Australia must prepare for the inevitable

Doug McTaggart

Two of Australia's foremost financial services economists have urged the establishment of a sovereign wealth fund.

Praemium chairman Don Stammer and QIC chief executive Doug McTaggart both told the Association of Superannuation Funds of Australia that a sovereign wealth fund was necessary to help Australia cope when the mining boom inevitably ends.

McTaggart said the mining boom was actually bad for Australia because it had created complacency and overconfidence.

He went so far as to suggest that the Government should use a Resource Super Profits Tax to fund the sovereign wealth fund together with a profits tax on the banks.

"We are overconfident about the minerals boom but all booms come to an end," McTaggart said.

He said the minerals boom was not being driven by demand but rather by a lack of supply — something that could rapidly change.

Stammer said the inevitability of the minerals boom coming to an end meant superannuation funds should prepare themselves appropriately.

He said this should be done via the accumulation of safe assets to deal with tough times.