Remember the saying “there’s no such thing as a free lunch”?
This week we heard from the Tasmanian hospitality industry that some tourist accommodation operators might be looking for interest-free government loans to bring them up to scratch to maintain or improve their star-ratings. They might have to buy 20 television sets, it was argued, to lift them from 3.5 to 4-star rating. They couldn’t afford it. They would need interest-free loans, from the government; that means from us, from taxpayers. Tourism Minister Scott Bacon said he was considering it.
There really is no such thing as an interest-free loan from government. It means that someone is getting access to our money free of cost, money that we should be using elsewhere, like improving health, education, housing, emergency services, public infrastructure. We have to borrow money to do that. We pay the interest. That is called the economic cost of giving away interest-free loans.
The same goes for handouts to noisy interest groups.
Most of us, before we go into business, assess the risk. We examine the market forces operating in that industry sector, do our SWOT analysis, understand what risks are foreseeable and manageable; and only then make the decision whether or not to invest.
The “T” in SWOT stands for “threats”. For the log truck owner, the factors under “T” would have, or should have, included conservationists closing down their industry – especially when there was previous history of that happening.
For the tourist accommodation industry, “T” should have included the threat of ratings upgradings, the need for capital equipment upgrading and replacement and the depreciation factor of accommodation components. If you don’t have the capacity to be able to afford to spend the money to address foreseeable and manageable threats, then you probably shouldn’t enter the business in the first place.
Of course, not all threats and risks are foreseeable or manageable. For the tourism sector, things like Icelandic volcanoes erupting or avian influenza were probably not predictable and were certainly not manageable. Similarly, farmers can’t control the weather nor can they predict or manage the impacts of interest group interference on their industry.
If farmers went cap in hand to government every time they faced a challenge to their livelihoods, they would never leave the doorstep of Mr Bacon or his colleagues. Farmers don’t operate like that.
They take the good with the bad, because agriculture operates in cycles and that is simply how life is on the land. If their path is blocked in one direction, then they seek another. It may be another crop or another market, but they generally have to find their own way through.
Apart from genuinely unforeseeable and unmanageable circumstances, the only time governments should look at investing public funds in industry is when that industry is part of the ‘base load’ for the economy.
Where there is a need to invest in infrastructure for the future, often funding that investment is beyond the means of the businesses in the sector. In these circumstances, a hand up may be what is needed to get them over the line. A case can then sometimes be made for government co-investment for the common good, i.e. when the co-investment will deliver clear and quantifiable benefits to the broader community. This is the equivalent of the ‘poles and wires’ situation we are now seeing in the electricity industry. Of course, the players in the industry must also be prepared to put their money on the table, too.
The base load industries in Tasmania are agriculture, forestry and mining. They have been the key economic drivers for the state for generations. Other industries, tourism included, are largely supported by these keystones – and any public investment needs to be focused on future-proofing these sectors to ensure we keep core capability in our struggling economy.
Farmers are putting their money on the table – and expect to see ongoing co-investment by government in our industry to ensure we can keep delivering benefits to all Tasmanians.