Norway’s is famously huge. Qatar used theirs to buy Harrods. How do sovereign wealth funds work? And why isn’t ours as big as Norway’s?
By October 1969, the rumour mill was in overdrive in Stavanger, a once-thriving port on Norway’s ruggedly Instagrammable west coast. The fishing industry that had supported families of hard-tackle seafarers and straight-talking townsfolk for generations was in long-term decline. Youth unemployment was endemic. But now, the talk went, there might be a lifebuoy bobbing on the horizon.had been scooping up geological samples from three kilometres beneath the seabed.
How do sovereign wealth funds operate? Which countries have them? And why doesn’t Australia, also resource-rich, have more cash in a special piggy bank? While the funds share some common values, they diverge greatly in their make-up and purpose. Even defining them can be tricky – economists don’t necessarily even agree on what is and what isn’t one.
That said, we can work with the general definition that a sovereign wealth fund is a handsome pot of money – often generated by a windfall such as a resources boom or budget surplus – that is controlled by a government to improve the lives of its citizens, usually long into the future.
“Norway is highly reliant on oil for exports and they have a tiny population . Comparisons between Norway and Australia are very misleading.”By 2004, the government was aware of the growing gulf between these liabilities and its ability to cover them when they inevitably came due, partly because not enough had been saved and partly because those eligible for the pensions were living longer than had been predicted.
Instead, Norway invests widely and globally, including in many of Australia’s largest listed companies. It publishes a list of its holdings and displays a prominent and ever-changing ticker of its total balance on its. It is not immune from criticism, however: it has been pressured by environmental activists to divest its investments in companies that mismanage climate risk.
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