A prominent venture capitalist says Australians should be the richest people on earth but that decades of economic mismanagement has brought the nation to the brink of “obscurity”.
Misha Saul has penned a scathing assessment of the Australian economy, saying the country’s enviable natural resources, education, peaceful security environment and huge Asian customer base were all being squandered.
Despite being dealt the best cards on the planet “something is rotten in the state of Australia”, he has declared.
In a blog post titled Australia is sick, Mr Saul blasted the two major political parties’ fiscal policies since the end of the John Howard era, saying they were both “complicit in two decades of bungling”.
“No nation has ever been dealt better cards. Yet we are failing,” he wrote in the viral post published on Sunday.
“GDP per capita has been negative or sclerotic since 2023. The steepest fall in real household disposable income in the OECD and highest inflation in the Anglosphere.
“Fertility at a record low. Capital-city houses at ten-plus times incomes. The list goes on.
“We are on track for the grind into obscurity. We will have no one to blame but ourselves and we will not be able to say we did not know.”
Mr Saul is a co-founder of Dragonfly, a firm that aims to acquire service businesses and use artificial intelligence to turn them around.
He left fund EVP last year after a dramatic saga following a $10.4 million investment in a pharmacy company called StrongRoom AI, which led to a court battle over allegations its leadership had misrepresented the company’s financial position.
Mr Saul is not accused of any wrongdoing in relation to the court matter.
In his scathing blog post, shared by several of his colleagues in the finance industry on X, Mr Saul laid out what he believed were the biggest government missteps of the 2000s.
First was the “catastrophic decision to abdicate immigration policy to the universities”, under John Howard, which he claimed had “disfigured our universities into visa mills”.
He believed Australia’s energy system had been “hobbled” by attempts to cut emissions from 2007 and then pointed to the mass cost blow outs of the NDIS and Snowy Hydro 2.0.
Mr Saul called the latter “the greatest white elephant in Australian infrastructure history, and it isn’t even finished”, with an initial $2 billion budget now expected to be north of $12 billion.
“Self-congratulatory tears were shed when the Gillard government launched the NDIS, costed by the Productivity Commission at $13.5 billion a year at maturity, serving roughly 400,000 of the most profoundly disabled Australians,” he wrote.
“It now runs past $50 billion a year — more than Medicare (!) — with 740,000 participants and counting.
“We could hand every one of the originally intended recipients $125,000 a year in cash and come out ahead. But that wouldn’t feed an entire industry of parasites. Just try clawing those sweet dollars from their hands now. It’s over.”
The Adelaide-raised entrepreneur bemoaned the “absurdities” of banning drilling in some of the world’s biggest liquid natural gas fields, the lack of use for Australia’s huge uranium deposits and the regulatory barriers to work such as occupational licencing.
He also pointed to the immigration intakes under Labor and Coalition governments, stating high levels had been pursued to either boost GDP or provide cheap workers.
The Albanese government has been criticised for its level of public spending in recent years as the economy experienced prolonged periods of high inflation.
Treasurer Jim Chalmers has maintained the government was cutting back on spending and was this year pointing to a faster-than-expected recovery in private sector demand for the nation’s inflation woes.
Top economist react to investor’s scathing takedown
Mr Saul evoked the infamous tale of how Argentina squandered its enormous prosperity in the early 1900s to become an economic basket case as a warning for Australia.
AMP’s chief economist Shane Oliver said he did not see Australia following the South American nation’s path but worried our economy might need to experience a “crisis” before it escaped its “malaise”.
Mr Oliver said productivity had been an issue for at least a decade, with the last major tax reforms coming in the shape of the GST under the leadership of Mr Howard and then-treasurer Peter Costello.
He pointed to the growing public sector, which was now making up about 28 per cent of GDP, as a handbrake on an economy that was becoming less competitive.
“The budget missed a golden opportunity to deliver a lot more (on productivity). It sort of lacked the vision that you might have got from, say, a (Paul) Keating or a Costello,” he said.
“But unfortunately, that’s the sort of vision we need to get the economy moving again. But I don’t think we’re in a disastrous state here. It’s recoverable but it needs a lot of effort to get things right.”
