Rob Prugue (Photo: Matt Fatches)

It has been cynically said that profits are privatised while losses are socialised. This is even more true when the industries serve a national interest or are sizeable enough to hold a “too big to fail” status. While far from being an Ayn Rand devotee, I do have sympathies with those who question the efficacy of taxpayer-funded bailouts.

Case in point is Virgin Australia. Should the government bailout Qantas?  If so, doesn’t it equally serve the national interest to have two airlines? I’d dare say it is in the national interest, albeit that I am not a fan of current laissez-faire bailouts. History has shown that previous unconditional bailouts only secured bonuses for management, while staff were made redundant.

So heads I win, tails you lose?

If the government formed the Future Fund, then perhaps there is room to set up a federal investment holding company whereby any bailout comes with commercial (and social) safeguards. The global example is Temasek, a commercial investment company owned by the Government of Singapore. 

While I fully appreciate that a national investment company is susceptible to vested interests and manipulation, proper governance can assist as we have seen within the Future Fund.  If losses have to be socialised, perhaps we should at least offer taxpayers some national profits for being the lender of last resort.

COVIDnomics requires new alternatives to new challenges.

Rob Prugue is a principal consultant at Callidum Investment Research. He was the former CEO of Lazard Asset Management in the Asia Pacific for 15 years.

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