Dutch Disease and the Sustainable Management of Royalty Wealth in Western Australia

Authors


  • The author thanks James Fogarty, Steven Schilizzi, Greg Hertzler and Ashby Monk for useful comments. Most of this paper was completed as part of a thesis submitted to fulfil the requirements for BSc (Environmental and Natural Resource Economics) research project at the University of Western Australia.

Jason C. Hart, Greenbase Pty Ltd., P.O. Box 145, Willetton 6955, Western Australia. Email: jhart@greenbase.com.au

Abstract

During the 2003–2008 commodity-price boom, the Australian economy exhibited symptoms of Dutch disease where state governments followed cyclical consumption-based fiscal policies that eroded the country’s capital stocks and exacerbated costly adjustments. International experience has shown that a revenue fund could offer a solution to both these problems; however, the collection and redistribution of royalty wealth between Australian states makes it difficult for individual states to set up all but the most rigid form of revenue funds. Establishing a revenue fund at the state level would help to ensure Australia convert its finite mineral wealth into productive capital and dampens adjustments that naturally result from exporting non-renewable natural resources.

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