Article by John Kehoe, courtesy of The Financial Review
14.08.2025
These are risky times for hardworking taxpayers and retirement savers.
Reckless governments, particularly states, are accumulating higher debts through their runaway spending.
Immorally, governments are stealing from the future to bribe voters today. Governments are imposing higher debt and inevitably higher taxes on our children and grandchildren. These younger and future generations cannot vote to exercise a democratic right to avoid the financial burden being heaped on them.
At the same time, the Reserve Bank of Australia’s stark downgrade to productivity growth this week reinforces concerns that living standards will not rise as much in the future as they did for past generations.
Higher debt and tax increases await taxpayers to fund bigger government, but superannuation savers should also be on alert.
Modern politicians with a penchant for central planning are dreaming up new ways to spend other people’s money – be it taxes or retirement savings. A former Labor operative likens them to “kleptocrats”.
Witness former Victorian Premier Daniel Andrews’ breathtaking comment at a superannuation lending summit hosted by The Australian Financial Review and Visy chairman Anthony Pratt in Sydney last week.
“Surely, one of the world’s biggest pools of capital has to make a really important and meaningful contribution beyond your stated purpose,” Andrews said.
The purpose of super is to provide a comfortable retirement savings for hardworking members, not gamble on pet projects of politicians and special interests.
Thankfully, AustralianSuper and Hostplus leaders pushed back on pressure to divert member capital to activities that did not meet rigorous risk-adjusted return benchmarks. Characters like Andrews see a honey pot to get their hands on.
This is the same infamous Andrews who almost sent Victoria broke after his nine-year premiership. Victoria’s gross debt burden is more than 200 per cent of operating revenues, among the highest of similar sub-national jurisdictions in the world.
The state Labor government he abdicated from has grand plans to build a $200 billion suburban rail loop, despite it failing a cost-benefit analysis.
Once politicians such as Andrews exhaust taxpayer money, they will look for ways to pilfer retirement savings.
Andrews is not alone in the Labor movement, and some industry super funds, in entertaining compromising member returns for causes such as social housing and clean energy.
Politicians no longer want to do the hard policy work of growing the economic pie through productivity-boosting reforms to generate prosperity to pay for government services and infrastructure, like Paul Keating and Peter Costello did.
Taxpayers fund ‘nation-building’ pet projects
Instead, state-directed capital allocation will be used for clean energy, housing and other “nation-building” infrastructure.
The Albanese government is getting in on the action.
Federal Industry Minister Tim Ayres is busy on a bailout blitz of industrial businesses. Labor is injecting billions of taxpayer dollars into steel and aluminium smelters, a lithium mine, green hydrogen, batteries and solar panels.
It’s even offering up to $470 million in equity and loans to a US-headquartered quantum computing company, PsiQuantum, to expand in Brisbane.
Labor’s Future Made in Australia policy is papering over the symptoms of other policy failures, without dealing with the underlying problems.
The hugely expensive clean energy build, with an estimated cost of $600 billion, to try to achieve net zero carbon emissions, and retrograde workplace laws are putting Australia on a path to deindustrialisation.
Energy-intensive and labour-dependent businesses in smelting and critical minerals mines struggle to operate with expensive and intermittent electricity, in addition to rigid labour laws.
Ayres, a former Australian Manufacturing Workers’ Union official, is doubling down.
He announced last week that the National Reconstruction Fund would inject $50 million of equity into battling lithium miner Liontown Resources.
“[Future Made in Australia] is a very slippery slope, giving politicians cover to blow tens of billions of dollars of other people’s money.”
Ayres may be a good bloke, but are he and the NRF board really more savvy investors than Australia’s richest person, Gina Rinehart? Liontown’s biggest shareholder, Rinehart’s Hancock Prospecting, did not tip into the $266 million raising.
Labor has also bet $2.4 billion on rescuing the ailing Whyalla steelworks in South Australia.
Taxpayers have given more than $100 million to billionaire Andrew Forrest’s failed green hydrogen experiment, including under Labor’s $2 billion green hydrogen fund and state schemes. Green hydrogen hopes have been scaled back and increasingly look like a fantasy in Australia.
The worst consequence may not be the waste of finite taxpayer money.
Australia is now fuelling a culture of rent-seeking by special interests. Parliament House is swarming with lobbyists.
Rio Tinto’s Tomago aluminium smelter in NSW, the nation’s largest electricity user, has its hand out for billions of dollars in support from federal and NSW taxpayers, as first reported by The Australian Financial Review in June.
Bailouts and subsidies impede the efficient allocation of resources by markets.
In a full-employment economy that Australia has at present, the costs are larger, as Treasury has warned.
High federal and state government spending on disability, aged care, health, education and bureaucracy means that 80 per cent of the jobs created over the past two years have been in the non-market economy.
With little or no slack in the labour market, workers need to flow to their best and highest-value purpose.
Business churn and labour reallocation are ultimately good for worker pay, positive for productivity and reduce inflation pressure.
Bailouts throw sand in the gearbox of this necessary adjustment.
But with central planners trying to direct the allocation of taxpayer funds and superannuation savings, our woeful productivity performance and weak real wage growth will likely persist.
Allegedly, a Future Made in Australia is not about picking winners. The new economic justification is about “shaping markets”.
This is a very slippery slope, giving politicians cover to blow tens of billions of dollars of other people’s money.
Where are the economic rationalists at Treasury and the Department of Finance protecting taxpayers and championing markets as the best allocator of capital?
Treasury’s national interest framework for a Future Made in Australia was supposed to be a benchmark to keep our spendthrift politicians in check.
Alas, Prime Minister Anthony Albanese immediately breached it by offering billions for Australian-made solar panels and batteries.
Spending other people’s money without political consequence is too easy these days.
