Federal and state governments now face a steady queue of large, tax advantaged Multinational corporations with a simple message: “Subsidise us, or we shut the gates.”
Jamie Dimon, CEO of JP Morgan recently said at an earnings call: “When you see one cockroach, there are probably more.”
We now see the same thing with corporate subsidies.
Once one bailout appears, a small army of “essential” projects scuttles out from behind the skirting board.
Think about a few recent examples.
Whyalla Liberty Steel receives a multi‑billion dollar rescue package.
Glencore secures support for its Mount Isa zinc smelter and Townsville refinery.
Nyrstar’s lead‑zinc smelter attracts funding.
Arnott’s receives a 45 million grant to ‘shore up their balance sheet’
On top of that you have the fuel tax credit scheme running at around ten billion a year, and a series of Petroleum Resource Rent Tax concessions.
Not every one of these choices fails a hard‑headed test. Some, probably many, will stack up when you count jobs, regional impact, supply chain risks and national sovereignty. However, that does not diminish the simple fact that the only ‘policy’ we have is to be selectively tactical in our response. Little integrated, coherent policy aligned with the long term best interests of the country, that has bi-partisan support.
The problem sits with the ongoing failure of the adversarial nature of our political system, and successive governments to provide a stable and reliable long term investment environment.
Taken together the tactical responses do not look like strategy, but they do look like frantic pest control in a kitchen nobody bothered to design properly.
The cockroaches are running wild, demanding sustenance.
There is a common thread.
Most calls for subsidies exploit the absence of a coherent energy policy, and restrictive, time consuming approval processes, combined with a small domestic market.
Governments then reach for subsidies to keep often extremely wealthy, tax‑advantaged multinationals from walking away with their capital, seeking the best risk adjusted returns elsewhere.
It pits national governments against one another in a global options game, that filters down to regional governments.
In contrast to our ad hoc playbook, China has played a long and highly strategic game with subsidies. For example, they have spent years locking down global supply of rare earth minerals, and Chinese firms now dominate large parts of the EV supply chain. The same playbook has been applied to batteries, solar panels, and increasingly AI.
It is a giant international poker game, and we are a minor player with a few good cards if played well.
We supply resources, are stable politically and economically (despite the problems) and have an educated workforce. However, we have shallow and short term oriented capital markets, so need investment to leverage our natural assets, while rabbiting on about sovereign capability.
For Australian governments to attract mobile capital on sensible terms, we need a different offer.
Subsidies and favourable tax treatment can play a role, but they do not carry the game when they are subject to management by press release, and the loading of investment in marginal seats.
Serious investors look for something more valuable: reliable educated workers, technical capabilities, and reliable institutions, all of which contribute to the certainty that encourages investment.
The strategic dilemma is that competitive countries have a different set of foundational assumptions that deliver competitive advantage.
On one side sit the cheques written to keep multinational operations in place.
On the other side sit the losses in productive capacity, skilled jobs, capability building, and tax revenue if those operations close.
Do our governments, bureaucracies, and political culture have the capability and courage to wrestle with that complexity?
Because until they do, the cockroach subsidies will keep multiplying under the fridge.
