Alan Kohler is a fixture in the Australian financial press. For decades, he has cut through the noise of daily news to pinpoint the structural issues dragging down the nation's progress. When he speaks or writes, he focuses on systemic decay rather than temporary fluctuations. His commentary on Alan Kohler: Australian-made market and political failures remains his most potent work, challenging the status quo with sharp, data-driven analysis.
The central thesis of Kohler’s work is that Australia suffers from a chronic inability to plan for the future. He often points to a misalignment between economic policy and the reality of the average citizen’s life. According to Kohler, our obsession with short-term wins and the protection of vested interests blocks meaningful change. This article will track his critique through the decline of our industrial base, the housing affordability crisis, and the recurring failures within our political and financial systems.
Alan Kohler and Australian-made market and political failures in manufacturing
The decline of Australian manufacturing did not happen overnight. Kohler frequently traces the roots of this shift back to the economic reforms that began in the late 1970s and 1980s. While trade liberalization promised efficiency, he argues it often left Australia without a safety net or a plan for what would replace these industries. The result was a hollowed-out base that left the country vulnerable to global shocks.
Globalization pushed Australian firms to compete on price rather than quality or innovation. Kohler often highlights the short-sighted nature of this trade policy, which prioritised cheap consumer goods over building local capability. Without government backing for high-value manufacturing, Australian businesses struggled to compete with low-wage economies. This strategy sacrificed long-term industrial strength for the temporary comfort of lower prices at the checkout.
He often points to the auto industry as the prime example of this failure. The decision to phase out car manufacturing was presented as a natural evolution of the economy. Kohler argues otherwise, suggesting it was a policy choice that ignored the economic value of skilled labor and supply chains. When the car plants closed, Australia lost not just jobs, but the expertise that fueled other heavy industries.
Australia struggles with a culture that often discourages risk and big thinking. This "Tall Poppy Syndrome" means that when someone tries to build a new, innovative industry, they often face more hurdles than help. Kohler notes that our environment fails to nurture the startups and high-tech firms that define modern, high-value economies. Innovation needs a support system, and Australia’s current policy environment falls short.
Government grants and subsidies often miss the mark by focusing on political optics rather than long-term growth. Kohler notes that these programs are often too small, too temporary, or tied to industries that have already peaked. Education is the other side of this coin. He argues that our training systems do not produce the technical workers that a modern manufacturing sector needs to survive.
Addressing Alan Kohler: Australian-made market and political failures in housing
The "Great Australian Dream" of home ownership is turning into a nightmare for many, and Kohler has been a vocal critic of the policies fueling this fire. He argues that housing in Australia is no longer just a place to live; it is a speculative asset class. This shift has locked a whole generation out of the market. He tracks this back to tax settings that heavily favor those who already own property.
Negative gearing and capital gains tax concessions are the main culprits in Kohler’s view. These tax breaks encourage investors to buy property, driving up prices and squeezing out first-home buyers. He argues that the tax system actively makes housing less affordable by treating property as a tool for wealth creation rather than a basic need. Governments remain hesitant to touch these policies, fearing a backlash from the voting base of property owners.
The supply side of the equation is just as broken as the tax side. Kohler frequently critiques restrictive planning laws and the power of local residents to block new developments. When a city cannot build up or out, prices inevitably rise. NIMBYism, or "Not In My Backyard" sentiment, forces younger generations into long commutes or expensive, overcrowded rentals.
This crisis is cementing a massive divide in wealth distribution. Those who got into the market years ago have seen their wealth explode, while those who missed out are stuck renting for life. Kohler observes that this is changing the nature of Australian society. We are moving toward an economy where success is defined by what you inherit, not what you earn or produce.
This creates what he calls a "rent-seeker" economy. In this system, the smartest money flows into hoarding land and existing property rather than building businesses or investing in new technology. This sucks productive capital out of the economy, slowing down growth and making the nation poorer in the long run. Investors chase the guaranteed returns of the property market, ignoring the risks of the productive sector.
Political Folly and Australian-made market and political failures
The Australian political system has a major flaw: short-termism. Kohler frequently points out how the three-year electoral cycle forces politicians to focus on the next poll rather than the next decade. Real reform requires taking risks that might be unpopular today but will benefit the country tomorrow. Our leaders rarely show this level of courage, as they fear losing their jobs before the long-term benefits become clear.
