An Australian Resources Sovereign Fund: A Strategic Reform Proposal to Boost Productivity, Resilience, and Fiscal Sustainability

Smyth, Russell and Vespignani, joaquin vespignani (2025): An Australian Resources Sovereign Fund: A Strategic Reform Proposal to Boost Productivity, Resilience, and Fiscal Sustainability.

Abstract

This submission proposes a national economic reform package, designed to mitigate the structural distortions arising from the "Dutch disease" in Australia. While resource booms have boosted national income, they have also weakened tradable sectors, entrenched regional inequalities, and exposed the economy to external commodity price shocks. The centrepiece of this submission is a proposal to establish an Australian Sovereign Resource Fund, inspired by the Norwegian experience, which would improve productivity, build economic resilience, and strengthen fiscal sustainability. The proposed reform package would explicitly address the exchange rate dynamics of commodity supercycles and reduce distortions to the Australian dollar, which are typical of a resource-rich small open economy.

• Item Type: MPRA Paper
• Language: English
• Keywords: Resources, Macroeconomic Reform, Fiscal Policy
• Subjects: E - Macroeconomics and Monetary Economics > E0 - General; E - Macroeconomics and Monetary Economics > E0 - General > E02 - Institutions and the Macroeconomy; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General; Q - Agricultural and Natural Resource Economics ; Environmental and Ecological Economics > Q0 - General > Q02 - Commodity Markets

References

Bjørnland, H.C. and Thorsrud, L.A., 2016. Boom or gloom? Examining the Dutch disease in a two-speed economy. The Economic Journal, 126(598), pp.2219–2256. Downes, P., Hanslow, K. and Tulip, P., 2014. The Effect of the Mining Boom on the Australian Economy. RBA Research Discussion Paper 2014-08. Gruen, D. and Stevens, G., 2000. Australian Macroeconomic Performance and Policies in the 1990s. In: The Australian Economy in the 1990s. RBA. Knop, S.J. and Vespignani, J.L., 2014. The sectorial impact of commodity price shocks in Australia. Economic Modelling, 42, pp.257–271. Plumb, M., Kent, C. and Bishop, J., 2013. Implications for the Australian Economy of Strong Growth in Asia. RBA Bulletin, March. Productivity Commission, 2015. Trade and Assistance Review 2013–14. Canberra: Australian Government. Smyth, R. and Vespignani, J.L., 2022. Increasing Australian Lithium Production to Meet Electric Vehicles and Net Zero Global Targets: A Decarbonisation Tax Discount? Economic Papers, 41(4), pp.385–389. van den Bremer, T.S. and van der Ploeg, F., 2013. Managing and harnessing volatile oil windfalls. IMF Economic Review, 61(1), pp.130–167. Vespignani, J. and Smyth, R., 2024. Australia’s Critical Minerals Strategy: Submission to the Department of Industry, Science and Resources. HAL Archives, hal-04817879