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So, I stewed on this yesterday afternoon.
And the more time I spent thinking about it, the crankier I got.
See, the government has announced something that I'm sure is wonderful politics. It's just also terrible economics.
The announcement? That 20% of the output from new gas projects would be 'reserved' for Australians.
Great politics, right? 'We should keep our gas' the tabloids would scream. After all, why wouldn't we?
I'm sure it's 'cleverly' designed, by the spin doctors, for exactly that reaction.
But in reality?
In reality the 'modest oversupply' that the reservation would create isn't really about whether or not we have enough gas. It's designed to be a de-facto price cap, instead.
But because 'price caps' are very 1980s, they pretend it's a 'reservation' instead. Nudge, nudge, wink, wink.
What's so bad about price caps?
Well, nothing… if you think that discouraging new drilling projects and spending our national resource wealth to buy votes is a combination that's a good idea.
See, not only is capping prices awful policy (Russian breadlines, anyone?), but it encourages the (over)use of eternal resources and captures none of that value for the future.
It means the chances of a higher gas royalty in future is now far, far lower (because we're already costing the gas companies money by making them supply at a below-market price).
And it means the chances of using those royalties to seed a Sovereign Wealth Fund are also far lower, for the same reason.
Yes, rather than demanding more value for our resources, and putting that money aside for future generations, the government has decided to just make the gas companies supply us with cheaper gas, now.
It's bad policy.
Not only overall, but I hope very clearly specifically for my audience, here.
If you're reading this, you're probably an investor. Or on the way to becoming one.
And what is the defining characteristic of an investor?
The ability to 'defer consumption'.
To put a little away, today, for a lot more, later.
Which is… precisely the opposite of what this policy does.
And not only is it not putting money away for the future, it's actively preventing future governments doing the same, by shackling future gas projects with this reservation scheme… and encouraging extra use today.
They're poisoning the well for future governments… and future generations.
All so, as The Whitlams sang, 'so they can say that the trains run on time'.
Or, well, for a few votes.
The policy would be reckless if it just impacted current revenues and current gas production.
But by locking in future production, they're undermining future generations.
Sure, gas might be cheaper next year. Maybe even for 5 or 10 or even 20 years.
And then?
And then we'll have nothing to show for it, having burned through (literally and metaphorically) the potential proceeds that could have funded a far better future.
The more I type, the more disappointed I feel.
They've given up a golden opportunity for now, but also stolen that opportunity from the future.
What a terrible legacy.
Can I stretch for an investing 'so what' here?
Only by negative example.
The sensible investor should do the opposite of what the government announced yesterday.
We should defer consumption, today, and use the savings to fund a compounding machine that's very likely to generate funds for far, far more consumption in the future.
We should exercise self-discipline.
We should focus on the future, not the present.
We should build, rather than consume.
Bottom line? We should act, today, as our future selves would like us to act.
Not like the future Australians who will look at Sovereign Wealth Funds in other countries and wonder what we were thinking in 2026, when we decided that we'd just spend their inheritance today, instead.
I suspect they won't look back with fondness. And nor should they.
Fool on!
