Why invest in Australia? Labor’s policies are destroying our economic appeal

Maurice Newman I 16 November 2024 I Spectator Australia

It says something about national smugness when the feelings of the ‘Jidirah Spirit Whale’, which tells all the fish in the sea what to eat, when to mate, and where to migrate, overrides an $18.7 billion Woodside offshore gas project with the capacity to power 8.5 million homes for 30 years.

Or allows a blue-banded bee Dreaming tradition to halt a $1 billion gold project in Blayney NSW which would have created around a thousand jobs together with $65 million (net present value) royalties over the life of the mine.

The McPhillamy’s gold project is just the latest commercial venture to fall victim to Aboriginal mythology.

It’s true, not all indigenous claims succeed. Justice Natalie Charlesworth rejected indigenous arguments that Santos’s $5.8 billion Barossa offshore gas project would damage ‘Sea Country’ and anger two creatures of their Dreaming stories. Justice Charlesworth found supporting evidence was ‘so lacking in integrity that no weight can be placed on it’.

Yet the law often sees Aboriginal claims through a social justice lens and as opportunities to right past wrongs regardless of the wider economic impact. And not all investors have Santos’s money or determination.

Indigenous claims aren’t the only obstacles investors in Australia confront.

Mining giant, Rio Tinto, and its partner in the Rhodes Ridge joint venture recently informed federal environmental regulators that they would no longer invest half a billion dollars developing the high-grade Giles Mini deposit near Newman due to its impact on potential roosting sites for the vulnerable ghost bat.

And, after a decade and more than $150 million spent navigating environmental obstacles, Queensland’s multi-billion dollar Adani Carmichael coal project was nearly aborted over the endangered black-throated finch. A panicked political decision to approve the mine calls into question the integrity of the process.

But even state approval and a decade of successful operations doesn’t protect businesses from indigenous damages claims.

Take Fortescue Mining’s Solomon mining hub in the remote Western Australian Hamersley Ranges. There, the Yindjibarndi people are seeking upwards of $500 million in compensation for the desecration and destruction of 249 culturally significant sites arguing they weren’t initially consulted. All up their claims could amount to one billion dollars.

These examples, however resolved, are major disincentives for potential investors.

And, if they aren’t reason enough, increasing union militancy and the onward march of punishing industrial relations laws give potential investors even more cause for concern.

The world’s largest mining group, BHP, says the government’s latest ‘same job, same pay’ policy could cost it $1.3 billion extra a year and jeopardises $3.2 billion worth of investment it alone has planned for its local copper business.

It appears those responsible for Australia’s economic future are detached from this reality. They seem unaware the country operates in a competitive world and blind to the cumulative structural harm their policies bequeath. Perhaps nearly 35 years of uninterrupted economic growth and a woke education system have cemented a belief within the current generation of lawmakers that the Australian lifestyle is impervious to the laws of economics?

And, not content with spending record revenue receipts on their latest fancies, they borrow from future generations to the point that total debt is now closing in on one trillion dollars.

But, rather than free up the economy to make it more competitive and, more attractive to private investors, the federal government’s latest solution is to embrace the failed industry policies of the 1940s. Its $23 billion ‘Future Made in Australia’ plan will employ tariffs and subsidies to encourage investments shunned by the market. It will do nothing to improve labour productivity, already at its lowest level in 60 years.

Meanwhile, reckless, ideologically-driven investment in renewable energy has taken Australia from among the world’s cheapest electricity generators to one of the most expensive. Currently, Australian households and businesses pay two to three times more than their American counterparts for electricity. And now there are growing concerns around supply reliability.

Then there is the ever-increasing burden of multiple regulators who impose onerous reporting requirements, especially on listed companies. They demonstrate no regard for the cumulative damage their actions are causing, but it likely explains why more companies are leaving the stock exchange lists than are joining, making it of diminishing value as a price discovery benchmark.

Perhaps increasing compliance costs also explain why total investment in Australian start-ups last year fell to 2019 levels.

For investors looking for an educated workforce, Australia concentrates on ‘wellness’ rather than education. It has resulted in one in three students not meeting basic international standards of numeracy and literacy.

Investors concerned with national security will also get little comfort. Australia is largely defenceless, with one operational submarine, just nine cargo ships, no maritime drones, a hundred fighter jets and a shrinking defence force. It must depend on America.

Taking all this into account, it is unsurprising the Minerals Council claims Australia is missing out on an average $68 billion worth of potential investment every year.

But it’s not only mining.

Taxes, compliance costs and labour laws are creating barriers to entry and driving many smaller operators out of business. Less competition limits innovation, dampens investment and is a drag on productivity.

Like it or not, a day of reckoning is rapidly approaching. China’s economic growth, on which Australia has greatly relied, is slowing and its steel production is falling. This is structural not cyclical and its impact on Australia’s economy will be long and profound.

The election of Donald Trump as US President now adds to Beijing’s and Canberra’s woes. As President, he will likely withdraw from the Paris climate accord, lower taxes, free up markets, reduce the size of government and re-order supply chains.

Already there are signs others are preparing for this new, developing world order. For Australia not to follow suit is to risk being sidelined. All options should be on the table including Gina Rinehart’s integrated development zone.

The sooner Canberra understands this the better.

Author: Maurice Newman