Thursday, March 29, 2012

Outgoing Future Fund Chairman David Murray Says Carbon Tax Will be 'Very, Very Bad' for Economy

OUTGOING Future Fund chairman David Murray has condemned Labor's carbon tax as "the worst piece of economic reform I have ever seen in my life".   

Mr Murray, who has also lashed the Gillard government's mining tax, warned the tax would undermine the nation's competitiveness and damage the economy.

“If you want me to tell you my view, it is the worst piece of economic reform I have ever seen in my life in Australia,” he told ABC radio this morning.

“The consequence of introducing that tax at that level in Australia today is very, very bad for this economy, particularly in terms of international competitiveness.

“It raises costs further within Australia, it reduces our competitiveness for export of energy-related commodities, and it therefore renders us less competitive in the future.”

Mr Murray has previously questioned the dire warnings of climate scientists, telling the ABC's Lateline program last year there was insufficient evidence of environmental risks to warrant major policy impositions on the economy.

Today, he said the government should instead focus its efforts on improving energy efficiency.
“The sweet spot in dealing with a climate problem is to reduce reliance on energy and be more efficient in using it,” said Mr Murray, whose six-year term as head of the Future Fund ends on Monday.

“So anything that does that, improves the productivity of the economy and hedges the problem of a changing climate, if indeed it turns out to be as serious as some people think.”

In a wide-ranging interview, Mr Murray also criticised the process to select his replacement, saying measures should be put in place to make statutory appointments independent of government.
He said former treasurer Peter Costello, who founded the fund in government and was passed over for the chairman's job, could “above all” been expected to stand up for the fund.

But he said incoming chairman David Gonski was a “good appointment”, and he would have been “inclined to consider” the argument put by former federal Liberal politician Nick Minchin that an ex-politician should not be appointed to the post.

Mr Murray said Australia should look to Britain, which had introduced new rules to make statutory appointments more smooth and transparent.

“The issue with the selection process is it was not timely, which creates tensions,” he said.
“The key is some form of independence in the selection process, some timely approach in the selection process, a much more predictable process to make the appointment.”

Mr Murray also defended the Future Fund's earnings during his time at the helm, which have averaged 4.2 per cent - below the fund's target of 5 per cent plus inflation.

He said the fund had generated better returns than balanced superannuation funds, while still retaining a low risk profile.

“The portfolio is appropriately structured for the sort of world we are in today and I think those returns have been very good in the circumstances,” Mr Murray said.

He also called for further sovereign wealth funds like the Future Fund to be created to ensure mining revenues were not squandered.

“If a community depletes its resources - particularly in countries that have very significant resources relative to a smaller population - then those countries should consider whether the proceeds of that resource generation are set aside for future generations.”

He said this should apply not only to the federal government but also to the states.
Mr Murray also reiterated his criticism of the government's “jawboning” of the banks over interest rates, saying the banks had a role to play in the economy.

“By jawboning their interest rates down when the international cost of funds and the domestic cost of funds has been behaving the way it is, is to render the banks less able to perform their very important economic role,” he said.

A spokesman for Climate Change Minister Greg Combet said the government's climate change policies were based on scientific and economic advice.

“The scientific advice from organisations such as the CSIRO and the Bureau of Meteorology is that climate change is happening, that it poses risks to our environment and that carbon pollution is contributing,” he said.

“The economic advice from organisations like the Treasury, the Productivity Commission, the OECD and the International Monetary Fund, is that a price on carbon is the most economically-efficient way of reducing carbon emissions.”

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