Mr Oliver said greater regulation in the workforce and the tax system falling into “disrepair” were among other big drags on productivity growth.
He mused that the volatile political landscape since Kevin Rudd’s election in 2007 – with seven prime ministers in the past 19 years – bred a climate where lawmakers “lacked the boldness politicians of the past”.
“I mean, to undertake economic reform does unfortunately require taking something away from some people,” he said.
“The history of revolving prime ministership, doesn’t help prime ministers maybe think, ‘well, I don’t want that to happen to me so I’ll just keep a relatively low profile and not do anything which is too controversial’.
“It just perpetuates the malaise.”
‘They’re focused on crusades’: Fund manager agrees
Author and fund manager Roger Montgomery, giving his take on Mr Saul’s analysis, agreed that the economy had fallen to ideologies and mismanagement.
“The policy decisions aren’t necessarily for the betterment of the country,” he said,
“They satisfy a small group of people who are, are ideologues who require their version of the world to be met.
“They’re focused on crusades … They want wealth distribution.
“But these are the these are the things that you focus on if you’re a rich nation, they’re luxuries. But we aren’t origination. We’re now mired what’s coming up to $1.3 trillion of federal debt that’s not including state debt.”
Mr Montgomery also pointed to a need for serious tax reform to boost productivity, and like Mr Oliver, said more should be done to decentralise the economy and population away from the major cities.
Venture capitalist’s motivation for blog post
Asked what his motivation for writing the piece was, Mr Saul told news.com.au it was born from a “love for this country” adding it was “hard not to worry about where we’re going”.
He has previously written about his ideas for an “ambitious Australia”, which involved becoming an energy superpower – including nuclear – poaching global talent, owning AI niches, tax reform and slashing bureaucracy.
This week, however, he mused “we may be past the point of no return, where too many mouths are now dependent on government mismanagement”.
“We’ve always had interest groups vying for their cut,” he said.
“But now the misalignment between the good of the country and the good of particular groups may be too high.
“Australia is not alone. Similar demographic, political, economic, and institutional challenges seem to grip most countries.
“But that is not an adequate excuse … Our decline has been self-inflicted.”
Mr Saul told news.com.au Australia had “everything going for us” and he was hopeful the nation can turn course.
“I do believe the right individuals at the right moment can have massive impact,” he said.
“But as I wrote, structural challenges are making that increasingly difficult.”
Australia exposed by brutal real GDP growth chart
Last week Mr Montgomery slammed Australia’s real GDP growth as a “disaster”, pointing to a chart from The Spectator showing its performance since 1976.
It showed real GDP growth under the Albanese government languished well behind the 30 per cent increase under the Bob Hawke/Mr Keating years.
“Australia is number one or number two globally for median wealth per adult, and that is largely because of home ownership,” Mr Montgomery told news.com.au.
“Not only have we now had the longest continuous stretch of negative quarterly per capita GDP in modern Australian history, but the government has also blown up the property market, which was the primary source of wealth for two-thirds of Australian households.”
A Treasury spokesman hit back to say Australia has recorded faster annual growth than every major advanced economy except the US in years blighted by major supply shocks.
“Every major advanced economy has recorded at least one negative quarter, but Australia has avoided one,” he said.
Data from the Australian Bureau of Statisitics showed nominal GDP was about $2.12 trillion in the March quater, growing by 0.3 per cent and 2.5 per cent annually
Much has been made of Australia’s inflation rate, which most recently came in at 3.8 per cent in June, being an “outlier” among other developed nations.
Senior economist Warren Hogan told news.com.au last week lingering inflation was “beyond a joke” that the Reserve Bank of Australia needed to get on top of.
Mr Saul also shared this graph but wrote that the current government “cannot be blamed for the economic conditions it inherited”, adding “the rot runs deeper than any one government”.
“Not once in a generation has our federal political class offered a pro-growth vision: a wealthier Australia, one where people want more children and can assume a better life for them,” he wrote.
“We have instead been ravaged by an inward-facing political class, each faction eking out a greater slice for its own interest group.
“We tinker with tax policy at the edges while the country is hollowed out. The state is eating the country:”