06-July-2011
Portfolio Media Releases
WHEN one of the world's biggest investment companies stops investing in Australia because of sovereign risk concerns you know there is a real problem.
Sadly, international investors are taking an increasingly dim view of Australia because of a host of unresolved issues and the growing list of bad decisions taken by the Rudd-Gillard governments.
A top Australian chief executive was advised recently by one of the top four investment houses in the world, entrusted with trillions of investor dollars, that it had stopped investing in Australia and was instead focusing on more "stable and predictable" jurisdictions.
Another prominent Australian businessman, who specialises in introducing foreign investors to mining, property and construction opportunities, said the Chinese were increasingly "switching off" in relation to Australia, to the point of "paying out" initial contracts.
Factors such as the looming carbon tax, the mining tax, the high dollar, excessive red tape and our complex tax system have China increasingly turning to opportunities in such places as Mongolia, Siberia, Africa, Indonesia and even the US.
"Canberra seems to have very little concern about the potential of sovereign risk emerging as a major issue," ANZ chairman John Morschel ominously said earlier this year.
Under the Howard government, putting Australia and sovereign risk in the same sentence would have been inconceivable.
In fact, international investors were lining up to share in a prosperous economy presided over by an experienced, competent and pro-investment government; a government that fully understood how policy decisions taken in Canberra would impact on business and be perceived by investors in New York, London, Hong Kong and Beijing.
Now we have a situation where alarm bells are sounding, yet the Gillard government is oblivious.
The undue influence the Greens have over this government on issues such as the carbon tax, combined with the fact Bob Brown now holds the balance of power in the Senate, is in itself enough to spook investors.
Brown is a walking sovereign risk as he rages against foreign investment in the mining sector, in water licences and land ownership.
The Greens, of course, want the coal industry wiped off the map, they want the mining tax toughened and for Australia to join a world government just for good measure.
Going it alone on a carbon tax is widely viewed as madness.
It will strip the balance sheets of our major companies and eliminate the comparative advantage we have long enjoyed. Our major competitors must be loving it.
Following Julia Gillard's carbon tax U-turn, RBA board member Graham Kraehe said: "It's done an enormous amount of damage to our credibility."
Would you invest in trade-exposed industries in a country with a carbon tax and which taxes our iron ore and coal at the highest rates in the world, or in a country with no carbon tax and lower effective tax rate on minerals? The answer is obvious.
When Andrew Forrest asked Wayne Swan recently how much the big three miners would pay under the mining tax, he reportedly replied: "If you don't like the tax, secede" -- an extraordinary response from our Treasurer. It's no wonder confidence is so low.
And it should be remembered that under the failed so-called "super-profits" mining tax, the government wanted to nationalise 40 per cent of the mining industry.
Beyond the carbon tax and mining tax are myriad other reckless decisions taken by this government that further heighten our risk profile.
The snap ban on live cattle exports to Indonesia shows this government's preparedness to shut down a billion-dollar industry overnight, without consultation, due to internal political pressure and 800 emails from GetUp!
The decision has led Sara Henderson's daughter, Marlee Ranacher, to sell the iconic Bullo River Station which has been in the family for three generations.
Ranacher said Gillard had "destroyed my life" and she vowed to find ways to make the Prime Minister realise the damage she had done.
Australians are crying out for leadership, for a government that supports business, encourages investment, creates opportunities and restores hope.
This Labor government is clearly out of its depth.
We need a government that will live within its means, makes a concerted effort to reverse government's reach, a government that backs the nation's strengths in areas of comparative advantage and seeks to restore a culture of personal responsibility.
Labor's botched handling of its National Broadband Network policy has resulted in the re-nationalisation of our telecommunications sector and has stifled investment since 2007.
The government has also reneged on deals under the Pharmaceutical Benefits Scheme before the ink was dry, changing the approval process for listing new drugs.
Under Labor, a deal is no longer a deal.
There is also the mindless refusal to sell uranium to India, serious industrial relations problems emerging, the preparedness to set mandatory betting limits on pokie machines to appease a single independent, tacit support for opportunity stifling wild rivers laws, and failure to outline an energy policy. The list goes on.
The Gillard government is doing untold damage to Australia's reputation. It has reached the point where the only way we can get the country back on track is to change the government.
Andrew Robb is opposition spokesman for finance, deregulation and debt reduction