Malcolm Turnbull’s much hyped “innovation agenda” has taken another hit today, with the co-founder of PayPal, Peter Thiel, warning that “success” in property and mining investment is holding back innovation. From The AFR:
“There’s no reason why Australia couldn’t do more [Atlassians],” Mr Thiel told The Australian Financial Review from Thiel Capital’s headquarters in San Francisco.
“The challenge in Australia is that there are so many good opportunities in the mining or the real estate industry that there isn’t as much of a need to push and do new things.
“Australia’s a very fortunate country, but people haven’t had to work quite as intensely on some of these technological innovations as elsewhere.”
In other words, why bother with the hardship of taking a risk on a new business or technology when you can instead buy a negatively geared investment property, watch it grow in value, and then sell it for tax effective capital gain?
And which bank is going to lend a start-up funds while there are oodles of “low risk” mortgages to profit from that require minimal capital to be held?
Before he sold-out to the property lobby, Malcolm Turnbull thought this way too. In 2005, Turnbull decried Australia’s “very generous” negative gearing and capital gains tax (CGT) concessions which he described as a “sheltering tax haven” that is “skewing national investment away from wealth-creating pursuits, towards housing”.
It is precisely Australia’s perverse tax concessions – negative gearing and the CGT discount – that have helped channel resource allocation in Australia away from productive enterprise and infrastructure towards non-productive housing.
And this financialisation and over-investment into housing has made the Australian economy dreadfully unbalanced and less productive.
The biggest inhibitor to Turnbull’s innovation agenda is his own support of Australia’s property tax lurks.
Digging under the surface, the “Innovation Prime Minister” is really the “Prime Spruiker”.
