When Australia slumps … a sovereign wealth fund for Australia is a no-brainer. Illustration: Michael Mucci

This week the International Monetary Fund warned against squandering the riches of the mining boom. Alongside the now lengthy retinue of business leaders and others, the IMF called for Australia to set up a sovereign wealth fund.

There was nary a smidgen of interest from the Office of the Prime Minister, though. Our intrepid Canberra correspondent, Clancy Yeates, put in the call yesterday.

”Little in the way of a meaningful response here from the government, unfortunately,” said Yeates.

”The Prime Minister’s office directed BusinessDay to the Treasurer, Wayne Swan. A spokesman for Mr Swan repeated what they said in response to an inquiry yesterday.”

And what was that?

”We’re acutely aware of the need to save more in good times and that’s why we have strict fiscal rules in place that have us on track to get the budget back to surplus in 2012-13, well ahead of our peers.

”We’re also implementing reforms to superannuation that ensure we’re saving more of the boom this time around. That’s not just one wealth fund but the wealth funds of more than 8 million Australians – which will boost national savings by $500 billion by 2035.”

Eight million wealth funds, scoop!

A sovereign wealth fund is a no-brainer. Same deal as a household’s savings. It provides for the future, it bolsters the national balance sheet, underpins the credit rating, lowers the cost of capital. It is an antidote to ”Dutch disease”, derisking the nation from dependency on the commodity cycle.

And when China cracks – and it will crack – and Australia slumps into its first full-blown recession in more than two decades, we will be better equipped to ride it out.

To be fair to the government, there were more pressing matters to attend to this week when we popped the question: the royal wedding.

The PM could hardly be expected to respond to trifling distractions of economic management when the nuptials of Will and Kate were bearing down upon her. Then there is the small matter of her predecessor, Kevin Rudd, who was bounced from office thanks to an ad campaign by the Minerals Council.

The reticence to back a wealth fund is not simple dithering. It has to stack up on the media front. There is polling to do, focus groups to deliver their wisdom, shock jocks to win over, and so forth.

Over the past year the two-speed economy has become more pronounced. And the wealth fund has to be funded by our natural resources revenue: in short, by the miners, the same mob who comfortably derailed a mining tax and a prime minister.

Yet support is growing. Lately, Malcolm Turnbull has joined the list of advocates, surely needling Tony Abbott and Joe Hockey in the process.

Then yesterday, disaster struck. The Greens backed it. The support of those dastardly Greens will make it hard for the government to embrace the idea any time soon. They would leave themselves open to Coalition claims of government by Bob Brown.

Tactically though, Julia Gillard and company have a nice hand to play when they get around to it. They can wrap themselves in the flag and label critics un-Australian. Now that is one fine stalking horse for a mining tax.

Moving forward, at the end of the day, it’s off to the polls and the focus groups then. But please, no citizens’ assemblies.

The US is in strife. Two years out from the financial crisis and the sharemarket has rallied 100 per cent on rising corporate earnings. That’s the good news.

The bad news is that unemployment still hovers at 9 per cent, property prices are off 38 per cent and public debt is rattling through $US9.65 trillion.

And so it was that Ben Bernanke uttered a subtle yet hugely significant change in interest rate policy this week. In the finely manicured rhetoric of the Federal Reserve, the chairman essentially turned on the printing presses for good.

Already, we have had two QE programs (quantitative easing, whereby the US Treasury issues bonds and the Fed buys them with Treasury money via the expanded Fed balance sheet) in an effort to kick-start the world’s biggest economy, and now we have virtual capitulation.

Whichever way you look at it, unlimited QE is not good. The Fed’s balance sheet has already bulged from $US800 billion to $US3 trillion. For the inflation hawks, it is irresponsible on a global scale to shower liquidity about like this when interest rates are close to zero. Appeasing Wall Street with ultra-low rates stirred the financial crisis in the first place.

It shows how grim things must be to risk, desperately, another boom and bust. The sharemarket didn’t react much to the news though, nor, surprisingly, the bond market.

Here we are well placed. While the US devalues its dollar, and therefore its humungous debt, there will be a further flight into hard assets. Yes, oil prices may keep heading north, but so will other commodities, soft and hard, as long as China holds. And gold.

Where’s George Bush when you need him? Forget monetary policy. Dubya could have just conjured up a few evildoers, started a war and fought his way out of it.