Yesterday Paul Kelly wrote at The Australian that:
The crisis now engulfing Australian manufacturing has been long predicted and much foreseen yet the inescapable impression is that our decision-makers have been taken by surprise and are scrambling to do something.
…Yes, the government has been acting. The critique, however, is it has not acted enough. Its political mismanagement of the mining tax in early 2010 despite the convincing case for a new commonwealth-based resources tax was a major blunder. Its corporate tax relief is too modest given cost pressures. Its re-regulation of the labour market has reduced flexibility and diminished productivity. Its instinct for government initiative means excessive red tape and regulation on industry.
I don’t dispute these points by Kelly. There’s no doubt the RSPT was badly designed and mismanaged. I said so at the time. However, criticism of the government’s efforts to address Dutch disease are a bit rich coming anyone at The Australian. That paper was a part of twin tipped spear that drove the RSPT debate into complete hysteria, destroying any chance for a reasoned debate about the merits and pitfalls of the tax.
The other tip of that spear was Business Spectator who, afterwards, trumpeted its role through Robert Gottliebsen:
When new Prime Minster Julia Gillard announces a completely revamped mining tax it will be an enormous victory for the nation. Former Prime Minister Kevin Rudd and Treasurer Wayne Swan, acting on advice from Treasury, devised what was probably the most disastrous tax initiative since Harold Holt abandoned tax deductibility of interest some 50 years ago.
Both the Holt and the Rudd-Swan tax measures were so nation destroying, that they were never introduced.
Here at Business Spectator, Alan Kohler, Stephen Bartholomeusz and myself realised that Rudd and Swan had made a diabolical mistake soon after it was announced. We decided to highlight every aspect of this terrible measure until it was changed. In all the KGB wrote some 80 commentaries on the tax and I think that, with a few print journalists, including Matthew Stevens on The Australian and Terry McCann on the Herald Sun, we led the push for the government to act in the national interest. Our readership soared to 400,000 as the business community turned to Business Spectator to understand what was happening. This is the first time I have been involved in an exercise like this and I have found that electronic communication is more powerful than print.
At the time I wrote the The Distillery column at BS, a daily critique of national business commentary, so I was well placed to assess the media through the debacle and, believe me, the assault upon the tax and government was like nothing I can recall in my lifetime. BS launched a wildly unbalanced attack on the tax and The Australian was not far behind. Reading the abive still makes me feel queasy.
The counter-balancing forces at Fairfax were piss weak. The AFR played along with the attack with a little more balance. The metropolitan dailies flailed.
My point, then, is that although the government was at clear fault in its execution, the media was also at fault in terms of the final outcome. It’s mad attack on the tax drove the government of the day into outright panic. In that state, they dumped a Prime Minister and allowed three foreign-owned firms to determine their own tax rates in the people’s Cabinet Room. The blasted political economy that has followed has made revisiting fiscal solutions to Dutch disease political anathema. Ironically, media company profits will suffer as a result.
What would have happened had the media provided a reasoned debate? Obviously it’s impossible to know. But I’d be willing to bet that we would have come out with a better result than the $100 billion gutted MRRT.
