Mr Turnbull, who first advocated a sovereign wealth fund when he was opposition leader in 2009, said he believed with the benefit of hindsight that the Howard government should have saved more money rather than spending it on policy measures, some of which created structural deficits in the budget.

Costello 'far-sighted'

He said former treasurer Peter Costello had been "far-sighted" in establishing the Future Fund, which was set up from the proceeds of the sale of Telstra to cover the unfunded Commonwealth superannuation liability from 2020 onwards.

But it would have been "good" if a broader wealth fund had also been established. "Particularly with an economy that is geared towards commodities, it is particularly worthwhile," he said.

Mr Turnbull said the "economic rationalists" in Treasury believe that if a government is running a surplus, "it should just give the money back".

Prime Minister Malcolm Turnbull: "When you talk about the budget being in balance over the cycle, when the business cycle is roaring ahead and the terms of trade are booming, you want to be running surpluses and putting money in the bank, preferably in a sovereign wealth fund." Andrew Meares

"So when you give it back, you invariably give it back as tax cuts or in some form of transfer payment, and occasionally spending on infrastructure, and then you get into that structural deficit problem," he said.

"Having been in a cabinet when we did have a big surplus, I think it would have been an advantage if we had been able to say, 'OK, we've got this bonanza, we've got all this money, it's terrific, we can cut taxes, we can spend more here, we can build some more roads – or, there's a fourth option, there's a bucket here marked Sovereign Wealth Fund Saving for our Grandchildren, we can put it in there'," he said.


He said it was not an either-or proposition. "I'm not suggesting you do one to the exclusion of the other, but ... saving is very important."

Coalition resurgent

Mr Turnbull replaced Mr Abbott in a lightning leadership coup five weeks ago and the dividends have been almost instant for the Coalition. A Seven News/Reachtel poll published on Friday night found the Coalition leading Labor by 53 per cent to 47 per cent on a two-party preferred basis.

Prime Minister Malcolm Turnbull in his Prime Ministerial suite. Andrew Meares

This is the same finding as the Fairfax/Ipsos poll published on Monday and represents a sharp reversal from the 46-54 deficit that had become entrenched under Mr Abbott's leadership.

Mr Turnbull said it would be a while before Australia had a big enough surplus to establish a sovereign wealth fund. "It's a long way off – I'll be a very old, record-breaking Prime Minister, but who knows, things could turn very quickly."

He said he wanted to end the practice of governments promising when they would return to surplus and that Labor had underestimated the public's intelligence by trying to do so.

"A forecast is by definition a hypothesis. What you are saying is based on what we know at the moment, and based on these assumptions which we think are reasonable, we should end up here, all other things being equal, which we know will not be the case.


Prime Minister Malcolm Turnbull in his Prime Ministerial suite at Parliament House in Canberra on Friday 23 October 2015. Photo: Andrew Meares Andrew Meares

"You get into this crazy stuff of representing a forecast as a promise. This is parallel-universe stuff.

"If you were out in the business world and said to the chief executive of a publicly listed company, 'will you guarantee that your net profit after tax in three years will be X, as represented in the broker's report?', he would say, 'you're nuts, you're completely nuts'."

Tax reform on agenda

Mr Turnbull confirmed that tax reform would be a major feature of a package he would take to the election – an election which he said would be fought primarily "on economic management and competing visions for Australia".

While declining to give details, he confirmed that addressing bracket creep was one of the driving forces behind tax reform, meaning income tax cuts will be on offer.

Prime Minister Malcolm Turnbull in his Prime Ministerial suite at Parliament House in Canberra on Friday 23 October 2015. Photo: Andrew Meares Andrew Meares

Mr Turnbull backed Treasurer Scott Morrison's belief that there should be no overall increase in the tax take. Instead, there should be a change in the mix to generated economic growth.


"The tax system has to do its job," he said. "It's got to collect the money we need to pay for everything, but beyond that it's got to do everything it can to incentivise people to work, save and invest."

He said tax reform would be one part of the policy mix that would be taken to the election. "We're looking at all of these areas relating to the economy. The tax system, the superannuation system, the transfer system, our own program of investment, particularly in infrastructure, all have enormous influence."

The first big instalment would be the innovation statement to be released in December which, Mr Turnbull said, would be just the beginning.

"Innovation is a lot more than tech start-ups. The package will be very broad, but it won't be the last word.

"To be an innovation nation, you need a lot of changes. Some of them are cultural. You need leaders, whether they are running a small business or whether they are prime minster, in an age of rapid disruption and volatility. You've got to be much more agile, and that means you have to be prepared to embrace different ways of doing things.

"You can't just assume that the way you did things last week will work."