The term ‘free market’ is in many ways an oxymoron. There are very few markets that aren’t regulated by one of Australia’s three levels of government. 

The aim of regulators should therefore be to regulate fairly and efficiently to maximise productivity whilst minimising regulation. A fair market will scorn subsidies. An efficient market will scorn unnecessary regulation. 

There are only two outcomes in a market, you’re either making money or losing money. Profitability, measured as return on equity is the benchmark by which markets should be measured. 

Capitalism and the risk-reward paradigm that drives it are what will maximise productivity. When making regulations governments should seek to promote and protect capitalism. Capitalism can be defined as the process where people risk their capital. This is defined in a broad sense as the labour of a carpenter or mechanic, the mind of a scientist or engineer, the heart of a teacher or nurse or the persistence and perseverance of business owners. 

From a political perspective, the ideological view of the world through the political prism of left verse right is a false dichotomy. Instead, the world should be seen through the prism of the entity that risks its capital verse the entity that seeks to either regulate or manage other people’s capital. 

The further removed the management class is from the capital they risk, the greater the chance for sub-optimal outcomes. This idea is understood in economics as agency theory. 

When one reviews Australia’s economy and society over the last 50 years individual risk-taking, productivity and personal responsibility have been scorned in favour of government intervention and consumption. On the other hand, the provision of essential services, many of them monopolies, has been outsourced to an unaccountable managerial or bureaucratic class that owns none of the capital they manage. 

In summary, Australia has pursued the opposite of capitalism in favour of a hybrid socialist-neoliberal economy where risk-takers are punished and rent seekers are rewarded. This has seen the rise of a bureaucratic mandarin class that is regulating Australia into servitude. It has also seen the rise of an unaccountable corporate sector that has gained control of sovereign industries and leveraged their strategic importance for rent-seeking purposes.

This has resulted in the decline of Australia’s productive capacity, especially its manufacturing and energy sector, to the point where Australia is no longer self-reliant in many strategic sovereign industries. As illustrated by the impact on Germany of the war in Ukraine, the provision of energy has national security implications. Such an essential and strategic service cannot be left in hands of those more interested in short-term profits, driven by scalping distortions in market rules that divide the provision of energy into five-minute blocks. 

If Australia is to regain its true independence and provide our children, the chance for a prosperous future many government policies implemented over the last 50 years need to be abolished. During this time Australia has succumbed to a dangerous mixture of neo-Marxism (think identity politics) and neo-liberalism (think privatisation by virtual signalling rent seekers espousing aforementioned identity politics).

The government does play an important role in democratic societies. However, their role should be restricted to the role of essential services that an individual can’t take responsibility for. For example, while an individual should be responsible for their health in terms of eating well and exercising, they cannot build a hospital. An individual can restrict their power usage but can’t build a power station. 

There is any number of reforms governments should address to reduce the size of the government and liberate the market players from the burden of excessive regulation. A few major reforms are outlined below. 

The priority of ‘free market’ reform should be the abolition of superannuation. It is a rent seeker’s paradise that generates nothing other than fees for paper shufflers. It transfers wealth from the active worker to the passive manager who has no risk exposure whatsoever. It is both a productivity and entrepreneurial killer. 

After 30 years, superannuation has failed to reduce the number of people on the pension by a significant amount. Around 70% of retirees are still on a full or part pension. The tax concessions alone cost the Federal budget $50 billion annually, most of which accrues to the upper 20% of income earners. The pension costs $53 billion for the lower 70% of income earners. 

The 2021 retirement income review estimated that superannuation tax concessions will soon exceed the cost of the pension. In terms of protecting the federal budget from a blowout in pension costs, superannuation is not fit for purpose. 

Superannuation administration costs are estimated to be at least $30 billion per year. This is a cost to the economy that yields no genuine outcomes. That sort of capital should be invested in productive industries such as infrastructure and manufacturing. Instead, it is a massive subsidy to the financial services industry. 

There is a hidden agency cost to superannuation. Union-dominated industry funds now control over 20% of many of Australia’s blue-chip corporations. This gives unions enormous power in corporate boardrooms, the result of which has seen Australia’s industries become driven by ideology rather than productivity. It has also seen market pricing driven by capital inflows rather than profitability.

Coalition Governments have stood idly by while unions generate rivers of gold from superannuation fees.

