31/01/2006 - 21:00

Targeted involvement by government can be worthwhile

31/01/2006 - 21:00

Bookmark

Save articles for future reference.

The wine industry’s woes are not self-inflicted and are an important example of what happens when government decisions start distorting business in an unhealthy way.

Targeted involvement by government can be worthwhile

The wine industry’s woes are not self-inflicted and are an important example of what happens when government decisions start distorting business in an unhealthy way.

While I support newly installed Premier Alan Carpenter in suggesting medical research and biotechnology could take over when mining begins to wane, I think the wine industry provides evidence that too much interference is a bad thing.

Firstly, let’s examine the wine industry.

In business, too much can be just as a big a problem as too little. For wine, there is a much-publicised glut of grapes and resultant wine, creating a flood of cheap product in a market that cannot absorb available supply.

There are only so many people who want to consume wine at $60 a case, assuming it is drinkable in the first place.

There is the possibility that so much cheap wine may actually change consumer behaviour and result in lasting habit changes, lifting consumption in the longer term, even if prices rise.

But that’s not enough to consume what’s available now.

So where is the government interference?

For the past decade or more, MIS schemes (and their predecessors) have provided well-packaged and heavily promoted products that have allowed investors with relatively small sums to become collective developers of vineyards.

While there has been some romance attached to these ‘wine’ schemes, the key reason for the investment has been to delay tax.

Of course, I am not opposed to people being able to do this, but it concerns me that – tax laws being what they are – it is much easier to enter this kind of ‘business’ than invest in numerous other sectors of the economy that arguably need capital more.

I am not advocating that government helps channel funds elsewhere but I am worried that present laws (underpinned by relatively high marginal tax rates) are distorting the market to such a degree that they are actually damaging an industry.

What’s more, despite the glut, the tax breaks are so attractive that vineyards continue to be developed.

It’s bizarre.

Turning to biotechnology and its many hybrids, I do welcome Mr Carpenter’s vision on that front.

I believe medical research is a good industry for Western Australia, not just because of its obvious qualities, but also because it has found success here naturally. Market forces, without notable government interference, have spawned:

• Nobel peace prize winning medicos Professor Barry Marshall and Dr Robin Warren;

• breakthrough burns technology by Dr Fiona Woods;

• exceptional child health research such as that headed by Professor Fiona Stanley; and

• important health research platforms like Dr Kevin Cullen’s famed Busselton study, which Professor Lyle Palmer now wants to extend and modernise through Joondalup and ultimately WA.

If Mr Carpenter is smart, he can gently encourage and tweak this sector to ensure that it continues to grow and thrive.

The premier can help promote this good work elsewhere; make sure proper funding continues to be available and help convince the public (if that is really needed) that this research is for their benefit.

Mr Carpenter knows, of course, that not only is medical research an industry of the future, it is also a key to reducing the ever-increasing cost of health.

However, what the sector doesn’t need is the equivalent of a grape glut.

Taking medical research to a higher plane in this state won’t happen overnight and throwing buckets of untargeted money at the sector will only produce the inevitable waste of resources that will cause problems for existing successful players and jeopardise public confidence in the sector.

Where overzealous funding and well-meaning government are present, one can usually find spivs and blue sky merchants – happy to rake off unaccountable dollars until someone starts wondering what all this expenditure is achieving.

There is no end of examples of government largesse ending up in achieving little, if not actually taking the original cause backwards.

If medical technology and research is to be a bigger part of our future, let’s make sure it is done without the over-indulgent waste that is drowning our winemakers.

 

Railway winners a law unto themselves

THE Perth-to-Mandurah railway may have been a premature piece of infrastructure, but now its being built I will welcome its completion.

The project has been a pet of the Gallop government, so it has been an irony that the major headache encountered to date has been militant unions causing delays.

However, it looks like the long-expected cost blow-out has appeared.

It’s not just governments that face these massive variations on projects, and it should be obvious that no-one can be certain about the price of any long-term project, especially in a skills shortage. It seems even something simple like a railway can’t be locked in  – despite assurances.

While the government may be naive for thinking this and it  should also shoulder blame for allowing its union mates to run rampant, I am disappointed that the big winners will be the litigation lawyers, as usual.

STANDING BY BUSINESS. TRUSTED BY BUSINESS.

Subscription Options