Here’s a bright idea from Alan Kohler:
…A 20 per cent tax rate AND immediate capex write-offs? Other countries struggling to balance their budgets haven’t got a hope. The fact that the US is likely to both impoverish its government and further impoverish the less well-off by paying for that with middle class tax increases and reduced government services is a matter for them; in the present reality of mobile international capital it presents a horrendous problem for other countries.
…Last week I interviewed Coby Hanoch, the CEO of ASX-listed Israeli business Weebit Nano, for The Constant Investor. The company is developing a new, faster and denser type of memory chip, based on technology licensed from Rice University in Texas.
Hanoch told me they are doing the development work in France because it offers the best incentives for research and development these days, including a rebate of 120 per cent of the salary of any French PhD he hires. 120 per cent! For any PhD!
I also spoke recently to Iggy Tan, CEO of Altech Chemicals, which is building a plant in southern Malaysia to turn West Australian kaolin into pure alumina for the production of sapphire (for LED lighting and the front of smartphones) — because of the tax incentives provided by the Malaysian government.
Amazingly, it’s worth him shipping the stuff from Meckering, a couple of hours from Perth, and then another 5000km to Johor in Malaysia, rather than process it alongside the mine.
It’s good that those companies are listed on the ASX, along with a growing number of other global technology businesses, to get access to Australia’s capital pool and the ASX’s favourable listing arrangements.
But it just reinforces Australia’s role as a quarry: the world is mining both our resources and our superannuation, but neither of those things produces many jobs.
…Whatever budget firepower is available should be focused on making sure firms like Altech Chemicals and Weebit Nano do their research and build their new factories in Australia. Whatever it takes.
Lordy, Alan, wasn’t that what the RSPT that your Business Spectator destroyed about? Still, better late than never.
The problem is, one of the characteristics of Dutch Disease is the Rybczynski effect:
The Rybczynski theorem was developed in 1955 by the Polish-born EnglisheconomistTadeusz Rybczynski (1923–1998). It states that at constant relative goods prices, a rise in the endowment of one factor will lead to a more than proportional expansion of the output in the sector which uses that factor intensively, and an absolute decline of the output of the other good.
The theory notes how capital and other resources are all drawn into the endowment sector to the detriment of all others. I extend that to the entire political economy as everyone loses the wherewithal to do anything other than follow the money down the endowment rabbit hole. Leaving that economy unable to change anything even if it can still imagine it would be a good idea.
Still, nice idea, seven years too late.