The Keating Government never sought a mandate from the people asking if their hard-earned dollars should be handed over to unaccountable managers with no capital guarantee. This is not surprising. Had a mandate for compulsory superannuation been put to the people, the answer would have been a resounding no. New Zealanders were asked what they thought of compulsory superannuation in a 1997 referendum. They voted a resounding 92% to 8% against it. 

In terms of ‘free market’ ideology, there is nothing free about superannuation. It is a mandated gravy train that is more akin to communism than capitalism.

Taxation is another area that desperately needs reform. Australian tax laws are littered with loopholes and exemptions that favour passive investment at the expense of active productivity. Australia’s tax laws also encourage profits earned onshore to be sent offshore. 

Taxation reforms should include capital gains being taxed at the same rate as active income. All CGT concessions on all assets should be removed. A CGT-free threshold for the principal place of residence could be maintained. 

Tax concessions for offshore investors should also be abolished. The rate of tax on profits transferred offshore should not be lower that the corporate tax rate for profits retained in Australia. Politicians should focus on retaining profits derived in Australia as a means of retaining capital rather than attracting more foreign debt. 

CGT concessions have caused house prices to climb to levels outside the reach of younger generations. The average price of a house in Australia is estimated to be over ten times the average earnings whereas forty years ago it was four times the average. High asset values are destroying the aspirations of our younger generations.

The Coalition should heed the rise of the Greens and Teals in the recent election. It is not just environmental issues driving younger people to vote for these parties. Their mantra of taxing the rich gains more traction the higher house prices go. 

There is too much capital invested in the housing sector at the expense of more productive industries. Taxes need to be flatter and encourage greater productivity rather than speculation or consumption. 

There is no better example of the failure of neo-liberal economics than the energy market. Privatisation of essential services with national security implications has been a disaster that has impacted not just the energy market, but downstream industries that rely on cheap and reliable energy to remain viable and competitive on global markets. 

Essential service monopolies with sovereign characteristics should never be held to ransom by virtue signalling rent seekers. Many of these rent seekers speak out of both sides of their mouths. On the one hand, they espouse free market economics while pocketing government subsidies courtesy of the taxpayer. 

It’s probably fair to argue the privatisation of fast-moving retail services companies like Telstra and Qantas has been successful. On the other hand, it is questionable if the same can be said for energy markets. 

The baseload energy market should be nationalised and subsidies for renewable energy cease. Those organisations who wish to compete in the energy market are more than welcome to do so by providing a full array of energy services not just limited to generation, but also transmission, storage, security, and recycling services. 

If the ideologues are correct and the private sector is more efficient, it shouldn’t be too difficult for private sector operators to undercut the national baseload energy market in price and reliability without subsidies. 

The supply of energy from the private sector should not be bought in 15-minute blocks but as yearly contracts. Service level agreements should place the risk on the provider to ensure the provision of reliable energy rather than the government having to underwrite reliability. 

Nuclear and hydropower should become a larger part of Australia’s energy mix. There is an abundance of uranium and hydroelectric sites in Australia. The Barakula State Forest in Southern Queensland is the largest in the Southern Hemisphere. Straddled on the edge of the Darling Downs it perfectly triangulates Southeast and Central Queensland and is the perfect location for a nuclear power plant. The power plant could easily connect to the southern interconnector at the nearby Kogan Creek power plant as well as provide cheap energy for industries wishing to capitalise on the nearby proposed inland railway line to Gladstone and Nathan Dam site. 

Nuclear and Hydro energy can provide other sovereign capabilities in areas such as defence, agriculture, water security, tourism, and the environment. 

Institutionalised childcare is one of Australia’s fastest-growing industries. Despite increased government subsidies from $500 million to $10 billion in two decades, institutionalised childcare has not seen an improvement in Australia’s education rankings. 

It has however caused a massive increase in the size of United Voice, Australia’s fastest-growing union. Most of the 150,000 childcare workers are unionised and as such, it is estimated that they contribute close to $100 million to the union movement in membership fees. 

Governments should not be involved in co-parenting children. Forcing parents to select institutionalised childcare if they are to receive any sort of childcare assistance is an affront to the concept of Australia as a free democratic country and to family values. 

Childcare, to the extent that it is paid, should be paid directly to parents (except where social welfare is an issue) so they can choose the best form of childcare for their family. Many parents work shift hours. These include nurses, police, transport, and hospitality workers. They cannot use childcare services. Many parents may prefer to use nannies, their parents or even stay home themselves, especially those on lower incomes. 

