the future.
No, that is one reason SWFs are created, but there are many - Australia's own SWF for instance was not created for this reason.
> But in Australia, the extraction of coal and iron results in a much smaller surplus spread over a much larger population, and so Australia's mineral wealth, while large in absolute terms, does not support the same level of surplus income per person as Norway's oil wealth
If we lack the surplus income of Norway, how have we managed to create a pool of wealth 3x as big from surplus incomes, in spite of wasting much more of it on fees each year?
> Australia is very much dependent on all the jobs that mining creates, but that is not surplus income, it is income that has to be earned with labor.
This is incoherent - both oil and mining resources require labor to extract. There's nothing special about oil or resources compared to any other type of capital - you can make a fund out of any type of capital.
Again, what is special about oil is that profits from extracting oil are very large, but the profits from mining coal are quite small. Therefore a nation sitting on a pile of coal has a great jobs program for employing coal miners, but not a lot of surplus industry income that can be taxed to give everyone in the country an extra 200K. A nation sitting on a vast pool of oil can do that.
> If we lack the surplus income of Norway, how have we managed to create a pool of wealth 3x as big from surplus incomes, in spite of wasting much more of it on fees each year?
Australia's large retirement funds are the result of a larger population saving for retirement. They are not obtained by taxing excess profits of the iron/coal industry, but by individual households cutting their spending and saving for retirement.
> Norway's SWF is literally a pension fund, and explicitly has the goal of creating equally shared wealth.
This is a non-sequitur. I am saying that we shouldn't confuse the policy goal of fixed versus individual savings programs with whether or not SWFs are used - as one is a retirement policy and the other is funding mechanism. A nation may want a defined pension but shouldn't have an SWF, or vice versa, or neither. The fact that you keep mixing them is not some rebuttal. It's like when I point out you shouldn't confuse colors with gender of animals, and you say "False, this is a blue, male bird!" At this point I have to disengage.
Are you aware of how Australia's superannuation system works? Contributions are literally paid from company income. You are saying it would be impossible for Australia to save trillions from surplus income when this has already happened and is the basic design of the scheme!
The post is about a person who has foresignt and self-determination, what is Australia meant to do about it?
Further, Australia is a lot more isolated than Norway.
(Australian BTW)
Australia has the highest median household wealth of any country in the world. https://www.statista.com/chart/19651/countries-with-highest-...
https://knoema.com/atlas/Australia/topics/Economy/Financial-... https://knoema.com/atlas/Norway/topics/Economy/Financial-Sec...
"its scotland's oil" was about Maggie Thatcher, and how the revenue was spent. Now scotland has independent tax raising powers, the border with england for sea resources was carefully restruck to favour england (look on a map to the boundaries, they aren't what you might think)
Australia has soverign wealth funds. Just, not made with revenue from this kind of industry. This kind of industry dominates the political landscape and has impeded the uptake of solar and wind, and replacement of coal for power generation. I don't mean silently: this is a quite overt distortion, active, such that major corporates actually have withdrawn from the australian mining and minerals council because its like the NRA, single-issue distorting of the polity.
In the early 2000s an Australian labor government tried to raise a tax analogous to a petrol royalties and revenue tax, and was pretty much de-elected by sectional interests on the strength of industry opposition. (the PRRT exists. the MRRT was voted down)
Mining employs around 40,000 people in a nation of 25 million. Solar and Wind and Tourism would probably employ more people. But, the voting effects of mining establish a lock on our senate (and sometimes, lower house) which make it next to impossible to see change. The industry is running the government, at one remove.
I don't believe for a minute Norway is all peaches and cream, but it probably has a better sense of cohesion around its role in the world, and the benefits of the sovereign fund, and future money, and de-carbonising the economy. Norway was an extremely poor, -to the extent of massive nutritional death in winter-poor economy. It's moved the dial to a different place, and done it quite carefully, economically speaking. (Norwegian settlers in the USA and Canada came because of a potato famine)
We're envious. (well, the Australians who don't derive income directly from mining, oil or gas)
The maritime border used to be a straight east-west line despite the east coast of England being curved. In 1999 it was changed so that it followed established international maritime border conventions regarding distances from the mainland[0].
[0] https://en.wikipedia.org/wiki/Scottish_Adjacent_Waters_Bound...
On balance, the maritime border appears to me to have been restruck to be fair.
Here's a 2001 legal review from glasgow Caledonia university which obviously favours Scottish interests: https://academic.oup.com/ejil/article/12/1/77/359040?login=t...
Here's closing remarks from the SNP on a parliamentary debate, that shows the predominant driving factor was fisheries, and (if you read the rest of the debate) suggests a lot of confusion about what was being discussed and why): https://www.theyworkforyou.com/sp/?id=2000-04-26.9.0#g58.1
Here's two extremely partisan takes by a pro Indy scot who claims to have previously negotiated sea boundary changes. What's interesting is the "northward drift" : https://www.craigmurray.org.uk/archives/2017/01/scotlands-st...
https://www.craigmurray.org.uk/archives/2012/01/scotlandengl...
Australia has done the opposite with their (our? I'm an ex-pat) natural resources.
https://au.finance.yahoo.com/news/why-australia-hasnt-had-a-...
Australia hasn't had a recession since the early 90s and you are complaining?
Of course, immigration-driven growth is great! But for people on the ground, what matters is GDP per capita, not total GDP.
If GDP per capita is what you are interested in, you don't want immigration as it increases the "capita" part.
Also, Australia's growth had nothing to do with immigration. It had everything to do with China and China's economic growth.
Australia hasn't had a recession since the early 90s and you are complaining?
Just look at Norway as the example of how much better we could have done.
In turn, we wouldn't be lumbered with egregious mining billionaires like Clive Palmer and Gina Rinehart, who - among other monstrosities - heavily back climate-disruption denial.