Who Stands For The Free Market?

This article was originally published in The Australian Financial Review on or about 1 December 2022 and was written by the author in their capacity as a contributor for that publication. It has been republished on the IPA website with permission. The views expressed are those of the author alone.

When business stops advocating for the benefits of competition and the danger of government regulation, Albanese’s energy price relief plan is the result.

If a week is a long time in politics, nine months is even longer.

It was back in March at The Australian Financial Review Business Summit that Jennifer Westacott, Business Council chief executive, was welcoming the then-opposition leader’s “embrace of free market economics as a critical component of a healthy country”.

“I think what is good about Mr Albanese is he understands the fundamentals,” she said.

“And then, of course, you know, when companies talk to me about whether they will come and invest in Australia, the first thing they say is, ‘Can I get access to the skilled people that I will need to actually kind of grow and expand my business?’ … Now, obviously, there are tax and other things that influence those numbers, but the access to skills is absolutely crucial.”

Given the federal government is about to come as close to nationalising the energy market as is possible to do without actually seizing coal and gas companies’ assets, it’s fair to assume the supply of domestic labour won’t now be the top-of-mind concern of international boards contemplating investing in Australia.

To be fair to Westacott, few observers would have predicted that within less than a year of its election, a Labor government would cause corporate Australia to reacquaint itself with the concept of sovereign risk.

Corporate Australia has for a long time assumed energy/climate change policy in this country just involved seemingly never-ending government subsidies for renewable energy.

More than a decade has passed since the last time sovereign risk was seriously talked about, and Kevin Rudd’s resource super profits tax was nowhere near as bad as Anthony Albanese’s energy price relief plan.

Not such a different leader

Some would say Labor has form – but the point is, Albanese promised to be a different kind of ALP leader, and corporate Australia has discovered that he’s not.

Saul Kavonic, an energy analyst at Credit Suisse, put it well, as reported in this newspaper on Thursday. “This is the most anti-business and anti-market policy in recent memory, and being rammed into law without even giving anyone time to discuss it. If Labor will come and price-fix gas, anyone could be next, it could be your business. Airfares, steel, food, wages, lithium prices are all skyrocketing – what will stop Labor capping those too?”

Indeed.

And what’s the ALP’s response to a potential energy industry campaign against the legislation? It’s been summarised as “go for it”. Labor knows that even if the policy is not an outright winner, and even if voters don’t quite understand it, any promise of relief on voters’ fuel bills will be welcome.

Shrinking free-market constituency

And in Victoria three weeks ago, Daniel Andrews thrashed the Liberals in the state election. One of his key election policies was the recreation of a government-owned State Electricity Commission.

As yet, there’s no public outcry against what the government is doing – and there might not be. If any business leader actually did try to argue that government-imposed price controls are counterproductive and reduce supply and eventually increase prices for consumers, there’s a fair chance most of the public would not have a clue what they were talking about.

And that’s not to blame the public. The truth is that the constituency for free markets is shrinking by the day, a trend exacerbated by the last two years of government control of every aspect of the lives of the country’s population.

It’s a little simple, but not entirely wrong to say that when business stops advocating for and explaining the benefits of competition and free markets and the danger of government regulation, policies such as the energy price relief plan are the result.

Too many company CEOs are far happier playing the role of diversity champion than being a full-throated defender of capitalism.

To your average, Greens-voting, 35-year-old corporate social responsibility manager or environmental, social and governance adviser in member companies of the Business Council of Australia, a term such as “the free market” would sound quite old fashioned, if not worse.

They wouldn’t know what an attack on private enterprise looks like, let alone how to fight it. Some of them would be comfortable with what the government is doing anyway.

And when it comes to the CEOs of those companies, too many are far happier playing the role of diversity champion than being a full-throated defender of capitalism.