Home » PM’s Made in Australia plan risks forever subsidies

PM’s Made in Australia plan risks forever subsidies

Ms Wood said the act should come with an exit strategy “by which government at least reviews, if not, commits to stepping back from supports” in order to “minimise the longer-term costs of these policies”.

Mr Albanese announced on Thursday that he would introduce into parliament a Future Made in Australia Act to try to compete with America’s Inflation Reduction Act and similar schemes adopted by nations such as Korea, Japan, Canada and the European Union.

Warning Australia needed to safeguard its sovereign manufacturing capacity on clean energy and advanced manufacturing after the pandemic exposed supply chain risks and deficiencies, Mr Albanese said the free market alone was no longer adequate.

Streamlining investment rules

The act will have in its remit already announced schemes such the $15 billion National Reconstruction Fund, the skills agenda; initiatives to encourage the domestic manufacture of batteries and solar panels, the hydrogen headstart program and the Net Zero Economy Authority.

But it will also include investment incentives to be announced in the May budget to either lure capital to Australia or prevent it leaving. This will include streamlining the Foreign Investment Review Board rules to remove impediments for established and safe investors.

Treasurer Jim Chalmers has previously flagged plans to fast-track the process for “trusted investors”, such as pension funds, which have been previously approved for other acquisitions.

One government source cautioned against branding the new scheme as beng all about subsidies and protectionism, saying when the full details are announced it will be more about incentives to lure capital.

Asked about solar and battery subsidies, Ms Wood said it was “certainly hard to see that those would be industries where we have an obvious, longer-term competitive advantage”.

Fewer jobs

But Mr Albanese told Sky News that Australia could be competitive in these areas because mechanisation meant labour costs were far lower than they used to be. Combined with the proximity of the raw materials, costs would be lower again.

He accepted mechanisation meant fewer jobs would be created than were being replaced, but that would be better than no jobs at all.

“What it will mean is that compared with older manufacturing processes, there will be less jobs created per output,” he said.

“But what you’re comparing it with here isn’t an old form of manufacturing or a new, more efficient, more productive form, it’s whether we produce that new productive form of manufacturing here in Australia, or it’s offshore.

“It’s as simple as that.”

Santos chief executive Kevin Gallagher echoed the views of many in business and industry that the government should think about removing impediments to investment.

Speaking in the context of Santos’ desire to establish large-scale carbon capture and storage technology, he said, “Australia is lagging the rest of the world in providing the policy and regulatory settings, and the market signals that would facilitate greater private investment in what could be a new, profitable, job-creating energy transition industry for our nation”.

Australian Industry Group chief executive Innes Willox welcomed the focus of the policy “on the vital need to address vulnerabilities to supply chain risks” but said there were “clear risks and unanswered questions which will need to be addressed”.

“The prime minister’s commitment to better co-ordination of government action is another positive direction. At present, we have an unseemly mix of policies pulling in too many directions,” he said.

He concurred with Ms Wood about the risk of establishing industry dependency on government and the need to identify failures and have an exit plan.

“Industry policy is fraught with pitfalls. It works best when there are clear objectives, well-designed policy instruments, and the administrators charged with their implementation have a willingness to accept responsibility for and respond quickly to inevitable failures,” he said.

Governments ‘should enable’

“Fundamentally, governments should be enablers, not deliverers.”

He also took issue with the government’s recent industrial relations changes, which he said, “manifestly detract from productivity and add complexity and cost to employment”, and tax systems “that are widely recognised as imposing undue costs and distortions to economic decision-making”.

Opposition Leader Peter Dutton, who earlier this week spoke in support of subsidised manufacturing to safeguard sovereignty and supply chains, cited IR laws and energy costs as impediments to the government’s plan.

“If you look at manufacturing in Australia now, it’s not made in Australia because it’s going broke,” he said.

“It’s going broke under the Labor government because of their energy costs, because of their industrial relations impost, and this government continues to do everything to please the union bosses, but it’s making it harder for the workers.

“Businesses are closing, they’re moving offshore. They’re going to Malaysia, they’re going to the United States where they’re paying a fraction of the electricity and gas costs that they are here.”

The ACTU called the initiative an “historic step forward for workers, for the climate, and for every Australian who wants a fair go on a liveable planet”.

Business Council of Australia chief executive Bran Black welcomed the initiative but said success would depend on reducing red tape.

He concurred with Mr Albanese’s approach that while open and free trade remained important, “a new global approach means increased government engagement is needed”.

“Any government intervention needs to be carefully calibrated and measured so taxpayer funding isn’t wasted, inflation isn’t fuelled further, and private funding isn’t crowded out.

“We will need to see the detail of how projects will be funded, planning co-ordinated and facilitated, and no further changes in areas such as workplace relations which make Australia uncompetitive.”

He cited as vital streamlining the foreign investment framework, reducing project approval times and reducing industrial relations interventions.

Manufacturing Australia said action was needed in the areas of approvals, regulatory regimes, energy policy, R&D, skills and tax incentives.