Rats. I was going to post here, but Billy C read my mind and said it for me.

Australia is a structural capital importer with a central bank operating under a Taylor-type regime. Keeping the gvt share of national income artificially high (by saving through a SWF) and investing a portion of it abroad (what an SWF would do) does not make any sense. Just look at what New Zealand is doing. The best investment of Australian gvt savings is in domestic infrastructure (with rigorous efficiency testing). If there is a need to reduce gvt revenue volatility, it should be done for that purpose, and not with an intergenerational excuse. If you want to weaken the AUD, just change the ARB's mandate to allow for higher inflation for a given level of economic activity, that would lower interest rates and weaken the currency. No need for this fiscal policy-in-reverse..

For a professor in economics, this was a particularly dense article.

Under Howard, the unemployment was less than 4%, and additional government spending on infra structure would have the effect of competing with business and driving up inflation.

A sovereign wealth fund is pointless when there is large debt, and an investment in reducing debt would be the obvious solution. Even now savings could be made by simply cutting out the bureaucratic bloat and waste that is the hall mark of a labor government.

Labor is not capable of controlling spending, and the main argument against a sovereign wealth fund is that it is too hard for Labor.

SWFs in democracies tend to constrain future gvt's ability to redistribute surplus revenue (eg by lowering taxes, spending on partisan causes like social security, culture, mining subsidies etc), or spending within a class-based political tradition. In Australia with its recent history of targeted vote buying based on detailed polling, surplus revenue is key to the success of incoming governments, especially Coalition ones.

Any government under the current circumstances would find it hard to do vote buying, and a gvt constrained by "minority" status (half the gvts in the EU are minority ones and they do at least as well as the US now but cannot be expansionary) but, more importantly, Greens (a true minority and a controversial one) preferences that do not fit with conventional economic policymaking and/or mainstream economic preferences, will find that even harder. Hence a rational gvt of the day should find its reelection chances below par (although there is a lot of time value left) and look for policies that would (a) be unopposable by the Opposition and (b) credibly handicapping the incoming gvt's ability to redistribute revenue. This is a strategy used with much success by US Republican tax cutters ("starving the beast"). It would make political sense (of course not economic sense) for the Treasurer to promote a SWF of sorts(rather than reducing debt) once electoral success seems unattainable and while partliamentary support still exists. The NBN was a great device to do something similar (and with the chance of public appreciation) but it may not be enough.