Australian Financial Review 17 October 2018
Populist economic policies such as tariffs, subsides and the White Australia policy failed our nation in the 20thcentury. Rational economics has delivered 27 years of growth. Chiefly this involves lower taxes, less regulation, more trade, more foreign investment, more immigration.
Two tests of whether economic populists are winning are the policies on trade / foreign investment and immigration.
It is easy to rag on foreign money and foreign people. There will be a real cost to Australian workers if policies to demonise either are adopted.
Firstly, on trade and foreign investment.
Free flowing global capital is essential to Australia. The unions’ attitude to the new trade and investment deal, the Trans Pacific Partnership, provides a contemporary risk to this pipeline.
Labor had done the right thing by pledging support for the TPP.
However it appears union bosses have extracted a deal which will effectively rob Australia of future trade deals, investment, exports and jobs.
Union opposition to the TPP is based on dogma and concealed protectionism. The unions resist a clause which supports the rule of law and investment known as “Investor State Dispute Settlement”.
We have seen this movie before: ISDS is used as an excuse to avoid doing trade deals.
The Howard Government started negotiations on the China trade agreement in 2005 but Labor in office from 2007-2013 couldn’t conclude the China or Korean deal, because unions oppose ISDS.
ISDS is a legal framework to resolve investment disputes. Australia has been a signatory to 27 agreements with ISDS since 1988. There has been one case brought against us which we won.
No Australian law on social, environmental or health grounds has ever been affected by ISDS.
ISDS is used as a red herring by protectionists who are afraid to be transparently protectionist.
Sadly, very few people have taken the time to look at what ISDS actually achieves and choose to believe the union protectionist dogma.
Similar dogma on foreign investment is commonplace, usually from the other end of the political spectrum.
The fact remains we rely on foreign investment and have done so since 1788 which is why we have a current account deficit.
In 2017-18 the current account deficit was $54 billion. That is $54 billion of foreign money invested into Australia that we do not have.
Yet Independent MP Bob Katter says: “the Government … profoundly believes in encouraging what they call foreign investment, they are what I describe as a traitor selling out his country...”
This colourful point ignores the fact Australian super funds and banks are unwilling to fund regional projects in places like Far North Queensland.
Despite having the fourth largest super pool of assets in the world at $2.7 trillion, super funds are largely index hugging managers unwilling to take risks to back rural Australia.
No Australian backed in Arrium steelworks in Whyalla which employs 3000 people.
It was a Briton, Sanjeev Gupta that came to the rescue last year by acquiring the steelworks, providing the capital needed to keep 3000 people employed.
It’s a similar story in places like Northern Tasmania where the abattoir is owned by a Brazilian company and the cheese factory is owned by a Japanese firm.
Secondly, migration is easy to argue is the cause of all evil.
One Nation Senator Pauline Hanson said earlier this year there should be a plebiscite on immigration:
“The question to be put would be along the lines of ‘what level of immigration should we be taking into Australia?”
Indiscriminate proposals to cut immigration ignore the complicated equation of what makes up our net migration intake.
Congestion is a used as a populist excuse to cut immigration.
Yet congestion is primarily a failure of many state governments to build infrastructure to support growing communities.
If less migrants moved into Sydney or more moved into regional areas, as has been proposed, it would surely improve services in the bush but would not necessarily solve congestion problems in Sydney and Melbourne.
Whatever the policy is on decentralisation and regional migration, it is intellectually dishonest to push for an aggregate “number” of people.
Most migrants are brought in to fill skill shortages or as foreign students contributing to Australia’s third biggest export: education. Our education system is now a $17.7 billion export.
68 per cent of migration to Australia is for work that Australians cannot or will not do.
Sectors as diverse as professional services and meat working are the primary users of this system.
This is the hard truth about migration in Australia today.
It is not a family reunion extravaganza of decades past. The boats have been stopped so migration is now an orderly process largely based on the need to either fill skill shortages or secure education exports.
Australia simply cannot afford to let the populists win. We need the money and the people.