By Geoff Wilson


Remember the 1970 hit song Big Yellow Taxi by Joni Mitchell? It’s all about taking things for granted, then missing them once they’re gone. “Don’t it always seem to go that you don’t know what you’ve got ’til it’s gone?” the singer croons. Jim Chalmers should play that song on repeat the next time he sits down to pen an essay calling for “better capitalism (that is) uniquely Australian”.

If the federal Treasurer’s aim is indeed to create an improved brand of Australian capitalism, he needs to wake up and smell the coffee. By pushing ahead with plans to dismantle the franking credit system that has served the Australian economy so well for so long, he will destroy the foundations on which he hopes to build.

The dividend imputation system – a key pillar of the Hawke-Keating economic reforms – has helped underpin more than three decades of recession-free economic growth in this country. Unique to Australia, the system has protected our companies through times of economic instability by encouraging them to raise equity instead of risky and unnecessary debt.

It also has removed double taxation; spurred companies to invest and pay corporate tax in Australia; and emboldened Australians to invest locally rather than overseas. This, in turn, creates more jobs and the additional tax revenue that Chalmers will desperately need to achieve his dreams for “values-based capitalism”.

By contrast, his proposed changes to the franking system would significantly disrupt capital markets, investment and economic growth in Australia.

They would risk the stability of the Australian banking system by inhibiting effective capital raising during challenging economic per­iods. And they would unfairly target honest, hardworking Australians who have saved and invested their earnings in a portfolio of predominantly Australian companies and who rely heavily on the fully franked dividends paid to them.

To be clear, I share Chalmers’ desire for a strong economy, as well as his belief that capital can be harnessed both for private profit and public good. That’s why I founded the Future Generation companies nearly a decade ago, which are the first listed investment companies to deliver both investment and social returns.

But his attack on the franking credit system will take us in the opposite direction.

Chalmers needs to start listening to corporate Australia and the people who have helped our country ride out recent downturns.

It is not hyperbolic to suggest that one of the reasons Australia performed so well during the past three economic crises is because of our unique dividend imputation system.

In a 6000-word essay for The Monthly, Chalmers points out that his generation of policymakers and leaders faces new and different crises and challenges. “We can’t just retrofit old agendas or retrace the steps of our heroes to address them,” he opined.

It is true that the polycrisis the world is facing in 2023 is different to crises past. That is no reason to blow up a system that has worked for more than 30 years and is still working. It is always dangerous to tinker when you don’t fully understand the consequences.

Back in 2013 Paul Keating, the architect of Australia’s dividend imputation system, warned that around every seven years Treasury would try to dismantle the franking system. He was right.

I urge the Labor government to remain vigilant in protecting the system. There needs to be a proper inquiry into the changes proposed by Treasury and the consequences they will inflict on Australian companies, investors and the economy in general.

In Chalmers’ desire to create “value capitalism”, he will destroy one of Keating’s major legacies and destroy value for all Australians. And we won’t know what we’ve had ’til it’s gone.