Tuesday, 3 December 2013

Grain Corp

The Abbott government is now the first Australian government to knock back an application to the Foreign Investment Review Board from the business community of our close ally the United States, writes Peter Reith.

I was shocked when I heard the news last Friday that the Abbott government had blocked the sale of GrainCorp to an American company, Archer Daniels Midland. Although the decision is technically made by the Treasurer, Joe Hockey, the reality is that this decision had Tony Abbott's finger prints all over it. And Tony was not alone; he was being supported by Nationals Barnaby Joyce and Warren Truss.

The Nationals were always going to be unhappy with ADM but I never thought that the Abbot government would be the first Australian government to knock back an application to Foreign Investment Review Board from the business community of our close ally the United States. I certainly hope that the Government properly consulted the US as required by our free trade agreement with them - and in a timely manner.

Of course, the Coalition government does not want to start its term with dissension from their National Party colleagues. But dealing with the Nats is nothing new; for example, in the early days of the Howard government, John Howard had to quell a very unhappy National Party on the question of gun reforms. And although it has not been the subject of much public comment, the new Treasurer Peter Costello had to take a very firm stance in dealing with Howard on the exchange of letters that led to a formal agreement on the independence of the Reserve Bank. In both cases, they were difficult issues but no one would question that the right decision was made.

Unfortunately there were numerous signs that the GrainCorp decision was always about politics; in fact Hockey went close to making that point when he talked about disquiet in the agricultural community over the prospect of the sale.

Needless to say, Joyce did his best to whip up the opposition. It seems that the decision had little to do with the national interest and everything to do with agrarian politics, Queensland style.

It is understood in some quarters that FIRB first intended to agree to the application and that Labor was going to approve the sale. However, the decision was not announced when the election was called and Chris Bowen, Labor’s Treasurer, either ran out of time or, more likely, decided to squib it. If it is true that FIRB was intending to say yes, then it has some explaining to do.

I also opposed the one decision made in the Howard years by Peter Costello to block the sale of Woodside. However on that occasion there were genuine issues to be resolved.

But the big difference this time is that the Costello decision was made by a government that had already established its credentials as an economically rational economic manager that had already introduced big reforms on workplace relations, with the budget back on track to paying down debt. Howard also had a good record of standing up to the Nationals when, in Opposition, he championed the end of the single desk for grain sales.

This is not the case for the Abbott Government. Abbott's government is brand new and many are watching its every move to see what sort of government it will become.

The Abbott supporters want a sign not that the Abbott Government gets every decision right but that they make more good decisions than Labor. I know that is not ambitious but it would still be an improvement on the last 6 years.

Unfortunately, Abbott, even before getting into government, had already made a number of decisions that should never have been made.

He has burdened business with his paid parental leave; he should never have agreed in the first place to Gonski funding; and he has deferred much needed labour market reform. And now comes the ADM decision.

ADM was not such a hard decision. The really hard decisions will be in the budget. I don't have much doubt that Joe Hockey knows what has to be done but all these big decisions have to be endorsed by the PM.

As well as ADM, Hockey also touched upon another decision that the government may have to consider. The government has a policy to reduce red tape. Normally these issues are determined by market forces but Qantas is handicapped by legislation put in place to preserve its national carrier status.

The idea of a national carrier became obsolete with privatisation and greater competition in the aviation industry. But the legislation remains on the books and is hard to repeal thanks to the socialist tendencies of the ALP and the Greens. Remarkably, Labor has even suggested that they could inject taxpayer money into Qantas to keep it afloat. Having spent billions of dollars on establishing a government owned monopolistic broadband utility, Labor now wants government to get back into the business of owning an aeroplane company. Whichever way you look at their propositions, Labor wants the government to subsidise a business with taxpayer funds.

Given the huge amount of taxpayer money already wasted by Labor in the last six years it is hard to understand how they could now propose even more waste.

Hockey says it should be the subject of a national debate. Australia does not need a debate; we need a government that makes it clear it will not be wasting any more taxpayer money with subsidies for business and that its priority, as promised, is to return the budget to surplus ASAP.

Peter Reith was a senior cabinet minister in the Howard government from 1996 to 2001 and then a director of the European Bank for Reconstruction and Development from 2003 to 2009. View his full profile here.

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