(February 21, 2012) — Australia’s wealthiest state in terms of resources is set to create its own sovereign wealth fund, despite criticism that the country’s superannuation system does not need the backup.
Western Australia’s premier Colin Barnett said that the investment vehicle will be comparable to the existing 73.07 billion Australian dollar (US$78 billion) Future Fund set up by the Commonwealth government in Canberra, the Wall Street Journal initially reported. The fund, which will aim to store away earnings from the sale of vast quantities of iron ore and minerals to Asia, follows in the footsteps of the Abu Dhabi Investment Authority and Norway’s sovereign wealth fund, whose successes have largely been driven by revenues from the regions’ abundant natural resources.
“Despite the fact that Western Australia is clearly the powerhouse driving the nation’s economy—we have the highest forecast growth in the country—rising state debt is the constraint on our economic growth,” Barnett told the WSJ.
Last year, Barnett revealed that the state was considering a Norway-style sovereign wealth fund so future generations can benefit from its buoyant resources sector. “The West Australian government is looking at setting up a state wealth fund so that we would potentially put some share of royalty income or some share of budget surpluses into a fund for the future,” Barnett said in April of last year, the Sydney Morning Herald reported.
While trade unions and institutions worldwide have urged the Australian government to create a sovereign wealth fund, Australia’s Prime Minister Julia Gillard has asserted that superannuation is already a trillion-dollar sovereign wealth fund–but with market benefits. “That’s because it’s privately managed by thousands of trustees, instead of a sovereign wealth fund managed centrally by a Canberra-appointed manager,” she said.
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