Paul Scarr (Queensland, Liberal Party) Share this | Hansard source

Thank you. I'm sure Senator Ayres will. I want to refer to the report I did, as deputy chair of the Economics References Committee, which looked at this, and ask two simple questions. What we've got here is the government proposing to invest your money, as taxpayers, in manufacturing enterprises all over Australia. Right? That's the proposition. It will be done either directly by becoming joint owners or by lending them money. That's the proposition they're putting forward for this $15 billion. I have two simple questions. Why can't the particular venture attract equity investment or debt support without going to the government? If someone's got a good commercial idea and they think they're going to generate a rate of return, generate profits—the flow of dividends—why can't they go and raise the money from private investors? What's the issue? Why can't they go and raise the money from the bank, if they've got a good idea? Maybe it's that they can't get the funds from somewhere else because it's just not a good idea. The government is actually going to fund them. Next time you come to Parliament House, Madam President, you'll see a queue of rent-seekers down Kings Avenue who are coming up to this place to seek equity capital and loans from the government to fund their projects. We're all going to become shareholders. We're all going to be thrown into this swamp. That's what's going to happen under this scheme. So the question is: if the private sector will not invest its equity in a venture and commercial lenders will not advance sufficient debt funds, why should the government risk taxpayers' money—your money? It's not my money; it's your money—$15 billion.

At the same time, think about how else that money could be spent, Madam President. You won't hear those opposite talking about that. That's called opportunity cost, the scarcity of resources. These are basic economic principles. You will not hear those opposite talk about them. How else could that $15 billion be spent? Maybe it could be spent in improving our road infrastructure, in improving health services or in adding drugs to the PBS for people who need those life-saving drugs. Maybe it could be spent in doing the things that should be the core business of government. That's the opportunity cost. Every single one of the dollars that are spent on this utopian dream is a dollar that can't be spent somewhere else. That's opportunity cost. You will not hear those opposite refer to that.

Could I just say, Madam President, that I come to this place with 25 years experience in the private sector. I have dealt with state owned enterprises on four continents. I was involved in one example where a state owned enterprise lost US$1.2 billion in relation to an investment. Do you know what? When you engage in these investments you don't always make a profit; you can make a loss. The problem is that when the government is the shareholder there's a blurring of the line between the commercial and the political. This has been well substantiated.

I want to give you a quote from a book I often quote from, Basic Economics. Let me quote from this book. These aren't my words. Page 492 says:

Where there are elected governments, their officials must be concerned about re-elected—

Does that make sense?

which is to say that mistakes cannot be admitted and reversed as readily as they must be by a private business operating in a competitive market—

Does that make sense to you?

in order for the business to survive financially. No one likes to admit being mistaken but, under the incentives and constraints of profit and loss, there is often no choice but to reverse course before financial losses threaten bankruptcy. In politics, however, the costs of the government's mistakes are often paid by the taxpayers, while the costs of admitting mistakes are paid by elected officials.

That is the blurring between the lines of politics and the commercial.

Senator Ayres, you will have your opportunity. I know I'm getting under your skin because my rebuttal of your utopian notion doesn't suit you. President, you might ask Senator Ayres to just cool down a bit.

That's basic economics. Let me give you an example. There is something called the Concorde fallacy. What's the Concorde fallacy? It's actually named after the Concorde. We all remember the supersonic jet. The Concorde was considered this great idea between the UK government owned enterprises and French owned enterprises. They wanted to invest in supersonic technology. They wanted to be ahead of the game. They wanted to provide manufacturing jobs. So they got together, they did the research and development, and they built the Concorde. And what happened? It was a commercial and financial disaster. The budget was blown, the project timetable was blown, and the Concorde doesn't fly anymore. But the reason they call it the Concorde fallacy is—this is the position those opposite in government are going to put all of us in as taxpayers—the UK and French governments of the day were unable, from a political perspective, to say: 'Draw a line under it. We won't put any more taxpayer dollars into it. It hasn't worked.' It's a fallacy to think that it makes sense to put an extra dollar of capital into it when you've invested billions of dollars of capital. You have to ignore the billions of dollars of capital you've invested and look at whether it makes commercial sense to invest that additional dollar of capital. That's the Concorde fallacy—billions and billions and billions of dollars of taxpayer funds were wasted under that fallacy.

This is the reality. They don't like to hear it, but again I come back to that fundamental question. If these companies can't raise the money from private investors, there might be a reason. Typically, people who analyse investment opportunities will invest in an opportunity that makes sense. But they want to invest your money in relation to these private ventures. What's going to happen when it goes pear shaped? What's going to happen after the Australian government has invested and becomes a minority shareholder in, say, a manufacturing enterprise which has 500 workers and is making a loss? We know what's going to happen—