Public expenditure - remember Blue Poles?

One of the most controversial public expenditures in Australia’s history was the purchase of American modern impressionist artist, Jackson Pollock’s Blue Poles by the Australian National Gallery and signed off by the Whitlam Government.

The outcry was incredible. Blue Poles cost $1.3 million, the highest paid for any work by an American artist at that time. Conservative voices adopted their default position, defining it as Exhibit 1 in the portfolio of evidence of the Labor Government’s flamboyance and economic ineptitude.

In today’s dollars, the purchase was about $11 million. Today’s valuation is in the range between $400 to $500 million. Not a bad return on investment, even over the half century since its purchase.

Why retell this story today? Because an identical narrative has emerged around two quite distinct things: the Albanese Government’s decision to invest northward of $900 million in a quantum computing venture called PsiQuantum and the broad assault on the Victorian Government’s state debt, driven by a massive ‘Big Build’ infrastructure investment (and admittedly some dumb decisions and actions around the now cancelled hosting of the Commonwealth Games).

There are valid arguments on both sides of these equations laced with heaps of ideology, political priorities and opportunism. Easy to criticise when you’re not sitting in the big chair and all that.

Underlying this is a global tug o’ war between globalists and nationalists - those subscribing to the idea of global citizenship and responsibility in solving the world’s biggest issues and those disenfranchised by the total absence of benefit from four-decade dominance of neo-liberalism and free markets across western democracies.

This is culminating in highly volatile and polarised communities, the repudiation of so-called intellectual elites and the belittlement of the aggrieved, acutely defined by Hilary Clinton’s electorally fatal ‘deplorables’ reference.

This polarisation permeates every public forum - climate change and the energy transition (now almost interchangeable), COVID vaccines, national security, refugees and immigration, inequality, wars and, of course, economic management.

And so to the PsiQuantum investment.

At a time when people are feeling the pinch from cost of living increases, investments like this seem to be something of a luxury carrying a big sticker price - no more than a spin of the roulette wheel. Quantum computing remains more a dream than a reality. Nonetheless, commercialising quantum computing will eventually happen. It almost has to happen to support the exponential growth of data and processing, now driven by a parallel growth in artificial intelligence (AI).

Should quantum computing become a reality, it will have the potential to power solutions for many of humanity’s climate, environment, health and growth challenges in vastly shorter timeframes. Depending on your perspective, the sand is rushing through the hourglass, shrinking the windows of opportunity to avoid the worst outcomes from mismanagement of these issues.

There are a number of companies and investors trying to figure out the quantum computing puzzle and better minds than mine will have sifted through the alternative investments in this space before landing on the California-based PsiQuantum. The broader question is whether it is appropriate for the Australian Government to invest public funds in frontier technologies like quantum computing.

I fall on the side of the ‘yes’ camp. Australia has often been too timid to take a long-term position in emerging industries, happy to feed off the scraps that fall off the big table. Traditionally, we’ve been short-term investors, driven by lesser but more assured short-term outcomes like tax concessions on franking credits. This has made most Australians particularly unsuited to and wary of tech investments.

But we are also a small and relatively remote market. With few exceptions, like Atlassian, the big tech opportunities are generally located on foreign shores. However, this should not deter us from taking a profile, gain a seat at the table and chase a potentially massive return. Of course there is a risk that the government will ‘do our dough’ if it all heads sideways, but that’s the nature of investing.

Which brings us to Victoria’s ‘Big Build’ and burgeoning state debt.

Unfortunately, debt has gained a bad name within the body politik, ignoring the fact that accountants and management consultants regularly advise business clients to take on debt to leverage their next phase of growth.

The reality is that Victoria’s infrastructure was shambolic before the Andrews Labor Government was elected. In true neo-liberal style, major assets had been privatised, including energy generation and distribution. Not only does this decrease the diversity of revenue options for the state budget, it flogs off any potential to increase the value of public assets and places consumers at the mercy of market forces.

While energy costs have risen from Victoria’s ageing and inefficient power stations, driven by the dirtiest and least effective fossil fuel, brown coal, the public has also seen the cost of motoring rise through infrastructure assets constructed as public private partnerships (PPPs), condemning road users to decades of tolls and expensive commutes.

Privatisation has largely failed consumers and its promise of capacity to invest in new infrastructure and better quality, more cost-efficient services and support has never materialised.

So the Andrews Labor Government’s multi-billion dollar Big Build, publicly funded was necessary investment in a city that, pre-COVID, was rapidly becoming (and now is) Australia’s most populous and cracking at the seams as it struggle to simply move people around.

The economic reverberations from the controversial COVID lockdowns, the world’s most extended and restrictive, remain to this day. The aftershocks are still being felt, particularly by small businesses starved of customers and revenue for almost two years. The loss of tax revenue to the state was considerable and workplaces, commuting and the essence of the city were transformed forever.

While saying big investment in infrastructure is necessary, there will always be questions about which infrastructure and what priorities. In truth, this will always be driven by priorities and electoral calculations. I still believe in the need for the East-West Link, signed up in the dying days of the previous Liberal Government, but cancelled at a cost of $1 billion by Labor. The logic of that was confounding and frustrating.

But infrastructure, particularly transport and communications dictates the economic health and efficiency and, what might disappoint many, is that there is still plenty to be developed if city planners are to effectively service and support the urban sprawl to Melbourne’s north, east and west.

All levels of government must face their Blue Poles moment, making that informed, perhaps inspired decision to invest public money into things that will deliver returns way beyond the political, even the natural life of today’s leadership.

Photo: Wikicommons, Australian National Gallery