One of the great paradoxes of the move to bigger government is that the Liberal party has embraced it. Big government and rent-seeking behaviour should be anathema to a party that espouses small government and reward for effort. The failure to stand up for its values will haunt the credibility of the Liberal party in the future.

On a macro level, productivity in Australia is severely curtailed by nine governments that serve a population of just 26 million people 

Australia’s federation needs a drastic overhaul. Of all Australia’s problems, none is greater that the vertical fiscal imbalance and ambiguous responsibilities between the federal and state governments. A constitutional convention or something of a similar ilk is desperately needed to resolve these issues. 

There is no greater rent seeker in the country than state governments. This is just as much the fault of the federal government as it is of state governments. The blame game between the two levels of government needs to end. 

Serious thought should be given to whether three levels of government are needed in Australia. Would it not be better to empower local regional communities with their own policing, health, and education? 

State taxes should also be reformed. Most discussion around reforming state taxes focuses on abolishing stamp duty. In my view, it is not stamp duty which is a tax on speculation that should be abolished but rather payroll tax. Taxing employers to employ people is a productivity killer and makes it harder for Australian industry to compete in global markets. Stamp duty on share trading could be re-introduced to fund the abolition of payroll tax. Share trading, like superannuation administration, doesn’t produce any goods or services.

Regardless of the reforms proposed, the duplication of responsibilities between tiers of government needs to stop. Australia would have to be one of the most over-governed counties on earth. It has been alleged that government spending as a proportion of GDP is higher in Australia than it is in China. Is it a wonder that Australia’s industries are struggling to compete with the rest of the world?

The least understood responsibility when it comes to markets and government responsibility is monetary policy. As a sovereign country, Australia should control not just the price of its currency but the volume of currency. This is not a new concept. Governor Macquarie adopted this method with the introduction of the holey dollar, Australia’s first currency in 1810. It was also a recommendation of the 1937 Royal commission into banking. 

If you think the sale of sovereign infrastructure to offshore interests is bad, it is nothing compared to the outsourcing of Australia’s printing press.

The biggest market in the world is the United States Treasury Bond market. It is controlled by the United States Federal Reserve whose ownership structure remains opaque.

While Australia has the privilege of borrowing in AUD, the money loaned to it is ultimately through intermediaries that source their funding from the major central banks via currency swaps, predominately the United States Federal Reserve. 

For some strange reason, the RBA has outsourced control over the volume of credit in Australia to foreign central banks. I believe that this has cost Australia billions if not trillions in foregone wealth.

For example, if the Australian Government builds a dam at a cost of a billion dollars, and funds it via foreign debt, the first billion dollars in wealth created must repay that foreign debt. Interest on the loan is also paid offshore. That means Australia has just given up over a billion dollars in wealth because the government outsourced its sovereign capacity to fund itself to a group of unelected and unaccountable foreign bankers.

The rules around the RBA funding Australian governments are simple. The debt can only be issued if it is secured against nation-building infrastructure that generates a return for the government. This would include dams, power stations, airports, ports, telecommunications, and toll roads. 

This is not a radical concept. Private entities use secured lending to fund investments all the time. Why Australian governments pay private financiers at the expense of the taxpayers can only be put down to blind ignorance in understanding how monetary policy works. 

The use of the quantitative easing lever is not just a cost-saving measure. It provides another lever in managing the economy. The current outbreak of inflation is a good example. While I believe that interest rates should be raised gradually over time, raising them too quickly, as the RBA is currently doing will only damage the economy. 

Rather than damage the economy through austerity measures, the RBA should increase supply by increasing productivity. Building more power stations, dams and other infrastructure will drive down the price of power, water, and other services to make the cost of living and doing business cheaper. 

While these measures will take time to implement, they are much more productive than changing the price of money monthly that only rewards speculators rather than producers. 

Unfortunately, the RBA did print money during the Covid crisis, but this measure damaged the economy rather than grew it as the money was used for consumption rather than investment. 

Governments need to get back to providing services rather than regulating every aspect of people’s lives. They need to empower the individual rather than enslave them through government dependence. This means people take responsibility for their health, their retirement, and their children. This is the role of the family and the community, not the government. Government should then focus on ensuring the taxes they collect are used to provide essential services efficiently and fairly.

Gerard Rennick is a Senator representing Queensland in the Parliament of Australia. Before that he worked in financial services.