Policy stagnation is the inevitable result of this cycle. Big issues like energy policy, tax reform, and industrial strategy get kicked down the road, session after session. Kohler argues that this creates an atmosphere where problems are allowed to fester until they become impossible to ignore. By then, the cost of fixing them is much higher than it would have been if action had been taken early.
Lobbies and vested interests play a massive role in shaping this policy vacuum. Kohler highlights how powerful groups exert control over politicians to protect their own profits. Whether it is the property lobby or industry groups, their influence ensures that the status quo remains unchanged. When the public good clashes with the needs of these donors, the public good often loses.
Budgetary responsibility is another area where Kohler finds plenty to criticize. He often scrutinizes major spending initiatives, pointing out when they are driven by election cycles rather than economic sound logic. Wasteful projects, he argues, drain the public purse and limit the government's ability to fund essential services like health, education, and infrastructure.
The taxation system needs a serious overhaul, but reform is treated as political poison. Kohler discusses the need to broaden the tax base and move away from over-relying on income tax. He suggests that current tax settings are not sustainable as the population ages and the economy changes. Without real tax reform, the gap between what the government spends and what it collects will only widen.
The Financial Sector: Regulation and Responsibility
The financial sector in Australia is dominated by a few massive players, and Kohler is a consistent watcher of their behavior. He looks closely at how the banking system has evolved and where it has failed to protect the public. The banking sector’s power creates a "Too Big to Fail" dilemma, where the government feels compelled to bail them out rather than force real change.
The Hayne Royal Commission exposed a culture of greed and misconduct, yet Kohler often questions if the lessons were fully absorbed. He points out that while the commission shone a light on bad behavior, the fundamental structure of the industry remains unchanged. The focus remains on short-term profit at the expense of customer outcomes. Regulation is often reactive, trying to fix problems after the damage is already done.
Superannuation is Australia’s largest pool of capital, and its management is a frequent topic in Kohler’s analysis. He is often critical of the performance of some funds and the high fees they charge. These fees eat into the retirement savings of millions of Australians. For a system meant to secure the future, it often seems to prioritize the funds' growth over the members' returns.
Political influence over superannuation funds is another concern he highlights. These funds hold immense power, and their investment decisions are sometimes colored by political or social agendas rather than pure financial performance. Kohler argues for more transparency and a clearer focus on maximizing returns for members. The super system should be an engine for long-term growth, not a political tool.
Final Thoughts
Alan Kohler has built a career on identifying the gaps in the Australian story. From the decline of manufacturing to the distortion of the housing market, he consistently highlights how policy failure impacts the lives of everyday citizens. His work shows a clear pattern: a nation that prioritizes short-term comfort over long-term strength will eventually pay a heavy price.
His message is not just about what is wrong; it is a call for a different approach. Kohler advocates for policies that look ahead, punish rent-seeking behavior, and encourage real innovation. He challenges the public to hold their leaders to a higher standard and look past the empty promises of the next election cycle.
To understand these issues better, keep a close eye on the real drivers of economic change. Look at where the money is flowing and whose interests are being protected by current laws. Engaging in public discourse is necessary, but informed engagement is better. By questioning the systems that shape our economy, you can make better financial decisions for your own future.
The issues Kohler identifies are not going away on their own. They require constant, critical analysis from the public to push for change. Australia’s future depends on moving away from the failures of the past and building a more productive, fair, and innovative path forward. Keep questioning the status quo, because the systems that govern your life are only as good as the scrutiny you apply to them.
Labor wants to provide tax rebates to mining corporations in Australia, which it taxed twelve years ago.
Despite claiming that the subsidies were "billions for billionaires," the Coalition repealed the Minerals Resource Rent Tax (MRRT) two years after it was passed into law in 2012, allowing the billionaires to keep their billions.
However, Australian politics has never been built on consistency, so let us move on.
The Rudd government felt compelled or capable of implementing only three of the 138 reform suggestions in the Henry Tax Review, including the replacement of the resource super profits tax (RSPT) by the MRRT. The 2024 subsidies are a component of A Future Made in Australia (AFMA), a new Labor program.
