Working Papers

Peter Costello, Economic Nationalist

In an op-ed for the SMH, Liberal backbencher Peter Costello wears his most disgraceful decision as a badge of pride:

I cannot remember Treasury ever recommending that I block or disallow the acquisition of an Australian company by foreign interests. There were specific rules for media, real estate and the like, but in the general economy Treasury always supported foreign investment. In 2001 I rejected the Treasury view that Shell’s application for the oil and gas producer Woodside should be allowed. It caused a great deal of agitation in the department.

Bad economic decisions tend to do that to Treasury.  Costello also takes pride in frustrating the attempts of Australian businesses to become global companies:

I was determined to ensure that BHP’s corporate presence did not disappear from Australia in the same way as CRA, so I put conditions on its dual-listed company structure that required the global headquarters to remain in Australia, that this be specified in all public documents, that the majority of board meetings be in Australia, and most importantly, that the chief executive and chief financial officer have their principal residences in Australia. This last condition was opposed by the company.

Several times the company sought to have these conditions eased but they remain in place, and to its credit, the company has scrupulously complied with them. The world’s largest diversified mining company is still Australian…

Costello gives the game away when he says:

The head office generates the corporate, financial, legal and insurance services and the highly skilled jobs that come with them.

In other words, the real rationale for FDI controls is good old-fashioned protectionism.  Needless to say, Peter Costello now also thinks he knows better than Rio Tinto how it should structure its business, a position he shares with Greens leader Bob Brown and the national secretary of the CFMEU.  Costello remains an unreconstructed economic nationalist.

posted on 18 February 2009 by skirchner in Economics

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Well if Treasury always recommends against blocking an acquisition what is the point of the FIRB law?

Peter Costello was the best Treasurer in Australia’s history.  If the Shell/Woodside deal had gone ahead it would be bankrupt today.  Just like if the acquisition of Qantas had gone ahead.  And the Coalition’s four pillars policy worked to ensure that there wasn’t a major bank collapse. 

If you think Costello was protectionist just by blocking one acquisition - and that’s the only one he blocked in 11 1/2 years - then what must you think of the highly protectionist Rudd Government?  Which wants to reregulate the economy against the evil neo-liberals

Posted by .(JavaScript must be enabled to view this email address)  on  02/18  at  05:42 PM

Sam, the role of FDI regulation is not to prevent companies from making what might be bad decisions.

Posted by skirchner  on  02/18  at  08:18 PM

Perhaps Pete was concerned about energy security in 2001?  I for one take some comfort in the fact our biggest oil and gas producer remains in Australian hands, but then I subscribe the nutty idea that oil & gas reserves may be finite.

OFF TOPIC:  It seems its not only the fiscal stimulus that has been saved not spent, much of the recent monetary stimulus has gone into savings as well:
Interest rate cuts going to our loans, not pockets

Does this mean monetary policy is also largely ineffective (at least for the household sector) despite the fact Australia is a long way from ZIRP?

Posted by .(JavaScript must be enabled to view this email address)  on  02/19  at  08:04 AM

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