Josh Frydenberg needs to show leadership to restore investment confidence

Australian Prime Minister Scott Morrison (left) and Australian Federal Treasurer Josh Frydenberg. Picture: AAP

Treasurer Josh Frydenberg is a highly-skilled politician but somehow he has forgotten what the word leadership means.

This morning he called on business to slow down cash returns to shareholders and instead invest for growth.

That is precisely what they would do if the opportunities existed.

Frydenberg also seems to forget shareholders are also meant to allocate capital to the best investment choice, which depending on their needs, means growth or value.

The Treasurer seems to want to impede that allocation.

The federal government has had the Productivity Commission road map for reform for two years and done precious little with it.

Now Frydenberg says the October meeting with state treasurers will advance the productivity agenda.

Business will be hoping it does something, because one of the reasons it’s been handing money back to shareholders is because that is the most productive use of its cash.

If the business climate was more positive, businesses may choose to invest but that depends in part on what the federal government does.

That is where the leadership comes into it.

It’s fine for Frydenberg to lecture boards of directors about what to do with their money, but why not start by actually laying down the guideposts and creating a more positive investment outlook.

Granted, global geopolitics is out of Frydenberg’s power but the Australian investment climate is firmly within his reach.

The PC report had some ideas both new and old, including one recently backed by Westpac’s Brian Hartzer to replace stamp duty on property with land taxes.

Others included a shift to favour locally-generated health solutions aimed at both reducing and better managing chronic disease; a concerted attack on out-of-field teaching; bringing roads and motorists associations into the process for both choosing and funding transport projects in cities; and a Hilmer-style review of planning and zoning restrictions, which will also find ways to relieve housing supply pressures.

The list is long and as Frydenberg noted most of the recommendations required state and federal action. Do once again the issue is leadership from the Treasurer.