The media laws introduced and pushed through the Senate in just the last few weeks have probably pushed up his personal wealth to something closer to eight billion.
It’s a development that neither the Communications Minister Helen Coonan nor her detractors seemed to have expected.
Coonan said on Tuesday last week that she didn’t expect the new laws to trigger a wave of takeovers.
And while the critics of her laws did expect takeovers, they were bracing themselves for mergers of the existing Australian media companies that they feared would cut diversity as newspapers bought television networks and visa versa.
The idea that the most immediate effect of the change would be the simple injection of hundreds of millions of dollars into James Packer’s bank account without anything being merged seems not to have occurred to them.
Since the Minister announced the government’s planned media law changes in July the price of PBL shares has climbed from around $17.70 to just short of $20 – its market capitalisation has increased by about one billion dollars.
The explanation is as simple as supply and demand... The supply of PBL shares is unchanged. But there is now a whole new source of demand. Hungry foreign investment funds desperate for places to park their funds have until now been prevented from buying Australian media assets. The new laws remove that restriction. As all students of economics are told as soon as they begin the course, when the supply of something is fixed and there is an avalanche of demand the price goes up.
The surge in demand for James Packer’s assets is good for James Packer. It would be nice to hear an economic analysis from the Government suggesting that the media laws that brought it about are good for Australia. Even a rough calculation along the lines of the one produced for the introduction of the GST or the Free Trade Agreement with the United States would provide some basis for debate.
The last time there was an avalanche of demand for television networks and newspapers (in the 1980’s, brought about by easy money and tax engineering) it turned out very well for James Packer’s dad.
He sold the Nine Network for $1 billion to Alan Bond and famously bought it back later for one quarter the price. But there was no obvious economic benefit to the nation from the takeover frenzy, and it’s hard to see one this time either.
