The New Nationalisers?

I was chatting with my colleague Bob Gregory about the budget today. Speaking with Bob is wonderful, since he always has something to say that’s a bit different from the punditry. This morning, he said “You know, it’s interesting. The public sector used to own assets like Qantas and the Commonwealth Bank. Then we sold them off. Now the public sector is buying up assets again, except now it’s purchasing a slice of the stockmarket. I don’t really know which is better – the government owning Qantas, or the government owning a whole variety of Australian companies via the Future Fund and the education endowment.”

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10 Responses to The New Nationalisers?

  1. Patrick says:

    Am I the only one who sees a huge advantage to having the government be a minority owner of publicly traded shares?

  2. This is a point that my father made in a review of some work by Quiggin – perhaps “Great Expectations” his book on micro-economic reform. Quiggin was objecting to the sale of assets on the grounds that it was lowering future returns to govt (swapping high return assets – equities – for low return assets – bonds). Dad argued – perhaps to be devil’s advocate – that if Quiggin believed that it would still make sense to flog off companies you didn’t want and buy a portfolio of shares.

    I think the point should be taken seriously and taken further. The govt’s balance sheet is too important for it to be managed as a residual of its current account. It should gear its balance sheet like any decent balance sheet, to optimise risk and return. I set out some ideas on this here. (pdf)

    Click to access Risk_Capital_Markets_and_the_Future_PCA_speech.pdf

  3. Kevin Cox says:

    It makes sense and governments do own shares through superannuation investments and I suspect in other places. The socalled Future fund should be part of the Commonwealth Super portfolio and then it could be kept for what it is meant for. The government might also consider buying equity in companies instead of giving out grants for R&D and other such schemes. Maybe even some research grants could be given to ideas that might be commercialised for part equity in the IP generated.

  4. invig says:


    Yes, yes you are.


  5. Phrog says:

    We have heavy government support in Australian business. Unfortunately its the Singaporean Government.

  6. harry clarke says:

    I guess the simple story is that, as a general rule, businesses should be run by businesspeople not politicians.

  7. Pingback: I Hadn’t Thought of That | slloydweb

  8. Uncle Milton says:

    When the government owns a small number of shares in a large number of businesses, as is proposed, it won’t be controlling or running any of them. The investments will be there purely for the financial returns.

    This is very different from owning all of a business and apponting all of its directors. In theory, the business might then be left to run as a business, but in practice the government either interferes overtly or, more likely, the leaders of the business, who have a good understanding of power politics, tailor their business practices to suit the government’s agenda.

  9. Patrick says:

    Yes, basically, thank you Uncle Milton.

    Is Invig so dumb s/he doesn’t understand that the whole idea of investing to get the returns offered by public sharemarkets is vitiated if governments actually control the companies 😉 ?

    N Gruen gets the idea, for example. But he’s another one of those lefties that understand economics despite being lefties…

  10. Rajat Sood says:

    Totally agree with Uncle Milton. Another benefit is the diversification. For example, a key impact of the commodity boom is a higher $A. The Govt can diversify away from the risk that the boom will end, thus lowering the dollar, by investing in overseas assets. Given the long-term outlook of the FF, it could probably benefit from investing in Asian markets, where the economies are growing faster than ours and many of their currencies are artificially low.

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