Some reasons why taxpayer surpluses should not be left in government hands, even if it is an Australian Government

New Australian Treasurer Wayne Swan has called an end to the Howard government policy of returning excess budget surpluses as tax cuts, saying the Reserve Bank had been allowed to shoulder too much responsibility for controlling inflation with interest rate rises.

The Treasurer said under the Rudd Government, any windfall revenue would be allowed to mount up as a larger budget surplus and would be quarantined, either with the Reserve Bank or the Future Fund.

"We will be banking any upward revisions to revenue, if they occur," he told The Australian.
(http://www.news.com.au/business/story/0,23636,23179313-462,00.html)

The Treasurer's proposal should be evaluated in light of the examples of Singapore and Malaysia, where compulsory savings banked into government managed and controlled funds are in effect a form of income tax. The Singapore government agency charged with the management of these funds is known as the Central Provident Fund (CPF),while its Malaysian equivalent is known as the Employees' Provident Fund.

In both countries these savings have been mismanaged.
The Singapore case has been analysed by Mukul Asher of the National University of Singapore and M.Ramesh, formerly of Sydney University.In Ramesh's words:

"... the annual returns offered on CPF funds was 1.8 percent over the 1983-2000 period which was lower than the growth in GDP and income (Asher and Newman, 2002: 58). This is gradually eroding the replacement rate whose cumulative effect over time is likely to be significant."

(http://cep.cl/UNRISD/Papers/Asia/Sing_Mal_Ramesh.doc)

CPF funds form a significant part of the funds provided Singapore's investment agencies, Temasek , and the Government of Singapore Investment Corporation. Both funds are highly regarded by many in the Western investment community, despite the evidence of poor management that is to be found in the CPF's returns, and in a number of well reported losses on investments outside Singapore.

Mismanagement of Malaysia's EPF has been reported extensively.

See for example:http://www.dapmalaysia.org/english/2007/mar07/bul/bul3255.htm,AND http://blog.limkitsiang.com/2007/12/21/epf-needs-to-explain-why-it-discontinue-the-rm14-billion-claim-against-it-six-former-executives/

Australian taxpayers should not assume that mismanagement and corruption of the type described above cannot or does not happen in Australia.

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