I was asked by a client this week on what I thought of Australia’s political climate. I said to him, “if you asked me 15-20 years ago I’d safely argue that it was the only country in the region which could boast incredibly stable government, sensible economic policy and a safe place to park your money. Today I can’t say with hand on heart that this is the Australia you are investing in today. What I will say is that you should keep your powder dry because it will become a ‘pound shop’ in the not too distant future with a weaker currency, higher rates and fire sale asset prices.”
He asked if I could elaborate. I replied “we have had 5 prime ministers in almost as many years. Before that we never saw anything like that. Our political climate is vile and volatile. We now have a government that is seeking to put in place knowingly unsound policies to arrest poll declines rather than try to fix an out of control deficit. What they are failing to see is that bashing big banks (especially for a conservative Coalition government) out of the blue chases off investment (Alan Joyce and Don Argua are right about that). Foreign investors must wonder whether they may fall foul of knee-jerk regulations and decide the risk is not worth it. So in answer to your question the current climate is going to offer some fantastic opportunities down the line because all of the political turmoil will eventually force change and buying into the market leading into that will be your best bet.”
So with our Dick Turpin highwayman robber at the helm we invite unwelcome flight of capital. If you want to create jobs, growth, stability and invite foreign investment you do so by providing a platform that supports it. It isn’t won by bashing industry, cranking up public spending and hiking taxes. It is done by making yourself the safest place to invest and all the while that happens the risk falls meaning capital is not only cheaper but more abundant. This isn’t trickle down economics but sound policy. Sadly talking of net debt isn’t going to save this government and what is worse Opposition leader Bill Shorten wants to outspend a budget that makes the Sultan of Brunei’s giveaways look like Venezuelan austerity measures.