Jim Chalmers resorting to new taxes is a misguided attempt to ‘purchase prosperity' as private investment in the Australian economy crashes

Sky News AU

2 days ago

Earlier this month, a collapsed high-voltage wire near Strathfield Station brought Sydney's entire railway network to a halt, forcing commuters to endure days of chaos and delay.
The State Government and rail officials scrambled to apologise, offering a fare-free travel day as compensation.
But no number of free rides can repair the ancient cabling, rigid work practices, and flawed design that make the city's rail system so fragile.
Sydney's rail meltdown is more than a transport failure - it is a metaphor for Australia's broader political and economic malaise.
A system that appears to function smoothly on the surface is merely running on inertia.
Beneath the facade lies decay: decades of short-termism, underinvestment, and complacency.
This week's news that business investment is falling confirms the rot has spread to the foundations of the national economy and that the current government has little appetite for structural reform.
Non-mining investment contracted by 1.6 per cent nationally in the March quarter, while private capital expenditure dropped by 5.3 per cent in Victoria in the three months to March.
Yet private investment is the engine of job creation, productivity, and wage growth.
Without it, the reverse holds: business shrinks, employment stagnates, and economic momentum falters.
Capital - the lifeblood of any economy - flows to where it is welcomed and where returns are reliable.
Under Treasurer Jim Chalmers, businesses are increasingly wary of investing in Australia, deterred by high costs, regulatory burdens, and policy uncertainty.
The Albanese government's Future Made in Australia strategy risks remaining a slogan unless it can reverse this investment drought.
But rising energy costs and an increasingly unreliable power supply are driving manufacturers offshore.
On top of that, Australia's high labour costs and complex industrial relations system deter new ventures.
CSL Chairman Brian McNamee captured the mood when he said businesses were reacting to 'an accumulation of hostile policies and government crowding out of enterprise'.
Investment capital, he warned, 'will find homes elsewhere that are more welcoming and reward risk-taking'.
These cracks in our economic edifice didn't appear overnight.
Like Sydney's ageing power lines and outdated rolling stock, the deterioration has been years in the making.
Australia's GDP per capita has now declined for seven consecutive quarters - a sign that, were it not for population growth through immigration, the country would be in recession.
Productivity, the key driver of long-term prosperity, has flatlined.
Over the past two decades, it has grown at just 0.7 per cent per year.
In the last year, growth was a mere 0.5 per cent. Small wonder that living standards have been slipping since the pandemic.
Whatever growth the economy shows is increasingly the product of government spending - now at 27 per cent of GDP, up two points from pre-COVID levels.
But governments cannot purchase prosperity any more than they can restore a rail system with free travel days.
Eventually, they resort to new taxes.
Mr Chalmers' proposal to tax unrealised capital gains in superannuation is one such example - a measure that will discourage long-term savings and further undermine private investment.
Self-managed super funds, often used to back small business and start-ups, will be particularly affected.
For a cautionary tale, we need only look to Germany, a country long admired for its engineering excellence and export-driven economy.
But as Wolfgang Münchau explains in 'Kaputt: The End of the German Miracle ' , complacency and underinvestment have taken their toll.
Germany's efficiency endured as a reputation long after it disappeared as a rea
lity.
The nation failed to keep pace with the digital era, relying instead in analogue infrastructure and unreliable energy sources.
Dependence on Russian gas and costly renewables sent electricity prices soaring - now among the highest in Europe.
Meanwhile, Germany's vaunted rail system has become a symbol of national decline.
Deutsche Bahn, once synonymous with precision and quality, is now plagued by delays, technical faults, and overcrowding.
In 2024, just 62 per cent of long-distance trains arrived on time.
In April, Swiss operator SBB cut two cross-border services, fearing Germany's dysfunction would spill over into their own network.
The parallels with Australia are sobering.
Both nations rode waves of prosperity driven by commodity exports while neglecting the need for reform.
Both now face the consequences: rigid regulatory systems, soaring power prices, stagnant productivity, and eroded competitiveness.
And in both countries, the signs of decline were ignored until something broke.
Germany kept betting against the digital age.
Australia, too, risks believing its own myth of resilience and economic strength, long after the underlying conditions have shifted.
If we don't act now to address structural weaknesses, the next broken wire, literal or metaphorical, will leave more than just a railway in chaos.
Nick Cater is a senior fellow at Menzies Research Centre and a regular contributor to Sky News Australia