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Casting Australia’s business reputation overboard

By Simon Cowan - posted Tuesday, 25 September 2012


When combined with other factors such as Australia’s high labour costs, there are serious concerns about Australia’s continuing attractiveness to investors. This perception of Australia as a risky and costly place to do business is only increased by international companies scaling back major projects (such as BHP’s recent decision to pull out of the Roxby Downs project in South Australia). 

A big part of the reason Australia was relatively unscathed by the 2008 global financial crisis was continued strong investment in sectors like mining, relying on Australia’s solid reputation as a good place to invest. In that sense, the robustness of the recent mining investment boom was the result of decades of hard work from the Hawke / Keating and Howard / Costello governments.

However, the global economic outlook remains gloomy and many sectors of the Australian economy are weak. Australia cannot afford to jeopardise access to investment capital in an increasingly scarce global market. Given the costs of walking away from committed projects, the impact of this impending capital flight might not be felt for a few years, but by then it will be much harder to act.

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The benefits of a stable regulatory environment –just like the 45 jobs in Devonport, Tasmania, that would have been created by the super trawler –will eventually be lost because of the government’s kneejerk, populist responses. Further damage to Australia’s reputation as an economy with a predictable regulatory environment is a large price to pay for a minor increase in opinion polls.

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About the Author

Simon Cowan is a research fellow at the Centre for Independent Studies.

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