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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.
Crowing About Making Life Harder
It feels like a while since any substantial discussion has occurred involving policy and the business of government more broadly. Lately we’ve been stuck on constructing and deconstructing personalities and political parties. We’ve also been debating what should or should not be said as part of the usually robust, but recently vitriolic public discourse. Today is the day we must again begin focusing on policy and the business of government, looking above and beyond the easy analysis of people and personalities.
During all the hubbub a milestone went by almost undetected, with only a brief passing mention in the political media as the sexism and misogyny debate accelerated.
The Gillard Government, often wrongly accused of not getting on with the business of government, announced to the media that they had managed to have passed through the parliament over 400 bills. That much legislation passed over 2 years is certainly not, by any stretch of the imagination, not getting on with the business of government.
There was probably much back-slapping and the brief mention smacked of pride. Why wouldn’t the government be proud of that achievement? That much work making it through the parliament, a minority government occupying the benches, would not have been an easy task, made both easier and harder at different junctures since the August 2010 federal election.
But is all this work necessarily a good thing? Will all this work lead to less government and bureaucratic interference in the lives of individuals and businesses? Will it make life in Australia a smoother process? Finally, what is better, new rules and regulations and processes to follow or new or beefed up penalties for existing or newer forms of wrongdoing ?
The answer to the first question is an emphatic ‘no’. Having passed 400 bills is not something to crow about. Yes, there will be legislation now in force among the new laws which will be beneficial. But that does not mean the overall number of bills passed is a good thing, it is not. But of course, for a government struggling to be able to take credit for work they have actually done, well, you cannot really blame them.
The problem with passing over 400 bills through the parliament is that it inevitably means there will be more government, not less and that the level of bureaucratic interference in the lives of individuals and businesses will of course be higher. There will be more rules to follow, more forms to fill out in your personal life and in the life of businesses and that is never a good thing for time or money.
So life in Australia as a matter of course, with over 400 new bills passed will not be smoother in a broad sense. Again, there will be, in that immense stack of paper, some legislation that might serve to make life easier in some narrow sense. However, with the sheer amount of bills that have been made into law being so high, those act’s of parliament making life easier, will be drowned out but extra rules and regulations in other areas of life.
What should governments focus on when engaging in the business of lawmaking? Should they have a predisposition toward business and people going through more regulatory approval, having more forms to fill out? Should the focus instead be on increasing penalties for wrongdoing rather than more oversight aiming to stem bad behaviour? Or is it the case that administrations need to focus on repealing laws?
The answer is a combination of the above. What should be first and foremost when thinking of amending or even introducing legislation is a focus on the penalty side of the good and wrongdoing equation. This means that those behaving appropriately are rewarded with less time needed for bureaucratic nonsense and more to do the business, personal or otherwise that they need to do. At the same time it punishes those few that do the wrong thing.
There should be little or no focus at all on increasing rules and regulations. Extra rules, read for breaches of law, should only be introduced to deal with wrongdoing that evolves or emerges, whether that’s for new technology or new practices which develop.
More red-tape is, in just about every case, an absolute no-no. Bureaucracy must be avoided at just about any cost. Businesses and people, both time-poor, just do not need extra time and pressure to apply for or get approval for aspects of their businesses and lives. There will of course be times where it is necessary.
Ideally, there should be a predilection toward actually cutting approval processes, forms and other time-consuming activities where practical and that means actually repealing some legislation or parts thereof. Stupid offences too, and there are certainly plenty of those, should also be on the legislative chopping block.
So really, the ALP might be happy with their work and so too the cross-benchers closely linked with the government, but the question is, should we the people and should the businesses of this country be jumping for joy too?
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