Josh Frydenberg is a former senior investment banker. He should know better than most that the recent wave of share buy-backs and special dividends by large Australian companies has little, if anything, to do with their capacity to invest.
The biggest contributors to the surge in buy-outs and special dividends were BHP and Rio Tinto, both because of large-scale asset sales. Thus there were a number of large ‘’one-offs’’ that boosted the return of capital to shareholders in the past year. Australia’s larger companies generally have solidly conservative balance sheets. What they return to shareholders via dividends, special dividends and buy-backs is capital excess to their needs. It isn’t the lack of financial capacity that limits their investment but the perceived opportunities.
That corporate discipline and the coincidental weakness in business investment isn’t a development peculiar to Australia.
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