Chalmers’ war on capitalists: Investors are abandoning Australia. By Dimitri Burshtein and Peter Swan.
How many Australian businesses must fail before another generation of politicians learns one of the oldest lessons in economics? State-directed planning and political capital allocation is a path to poverty not prosperity.
Capital is one of the most misunderstood things in our public debates. Politicians treat it as a fixed pile in a vault, waiting to be redistributed by the clever and the caring. It is nothing of the sort. Capital is patient money placed at risk on a promise about the future; a bet that the rules will still be the rules in ten years, that a contract signed today will be honoured tomorrow, that the government will not move the goalposts the moment an investment begins to pay off. Remove that confidence and the capital does not get redistributed. It just does not show up.
This is why sovereign risk matters, and it is the quiet catastrophe unfolding in Australia. Not a crash, just a slow bleeding away of the willingness of investors to commit their money.
The Albanese government’s record follows a clear pattern. The superannuation system: Division 296, arriving 1 July, levies an extra impost on larger balances. A tax the government was forced to redesign after first proposing to tax unrealised gains. Negative gearing and capital gains: perennially placed on the table, lifted off, modelled, leaked, denied, now hanging over every investment decision in the country. Each intervention is sold as fairness. Together they deliver one message to anyone with capital: whatever you build here, the government reserves the right to return for a larger slice once you have finished building it.
Then there is gas. Investors sank tens of billions into Australian projects on the understanding that they could sell what they produced at the price the market set. The government changed the terms after the fact with price caps, a mandatory code, rewriting the economics of projects already in the ground. You can argue the politics. What you cannot argue away is the signal. In Australia, the deal you struck is provisional. …
Say goodbye to investment and the capital for productivity improvements — because of sovereign risk caused by left wing government:
Foreign investors do not read Hansard. They do not follow which faction won which preselection. They run a screen across forty countries and flag Australia as elevated risk.
They remember that Australia keeps changing its rules: that signed contracts get reopened, that tax treatment shifts, that the government reserved the right to impose domestic reservation and price caps on gas projects already operational. So they file Australia alongside the economies where political caprice outranks the rule of law.
There will be no single moment of reckoning and no headline that captures it, and that is precisely the danger. A government can preside over the slow flight of capital and never see its own fingerprints on the wreckage, because the damage takes the form of things that simply never happen. The factory not built. The founder who took the idea to Singapore. The pension fund in Toronto that quietly trimmed its Australian weighting and moved on without a word.None of it bleeds in the quarterly figures. None of it can be undone by the next ministerial press release.
Confidence, once a country starts spending it, turns out to be the one form of capital no treasurer can borrow back. Somewhere on a screen in Tokyo or Seoul, Australia has already moved a few places down the list. No announcement. No media conference. Just a lower number beside a country that should know better.
Australia is going to get relatively poorer for several years ahead, because the big government team is ascendant — high taxes to pay for all those jobs and welfare for its supporters.
The current government makes the Hawke and Howard years look brilliant in comparison. We’re back at Whitlam-level craziness. Like many third word rulers, the Whitlam Government apparently didn’t understand sovereign risk.