A check-up for the states

When you get to a certain age, it’s generally good to get regular check-ups.

It’s at the check-up that our doctor reminds us that the small decisions we make every day can have big impacts on our longer-term trajectory.

Our long-term trajectory is always the result of our short-term decisions.

It’s a lesson we see in our health, our relationships and in our finances. Our decisions to save for a deposit, to postpone a holiday and buy an investment property or to put a little more into super can dramatically change our financial future.

It’s a pity that, all too often, governments forget how their short-term decisions can have long-term consequences.

Currently, three state governments – Victoria, NSW and Queensland – are implementing new taxes specifically targeted at foreign investment.

These are short-term populist decisions that may temporarily fill state government coffers, but risk changing the trajectory of these states.

As the Prime Minister has said many times in recent weeks – if you want less of something, you tax it more.

State governments are saying they want less foreign investment.

If foreign investors walk away, treasuries risk gaining 100 per cent of nothing and a loss of investment that will feed through to the rest of the economy.

The state governments may be taking a ‘populist road’ but it is a dangerous one too.  The consequences are less foreign investment, fewer jobs and a greater economic burden on domestic taxpayers.

Our message to state governments is –  think again. These are not decisions that will help housing affordability, government revenues or jobs.