“THE quickest and most effective means of attracting money to the north of Australia is to declare (for a trial period of 20 years) a tax holiday for all workers and salary earners.”
That’s not Gina Rinehart but her father, Lang Hancock, who was an equally passionate advocate of developing Australia’s vast resource-rich north, in 1958.
Rinehart’s increasingly frequent forays into public policy should surprise no one. Australia’s richest woman inherited not only her father’s lucrative mining interests but his unfashionable ideas.
Hancock was animated by distaste for bureaucratic and centralised government in Canberra. He railed relentlessly against the insidious and enervating impact of taxation — “the largest extractive industry in the world”, he said.
Along with advertising king John Singleton, he helped found the Workers Party in the mid-1970s to agitate against the massive expansion of government initiated by Gough Whitlam.
“If you want to help the poor and our next generation, make investment, reinvestment and businesses welcome. High-tax socialist policies don’t create jobs, business and investment do,” Rinehart said recently, pointing out Australia was mired in costly labour regulation, investment-sapping taxes and carping jealousy fanned by a pusillanimous political class.
Her remarks drew vituperative rebukes from Julia Gillard down.
A seemingly self-serving economics lecture by one of the world’s richest women, whose fortune owes as much to progeny as to acumen, may not be a marketing triumph but it doesn’t blunt the truth of her message.
And the truth hurts. Australia has become excessively expensive, with price increases concentrated in parts of the economy the government meddles most with, such as health and education.
The commonwealth parliament passed a farcical 7100 pages of legislation last year, compared with 358 in 1958. The tax system requires 21,000 bureaucrats to enforce, and the federal departments of health and education employ almost 10,000 people.
Far from being loopy, Rinehart’s remarks reflect standard, even boring, economic theory, entwined with a classically liberal philosophy that unwieldy government undermines national and individual prosperity.
Rinehart’s observation that Australian wages are high compared with Africa’s prompted fury, but logic points out higher minimum wages and laws hampering businesses hiring and firing decisions bolster unemployment.
The Prime Minister’s response that paying people $2 an hour “is not the Australian way” not only grossly misrepresents Rinehart but is pompous, suggesting Africans pay each other miserly sums by choice, and ignorant, implying the costs of goods and services in Africa are similar to here.
Rinehart’s claim that Australian taxes are driving international investors away reflects the government’s Henry tax review, which argued global investment decisions were highly sensitive to differing international tax rates.
Rinehart’s admonition against excessive smoking and drinking channels Max Weber, the German political theorist who argued the relative success of the Anglo-Saxon countries rested on their relative monopoly on industry, thrift and abstemious living.
Her claim that Australia is “grossly indebted” grates with Keynesian economists, who point to our low level of public debt compared with European countries, but Nobel prizewinner James Buchanan would have argued public debt will inevitably beget yet more debt. Even if Keynesian economics worked in theory, it is disaster in practice, giving politicians a glib justification for unsustainable borrowing.
What about her call for a special economic zone in the north? Economists’ aversion to inconsistency and exemptions leads them to dismiss the idea, as both government and opposition have done this week. But countries from China to South Korea have deployed them successfully.
Rinehart could sell her mines and swan around the Riviera for the rest of her life. Australia is lucky to have a billionaire with an interest in public policy, with the resources to provide a potential counterweight to the tired chorus of vested interests in Canberra.
When Australia’s boom becomes a whimper, her ideas will start to resonate more widely.