Populism over policy is no way to build economic prosperity
For a nation that is supposed to be "open for business", Australia sure does seem to offer a lot of caveats. Scott Morrison's decision to block the sale of the S. Kidman & Co pastoral company to Chinese interests is just the latest in a string of protectionist, nationalist and populist decisions. From paying a premium to build submarines at home, to blocking the sale of GrainCorp to American interests or imposing new burdens on overseas real estate investors, the Coalition's definition of open may well be refined to "kind of open". The Treasurer's justification for stepping in to prevent the sale of the "Cattle King" properties amounts, primarily, to the landholding being too big. It is the largest private landholding in the nation and amounts to 1 per cent of our land or 2 per cent of agricultural land (albeit mainly low-yield pastoral country). This would appear to be a particularly difficult threshold test for foreign investors.  
Are we saying that Australia wants to welcome foreign investors but not for any asset that is too large? Spurning foreign investment is risky for Australia, which has long needed and will continue to require foreign investment to pay its way in the world. We typically import more than we export, which means Australians have to borrow or sell assets overseas to make up the difference. And as David Uren writes today, foreign investment is particularly important in agriculture, which delivers the volatile and unreliable returns that local superannuation funds, for instance, tend to shy away from.
If we are to take advantage of our opportunities as a food exporter - our Global Food Forum in Melbourne this month heard we should be able to more than double the value to $100 billion inside a decade - we need foreign investment in agriculture. So while the populist sentiment in blocking the sale of an iconic company - especially, let's be frank, to Chinese interests - is obvious, The Weekend Australian is concerned about the signal it sends and the precedent it sets. The way it bends the national economic interest to fit the electoral mood, as expressed by elements of both major parties and the protectionist minor parties and independents, does not fill us with confidence about the ability of our political system to deal with the economic challenges ahead while a budget and election are looming.
As this newspaper has warned for close to a decade, successive federal governments have led us down a high-spending, high-taxing path that has generated significant public debt - it has tripled as a share of gross domestic product in the past decade - and severely burdens future taxpayers. Even if revenue growth is marked down on Tuesday (it is forecast to rise from 23.9 per cent of GDP this year to almost 25 per cent by 2019), it still will be rising far more quickly than spending, which is expected to fall only to 25.3 per cent across the same period from the post-GFC high of 25.9 per cent this year.
Not only are taxes too high but their composition remains problematic, despite three years of reform rhetoric. Mr Morrison has creditably promised to rescind his predecessor's arbitrary and unfair impost on workers earning more than $180,000 a year, the so-called debt repair levy. But this is hardly the tax reform Australians were told to expect from a new Prime Minister who promised economic leadership. In fact, doubling superannuation tax for high-income earners - a widely expected budget change - to help pay for the unwinding of a few years of bracket creep for middle-income earners is straight out of Labor's policy play book. It would be redistributive and populist, merely fiddling at the edges of efforts to reduce taxation and deliver reform.The Coalition has rightly established a stark contrast with Labor over climate policy and union corruption issues while the ALP desperately seeks to catch up on border protection. Malcolm Turnbull and Mr Morrison also should aim for the strongest contrast on fiscal discipline. Labor's $100 billion tax and spendathon is reckless in the extreme. And while the budget comes in the middle of what effectively is an extended election campaign, the Coalition must make a virtue of its own parsimony. It is not as though the challenges are getting easier. The chill deflationary winds of Europe, the US and Japan have unexpectedly reached our shores. The consumer price index fell 0.2 per cent in the first three months of the year, the first quarterly fall in almost eight years, leaving the index at only 1.3 per cent in the year to   March. Bracket creep, a covert money pump for government, will become a less reliable way to fix the budget. Slowing inflation will reduce growth in government pensions but it will hit government revenues harder, as wages and company profits slow down, hitting income and corporate tax receipts. The prospect of falling prices also should underscore the urgency of paying down public debt. Of the $424bn of federal bonds outstanding only 7 per cent are linked to inflation. If prices fall the government's real debt burden will rise. Fiscal prudence is required.