Let’s recall the shocking McKibbin Doctrine:
Obsessed by weak commodity prices and volatility in global financial markets to the point of not thinking about the future?
Don’t be, advises top economist and former Reserve Bank of Australia board member Warwick McKibbin.
Australia is better placed than most countries to benefit from long-term global trends – such as population ageing, fiscal adjustments and the shift in economic clout from Europe to Asia, Professor McKibbin says.
…”If you have got something like a fixed asset in a country and you are globalising the entire world then location becomes a valuable asset.”
“Real estate on Sydney harbour for example is also from a national point of view attractive. But for foreign investors it’s also very attractive because there’s billions of dollars of wealth being generated in China.
“The middle class is expanding, and they’re going to want to buy things, environmental goods – they’re going to want to buy stuff which we actually have in abundance. But much of it is fixed assets so you can’t change the supply of it, and so therefore it’s value is likely to go up a lot.”
But it will also drive up the real exchange rate, hurting the competitiveness of trade-exposed industries such as tourism – currently enjoying good growth with a lower Aussie dollar – and manufacturing. A stronger dollar means Australian goods and services are more expensive for foreigners while competing foreign goods and services are cheaper for Australians.
It appears Captain Glenn has saved the best until last, today from The Australian:
Glenn Stevens has weighed into the foreign investment debate, saying Australia should do more to attract the flow of funds that builds new businesses but be more cautious about foreigners simply purchasing existing Australian assets.
…“Australia wants to be open to foreign capital. That’s our national philosophy. I think in that discussion it would be helpful to think about the kind of foreign capital we want,” Mr Stevens said.
“Foreign capital that builds new assets — like some of the capital that funded the mining boom — that’s one thing. Foreign capital that buys up the existing assets, I’m not saying that we should be closed to that, but that’s not creating new capital for the country. “That’s just altering the allocation of who owns the capital that’s here now.
“When we all talk about ‘we want capital inflow’, we can probably have a bit of nuance and subtlety over what kind of inflow we mean and ask ourselves whether we’re attractive enough to the kind of capital that actually builds new assets.
Hat’s off to that. The AFR has the latest on the Augrid block:
Ausgrid may not own a telco licence but it owns and manages plenty of private secure fibre lines that connect to the NSW police headquarters in the CBD and other high-level organisations and could allow a foreign owner ‘remote control’ access to data that compromises national security, a company insider said.
The NSW power distributor, whose sale to Chinese and Hong Kong bidders has received an initial rejection by Federal Treasurer Scott Morrison, has played down the capacity of its network to carry communications and data.
The company signalled last week its communications capability is primarily used for internal purposes such as monitoring and checking faults on its poles and wires network, which serves 1.7 million customers from Sydney’s south through to the Upper Hunter region. A spokeswoman added on Tuesday some of Ausgrid’s poles and ducts also carry telecommunications cables owned by third parties.
“We do have telecommunications equipment which is exclusively used to help identify and respond quickly to faults and manage the electricity network,” she said. “A small portion of Ausgrid’s dark fibre optic cable is leased to third parties.” So-called ‘dark fibre’ is privately owned cable that can be used by the owner or third parties to form a private network.
Sure, but let’s face it, this challenge goes far beyond this. As Captain Glenn outlines, by selling off productive assets only to change ownership we gain a short term capital gain in exchange for longer term cash flow loss. At the same time we crowd other tradable businesses as competitiveness fails. And as you keep doing it you have no choice but to keep doing more of it.
But the problems flow far wider still. The associated high immigration intake and importing of foreign workers undermines labour’s share of income. That, in turn, generates resentment in the populace and a backlash against immigration builds, driving the rise of xenophobic politics. Younger generations get priced out of everything including basic needs such as housing, sending them packing, creating brain drain, and stoking tensions higher still.
In Australia’s case specifically, where economic and strategic outlooks are stretched between competing Super Powers, the nation’s entire strategic framework comes under strain, on one hand risking major economic reprisals and on the other the very stability of alliance security.
Eventually, populist government loses its way in a maze of conflicting pressures making arbitrary decisions as we lurch back and forth from one moral panic to the next. That is where Australia is already and it is intensifying.
With these questions congealing swiftly into the principle challenge of this term of government, where is Prime Minister Turnbull?
