Friday, January 17, 2014

When multinationals go on welfare

Coca-Cola Amatil's net profit in 2012 was $558 million.  In 2011 its net profit was $532 million.  In a few weeks we'll know its net profit for 2013.

CCA owns SPC Ardmona.  SPC Ardmona wants to be paid $50 million by Australian taxpayers — $25 million from the federal government and $25 million from the Victorian state government.

This $50 million payment from taxpayers will, according to SPC Ardmona, be a ''one-off government investment on innovation plans and efficiency improvements''.

There's an obvious question to ask about the company's request — and it's a question few people want to talk about.  Why can't SPC Ardmona get the $50 million from CCA?  It's not as though CCA doesn't have the money.

CCA has said that if SPC Ardmona gets the $50 million from taxpayers then it will give $150 million of its own money to SPC Ardmona.

CCA's commitment raises a further question.  To a normal person (and remember, it's normal people from whose pay packets SPC Ardmona wants to get its $50 million), it's strange that a very profitable company like CCA, which last year had revenues of $5.1 billion, would be willing to spend $150 million on SPC Ardmona but not $200 million.

If SPC Ardmona's prospects are in fact as bright as the company makes out, surely CCA should be willing to invest the entire amount that SPC Ardmona says it needs.

The fact that ­­it is not willing to do so is revealing.

SPC Ardmona and CCA need to explain (in normal people's language) why the federal and Victorian governments should give SPC Ardmona $50 million if CCA itself refuses to do so.

It's understandable that SPC Ardmona and CCA are lobbying the government for a handout.  That's how business in Australia — and how politics — has always been done.


A revealing article by Stephen Loosley, the former ALP national president and senator, appeared in these pages last week.  It was about the Labor Party and its relationship with business.  Loosley wrote ''elements of business, particularly the emerging generation of leaders, remain comfortable talking to the ALP''.  He's right.  And that's the whole problem.

The next generation of this country's business leaders have grown up in the 1980s and 1990s thinking that if they have a problem the government will fix it.  It's no wonder they're comfortable talking to the ALP.  Anyone running, for instance, a wind farm or an unprofitable manufacturing business would be especially comfortable talking to the ALP.

Four days before the last federal election Kevin Rudd promised SPC Ardmona the $25 million it wanted.  Thankfully, it was a commitment that wasn't matched by the Coalition — and it's a commitment that shouldn't be matched by the Coalition.

For one thing, the federal budget can no longer afford these sort of handouts.  But beyond the issue of cost there's something more important at stake — and that's the principle.  Put simply, government handouts to failing companies are unfair.  And they're unfair for two main reasons.

First, inevitably the handouts go to the largest and noisiest companies such as Ford, Holden, SPC Ardmona and even, potentially, Qantas.  Government handouts don't go to the family-run firm that services machine tools and employs a dozen people.  A worker at Holden (at least until a few months ago) was treated by the government differently from a worker at that machine tool company even though they might both be doing the same job.

Second, the handouts given to companies to support the above-average wages of their employees are paid for by the taxes imposed on everyone, including those who earn much less than those working in the companies receiving the government handout.

(It's ironic that the Left opposes taxes imposed on the less ­well-off to pay for the privileges of the wealthy — except when those taxes pay for ''free'' tertiary education or government bailouts to companies with heavily-unionised workforces.)

Federal cabinet is expected to make a decision on SPC Ardmona by the end of month.  Giving $25 million of taxpayers' money to SPC Ardmona wouldn't just be wrong, it would be unfair.

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