Manufacturing a Half-Baked Manufacturing Policy

Another weekend, another big political announcement. The Gillard Government today unveiled what is to be their big plan, their attempt to keep manufacturing viable in Australia. The plan involves money, lots of it, and will also require legislation of a somewhat coercive nature enacted by the parliament. When it all boils down, what we are left with is an expensive set of ideas which will not have much benefit for the Australian manufacturing industry. On top of that, government interference in industry decision-making markedly increases – again for little material benefit.

The Gillard Government’s attempt to keep manufacturing jobs in Australia will cost $1 billion. To fund this new manufacturing policy, the government announced it will remove a tax concession for big businesses with a turnover of more than $20 billion, which is aimed at promoting research and development.

The government would want to be absolutely sure that removing this tax break will not hamper the research and development efforts of Australian companies. Who knows, perhaps research and development conducted in Australia might discover a way to produce Australian manufactures more cost effectively.

The move to end the tax concession is also effectively a hit on the bottom line of those companies.

Under new legislation to be introduced into the parliament, large companies with projects worth more than $500 million and business opportunities which receive $20 million in state or federal funding, will be required to give local firms the ability to bid for contracts before any off-shoring can occur. They will be required to compile Australian Industry Participation Plans. All this does is increase the length of time businesses will have to take in order to make commercial decisions.

Individual ventures which are worth $2 billion dollars or more will be required by law to employ Australian Industry Opportunity Officers. They must do this in order to receive a five percent tariff reduction on imports. Further, these businesses will need to report on their efforts twice a year. Again we have another cost to business and more red tape to negotiate.

Neither of these two initiatives place any emphasis on improving the competitiveness of Australian manufacturing. For there to be any real benefit to the whole economy, it is essential that aiming to improve the manufacturing side of the equation is not neglected by government policy. All efforts the government can make which help cut the cost of business should be explored and implemented.

The Gillard Government also plans to spend $500 million dollars of the money raised to establish ten industry precincts in manufacturing hubs around Australia, starting with Melbourne and Adelaide. This will go part of the way to improving the manufacturing industry in Australia. It will bring manufacturers closer together so that collaboration is easier. This is however just a small element in the overall policy framework required to improve the lot of manufacturing in this country of ours.

Other elements of the policy include plans to help SME’s attract business and an increased vigour in the area of venture capital which is an integral part of modern business.

Like other policies the government has announced, the manufacturing policy is an attempt to influence decision-making that only looks at half of the policy equation. It’s also a further attempt to pursue big government at the expense of smart government.

It is quite intriguing that the plan which will cost $1 billion over four years, according to government figures, may add as little as $1.6 billion dollars to industry. This is not a particularly large sum when taking into account both the cost of the new framework and the susceptibility of the industry to internal and external shocks.

About Tom Bridge

A perennial student of politics, providing commentary for money and for free. Email me at tbridgey@gmail.com or contact me on 0435 035 095 for engagements.

Posted on February 18, 2013, in Federal Politics and tagged , , , , , , , , , . Bookmark the permalink. Leave a comment.

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