Paul Scarr (Queensland, Liberal Party, Shadow Assistant Minister for Multicultural Engagement) Share this | Hansard source

Thank you, Acting Deputy President. I always get excited when there are people in the gallery. When I'm here I do like to make sure that we include them in the proceedings, but I'll do my best to adhere to Senator Chisholm's rebuke.

In this respect, and this is an extraordinarily important point, I believe that the government should focus on its core responsibilities—that is, creating firstly an investment environment in which capital in the private sector comes to this country from overseas and is generated within the borders of our country, and the private sector makes investments in the businesses of the type we're talking about. The government should then use taxpayer dollars to provide the roads, the hospitals, the schools and all the other government services needed, which provide an environment whereby businesses can be established and provide wealth and prosperity across the whole country. That's my belief.

I do not believe that taxpayer dollars should be used as some sort of government process to pick winners, and I'll tell you why. History tells us that government—and this may come as a great surprise to those listening to this debate—doesn't have a really good track record of picking investors and winners amongst commercial enterprises. The government finds it hard enough to keep its own infrastructure projects within budget and on time. Why would you possibly trust the government to decide whether or not it should invest in a private enterprise? Why would you possibly trust the government to do that?

I had 25 years in the private sector before coming to this place. One of my jobs as a senior executive in a mining company was to travel the world and look for investment opportunities, and I can tell you that the best way to destroy shareholder value is to make an investment that is the wrong investment, to make an acquisition of an asset that is the wrong acquisition. I've seen billions of dollars of private sector money lost through those sorts of investment mistakes. So, given that environment, why would you possibly support a policy whereby the government is going to use taxpayer dollars—and all government money is taxpayer dollars—and go out and try to pick investment winners, effectively playing the share market? Why would you possibly support such a policy?

And let me tell you what the other issue with this policy is. What happens once the government puts its foot on the sticky paper? What happens when the government makes that initial $100 million investment into an enterprise, becomes a shareholder in an enterprise? It's put its foot on the sticky paper. What happens if the economy turns, the market turns against that individual enterprise, and that enterprise says, 'Well, we're going into liquidation unless we have another $100 million.' What does the government do then? Does it write off the investment and walk away? Ah! That's hard. That's political because the government has got its foot on the sticky paper and so if the government withdraws any future investment, then it's going to be heavily criticised. It'll be criticised first for making the wrong investment. It'll be criticised because the employees and unions—rightly—will beseech the government to provide additional support. It'll be criticised because it is not supporting the manufacturing industry. And all the arguments we've heard used in the context of the automotive argument will once again be used. It'll be deja vu.

The government will then be trapped to continue to use your taxpayer dollars—the taxpayer dollars of the people in the gallery, the people listening to this debate, the people who don't even know we're having this debate about their money, their taxpayer dollars. The government would be trapped to continue to provide additional support to those businesses. That is the fundamental risk of government sponsoring businesses. Businesses that can't attract equity and debt themselves, because private investors don't want to invest in them, will need to go, cap in hand, to the government. That's the fundamental risk—that is, those businesses that are unable to raise that equity and debt in the private markets are coming to government because they cannot otherwise raise it. They become dependent on the public support, and then the government gets trapped because it has its foot on the sticky paper. It knows, if it cuts them loose, then it's going to be heavily criticised. So then the government starts to make irrational economic decisions, with taxpayer money. We've seen it before.

What the government needs to focus on is productivity, energy costs, our regulatory system and providing the environment for businesses to prosper. If all of these businesses that the government is talking about have this great net comparative advantage, why can't they raise money from the private sector? Why do they need to go to the government? They can't answer that question. And the answer to that question is: because they don't have robust enough projects. If you have a project that's going to be profitable and the risks can be mitigated, you'll be able to raise the money. But if you don't, you go to government. And the Labor government is proposing to use billions—not millions but billions—of your taxpayer dollars to invest in these projects. Billions of dollars. What could go wrong? What could go right—that's probably a less elaborate question.

