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IMF urges Australia to create Sovereign Wealth Fund

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IMF urges Australia to create Sovereign Wealth Fund article image
Australia should establish a sovereign wealth fund to safeguard against falls in Asian markets, according to the International Monetary Fund (IMF). In its latest outlook for the Asia-Pacific region, the IMF said integration with Asia and increasing dependence on commodity exports make growth in Australia and New Zealand more vulnerable to swings in commodity prices and demand. Present demand driven by China and India could add 20 percent to the Australian economy over the next decade. The IMF wants revenue from the current resources boom to be saved, "in order to ensure a more equal distribution of its benefits across generations and reduce long-term fiscal vulnerabilities from an ageing population and rising health care costs." IMF director Anoop Singh says China and the rest of emerging Asia are confronting the threat of surging inflation that could destabilise the region. "If we allow a bubble to develop this would set the stage for a correction in the future that could be quite painful," he said. That bubble is already growing in China, Korea and Germany according to Asianomics economist Dr Jim Walker. "It is a dangerous position to get any country into, to be so dependent on one customer," he said. In Beijing recently, Prime Minister Julia Gillard reaffirmed economic ties with China, which buys one quarter of all Australian exports. ''Of course our economic relationship is a vital one for Australia's national interest and it's growing in leaps and bounds.'' Treasurer Wayne Swan has rejected the notion of a wealth fund, indicating reforms to superannuation will boost national savings to $500 billion by 2035.

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