How should we spend the surplus?

The big progressive agenda is where, and how, to invest it.

The surplus should be invested in building capacity – ­and there’s much to be done. Physical capacity, by investing in infrastructure; social capacity, by investing in housing; environmental capacity, by investing in energy technology.

But above all, we must build human capacity by investing in human capital.

We know empirically from economists like Becker and Heckman that investing some of the surplus in human capital would generate a far higher return than the conservative ‘keep it in a sock in the drawer’ trust fund model.

For instance, a big chunk of the surplus could go to a ‘human capital fund’ which invested in projects like early childhood development, workplace training and management of life-stage transitions.

The fund would co-invest in human capital projects and share the returns with its joint venture partners: local, state and Commonwealth governments; firms, community organisations, even philanthropics.

This is the key. Expand capacity, above all through human capital. It’s the only sure way to sustain our prosperity beyond the boom.

Michael Cooney is Policy Director of Per Capita, an independent progressive think tank.