And then consider the opportunity cost. The basic rule of economics: scarcity of resources. The government only has so much in taxpayer dollars. There's only a particular pool of taxpayer dollars. Would you rather your taxpayer dollars go to investing, go to picking winners in the private sector and investing in those companies? Or would you rather your taxpayer dollars go to addressing the recommendations which were brought down in the report of the royal commission into veterans suicide? I know what my preference is. Would you rather your government go out there and invest in businesses that can't raise money from the private sector? Or would you rather your taxpayer dollars go into the NDIS system, helping some of the most vulnerable people in our community? Or putting additional funds in the aged-care system. Or providing for the defence of the country? Or doing any of the other things that we talk about in this place? This is the choice for every taxpayer dollar, because it can only go so many different ways.

And bear in mind that these are taxpayer dollars, because, as a country, we've got net debt. We owe hundreds of billions of dollars in debt. Even worse, the government is going out and borrowing these billions of dollars and then investing. It's like going down to your local bank, borrowing from the bank and then putting the money on the share market. What could possibly go wrong? Time and time again through Australian economic history we've seen these issues arise, and policies such as this one end up as public policy debacles, where billions and billions of dollars in taxpayer moneys are spent and there's an inevitable conclusion: the business fails and taxpayer dollars, which could have been allocated elsewhere, are wasted.

These aren't just observations that I've made. This country has had the benefit of a productivity commission, which has been an outstanding institution providing detailed, objective advice with respect to economic matters. This is what Danielle Wood, the Chair of the Productivity Commission, appointed by the Labor Party, said in relation to these sorts of schemes:

If we are supporting industries that don't have a long-term competitive advantage, that can be an ongoing cost. It diverts resources—that's workers and capital—away from other parts of the economy where they might generate high-value uses.

That was the productivity commissioner, appointed by those opposite, speaking. She also said:

We risk creating a class of businesses that is reliant on government subsidies, and that can be very effective in coming back for more.

That's the sticky paper phenomenon: once the government makes an investment into these businesses, the government's foot is on the sticky paper, trapped.

Former productivity commissioner Mr Gary Banks described Future Made in Australia as a 'fool's errand' that risks repeating mistakes of the past by propping up 'political favourites'. So it's not just picking winners; it's picking political favourites. That's not a politician in this place speaking; it's the former productivity commissioner, Gary Banks, one of this country's most well-credentialled economists. He likened the scheme proposed by the government to 'Hotel California'—you know the song by the Eagles, Madam Acting Deputy President?—saying that many will enter into the program 'but few ever leave'. Again, it's the sticky paper phenomenon.

Do you know what our Prime Minister said in response to Gary Banks—a prime minister who, with all due respect, has spent nearly the whole of his working life in this place, not out in the private sector or building businesses but as a politician? He said that Mr Gary Banks was a flat-earther. That's how he described Gary Banks. That's like calling Galileo a flat-earther—absolute nonsense. Gary Banks is a very, very well-respected former productivity commissioner of this country trying to bring light to the mistakes of the past because he considers this bill a fool's errand which will actually lead to us committing exactly the same mistakes, and he gets called a flat-earther by the Prime Minister. Why couldn't the Prime Minister of this country actually engage in a sensible debate and explain to the Australian people why we shouldn't be concerned at the risk? If a company is going cap in hand to the government for funds, why should the taxpayer invest in that company, if it can't raise money from the private sector or from banks? He doesn't answer the substance of the argument. He doesn't engage in a civil debate with respect to the substance of the argument. He gives the good one-liner: 'Mr Gary Banks—a flat earther.'

Another eminent economist, Professor Richard Holden, defended Mr Banks, saying the Prime Minister's insult was 'wrong and uncalled-for'. Again, they're not my words. It was another economist who'd leapt to the defence of Mr Gary Banks. Professor Holden said:

The PM says all the wrong things … And his main argument for subsidies is that other countries are doing it. Like a primary school kid telling a teacher: "but he started it!".

These are not politicians; they are people who study this area and know the history.

Steven Hamilton, an independent economist, has said:

There are many problems with industry policy, and this is a big one. It's why I tend to favour more neutral investment incentives like a lower corporate tax rate or accelerated depreciation.

…   …   …

I thought we'd learned these lessons, but apparently not. The bad old days are back.

To those listening to this debate—through you, Acting Deputy President Chandler: billions of taxpayers' dollars are going to be spent on investments as the government goes out there trying to pick winners, playing the stock market and playing political favourites. Good luck!