Tag Archives: investment

Abbott’s foreign investment policy

This is the sentence that makes me feel most uncomfortable: Voters are likely to be less hostile to foreign investment if they think that the government is preserving a well-balanced economy.Extract from We are pledged to real reform | The Australian Most of the Abbott statements about manufacturing assistance, transaction costs and “economic diversity” that […]

Big tobacco bites back

The Gillard government’s plain packaging for cigarettes legislation is discomforting even for those who have no patience with the huge and unnecessary costs that tobacco use imposes on the Australian public health system.It looks like another piece of heavy-handed, “go for the jugular” government regulation (like the appalling NBN, the carbon tax and the blanket […]

The blind bouncer: arrogant and costly

The Treasurer has apparently told the media that the Foreign Investment Review Board “unanimously” recommended the prohibition of the Singapore Stock Exchange’s bid to merge with (or take over) the Australian Securities Exchange. What does “unanimity” mean or matter in secret tribunal? Nothing whatever. Swan should draw no comfort from that. But by far the […]

Trahaison des clercs

Whatever your views on the merits of the SGX/ASX deal—I’m sceptical of the durable value, but there is a rash of global consolidation in that industry—do you agree with me that it is madness to install a tribunal of bureaucrats at the door to the Australian investmentmarket exacting an obscure toll on foreign firms such […]

Resources tax mess

Henry Ergas explains what’s wrong with the Brownian ‘Resources Super Profits Tax’ (apart from the appalling, ideological sniping at foreign investors). “Unfortunately, we have a long history in this country of interventions that, were they capable of perfect implementation, might increase welfare. Typically, when reality hits, they have the opposite effect. The scientific tariff, which […]

Discounting the Intergenerational Report

“[H]ow often does the IGR [Intergenerational Report], in five pages vaunting public investment in infrastructure, use the term ‘cost benefit analysis’? Not once. Clearly, suggesting that public investment only be undertaken when the benefits exceed the costs is no longer politically correct.” Extract from Henry Ergas in The Australian
Henry Ergas is—as ever—right on the money. The 2010 IGR has been written like a government press release. It does not seriously evaluate the evidence nor even offer cost-benefit analysis of the current government’s infrastructure programs (that it praises) in the light of the changes it projects.

What can we make, for example, of an IGR whose chapter on ‘Climate’ fails even to mention the impacts of migration policy or population growth when evaluating the efficacy and economic impacts of a proposed emissions cap/objective/trading scheme?

Why do we need an IGR that merely regurgitates what the Government has already claimed about its own policies? An inter-generational report must be an independent and rigorous review of the evidence about policy outcomes to be of any use in the necessary debates about growing our wealth or maximising our opportunities. The current edition is a poor effort from such a talented group (Treasury).

Shorting common sense

I’ve previously noted that the policy of banning short-selling looked just like the sort of hunch driven regulation that hurts both the economy and common sense. Its prohibition ofspeculation on price falls was Canute-like.

Now here’s some strong evidence that bans such as ASIC’s had adverse impacts on precisely factor most needed in a crisis of market confidence: liquidity.

“The evidence suggests that the knee-jerk reaction of most stock exchange regulators around the globe to the financial crisis – imposing bans or regulatory constraints on short-selling – was at best neutral in its effects on stock prices. The impact on market liquidity was clearly detrimental, especially for small-cap and high-risk stocks. Moreover, it slowed down price discovery” Extract from Short-selling bans in the crisis: Alessandro Beber and Marco Pagano