Why Gerry Brownlee likes the idea of a national fund to hoard any oil or minerals windfall

Gerry Brownlee, the National Government's  Economic Development and Energy and Resources Minister, has agreed one option to preserve any windfall gains from a massive oil or minerals find would be a Norwegian style pension fund.

Brownlee made the comments in a Double Shot interview with Interest.co.nz on Friday. (His comments are 11 minutes 30 seconds in to the first video above.)

"I think it's a great idea and I don't discount the possibility of us doing that," he said.

"At the moment the New Zealand government receives about NZ$1 billion in revenues from taxes and royalties from the sector. We're a country that is borrowing to stay afloat so coralling some of that off at the moment isn't particularly useful," he said.

"If you were talking about a massive find with a very long life with a known royalty stream coming in, then I think you do get those sort of options," he said.

Brownlee said he was less worried about the 'Dutch Disease' where an influx of minerals or oil revenue pushed up the currency and destroyed the manufacturing sector, reducing employment and wealth.

"There's a higher risk of being worried about something that might not eventuate. If we were to strike that sort of 'Klondike' then we would have to immediately start considering that problem and start dealing with it. I don't think you could prepare for that," he said.

"It would be one hell of a great problem to have."

Big new West Coast coal mine

Elsewhere, Brownlee said an Australian company Bathurst Resources had further indicated to the government its willingness this week to start mining coal near Buller on the West Coast of the South Island. (See from 3 minutes 50 seconds in to the first video.)

"They hope to have that up and running midway through next year. That initially would be a million tonne a year opeation. That'll mean big changes for the West Coast community. They're thinking up to 250 jobs and the average mining industry job pays NZ$60,000 a year so that's pretty encouraging," Brownlee said.

"It'll probably mean more traffic on the Midland line  and more exports out of Lyttleton. If you see that coming on stream with Pike River, that's a pretty encouraging picture."

The NZHerald reported in June that Bathurst planned to list on the NZX later this year as part of a US$60 million plan to develop the opencast mine to produce up to 2 million tonnes a year of coking coal for steel production.

Peak Oil?

I also asked Brownlee about the issue of Peak Oil (see from 6 minutes 10 seconds in). He said: "New Zealand is a country that is now considered to be highly prospective. A lot of the decisions oil companies make about where to prospect or not relate to sovereign risk issues, and we're in a very good space there."

"Is the world going to run out of oil? I don't see it happening any time soon and if you look out the window you can't see the world deserting a hydrocarbon economy for decades to come. We're going to pay more for oil in the future, but if you'd gone back to 1930 you could have said that and been absolutely correct. I don't think we should worry too much about that. We should be encouraging new technologies where we can, but it's going to take a long time. If you look around this room -- mining and oil -- we're full of it!"

Brownlee also said New Zealand's gas reserves were likely to be increased.

China strategy?

I also asked Brownlee about the New Zealand's government's strategy for growing in the Chinese century (1 minute in to Part II below) and whether our political landscape allowed significant economic reform to catch up with Australia (3 minutes 50 seconds in to Part II below).

Here's Part II of the Double Shot interview

Please give us your thoughts and questions in the comments below.