Give and take
The amount of money that was supposed to be taken from miners back then is nearly identical to the amount that is being suggested to be handed to them now, which is a lovely historical quirk.
AFMA has a $22.7 billion budget, while the MRRT was supposed to generate $22.5 billion, but it only generated $6 billion. It is highly likely that the AFMA costings are also completely incorrect.
One example is the proposed $2 per kilogram "tax incentive" for hydrogen generation, which is the focal point of AFMA.
It is expected to cost $6.7 billion over ten years, or $670 million annually on average.
It looks to be uncapped, at least for the time being, in contrast to most Labor programs because that is an estimate of the cost rather than a cap.
Green steel
The primary goal of subsidizing hydrogen production is to develop a domestic green steel industry, which would use Australia's plentiful renewable energy resources to produce steel domestically rather than exporting iron ore. Although hydrogen will also be utilized for transportation and the production of urea, steel is the primary focus for an Australian-made future.
Direct reduced iron (DRI) technique uses hydrogen instead of coal in the blast furnace.
In essence, steel is iron that has had its oxygen removed. It is typically melted with carbon (metallurgical coal) in a blast furnace so that the oxygen reacts with the carbon to create carbon dioxide, which is then expelled out the chimney and is clearly no longer a good idea.
Instead, water is created when hydrogen and oxygen mix. Much better.
It appears that a tonne of steel produced with DRI requires between 50 and 70 kilos of hydrogen.
Unattainable objectives
About 560 million tonnes of steel were produced from the 950 million tonnes of iron ore that Australia shipped last year. Therefore, approximately 33 billion kilograms of hydrogen would be needed annually, at a cost to the budget of $2 per kilogram, or $66 billion, to replace all of the exports of iron ore with domestically produced green steel.
Naturally, that is absurd, and Treasury need not be concerned that the uncapped hydrogen subsidy will cost $20 billion more than the defense budget of $46 billion. We will continue to provide them iron ore rather than green steel produced in Australia, and a large portion of the green steel will be produced elsewhere rather than here, particularly in China.
The opposite may be a more accurate perspective: At an estimated cost of $670 million annually, 335 million kilograms of hydrogen would be subsidized at a price of $2 per kilogram, requiring eight million tons of iron ore to produce five million tons of steel. Additionally absurd and scarcely worth accomplishing, that represents 0.84 percent of Australia's iron ore exports.
And that would only be if all of the hydrogen was utilized to make steel, which is not the case because part would be used to make urea, power vehicles and buses, and export as ammonia.
However, it gives you an indication of how little the government wants to achieve with AFMA.
Financial concerns
It highlights Australia's issue in the international competition to support and entice the production of renewable energy: We just do not have enough money.
Additionally, it is consistent with the widespread underestimation of the energy transition's cost.
The fact that AFMA is the worst method of cutting carbon emissions and launching a regional green manufacturing sector does not imply that it is not worthwhile.
Because it compensates for a market failure, Rod Sims and Ross Garnaut, who have thrown their weight behind promoting Australia as a manufacturer of renewable energy through their Superpower Institute, support AFMA.
The lack of a carbon price, which would level the playing field with renewable manufacturing inputs like hydrogen and make fossil fuel providers and consumers pay for the harm they cause to the environment through carbon emissions, is that failing.
According to Garnaut and Sims, taxing fossil fuels is the best method to get rid of them; if that does not work, AFMA will have to step in.
costly concept
Fair enough, but it means that we are heavily subsidizing the good things rather than taxing the bad things, which we did when the MRRT was also in effect.
The idea is costly and unsustainable since the government lacks the funds to see it through to completion.
To sum up, it is important to remember the events that preceded the MRRT twelve years ago.
A consistent 40% resources rent tax, according to then-Treasury Secretary Ken Henry's extensive examination of the tax code, "would ensure the correct levels of exploration and extraction and offer adequate encouragement for private sector engagement."
At the time, Treasury pointed out that this was in line with other developed nations, with Norway being the most pertinent.
As previously said, Labor raised $6 billion and ultimately implemented a 22.5% rent tax that was overturned two years later.
Norway currently possesses a $2.4 trillion sovereign wealth fund, which is equivalent to the GDP of Australia. With states included, Australia's national net debt is approximately $1.5 trillion, and ongoing structural deficits will continue to increase the debt year.
0 Comments