The problem with Australia

Was going to say greedy self serving politicians – instead I will keep it more complicated.

Countries such as Australia – who are heavily dependent on commodities should look at the establishment of a reserve fund that receives revenues according to a formula – that is positively correlated with commodity prices and which – at some low price point begin dispersing funds.

This acts automatically to counterbalance the impact of changes in commodity prices with the fiscal balance.

Chile and Norwegia have such a model.

But – politicians would not be able to help themselves – perpetually having their fingers in the fund.

Then and therefore – as politicians like leaving legacies and large donations to secure their futures – restrict government expenses to a percentage of GDP.


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