PM’s manufacturing plan risks creating business ‘class’ system: Productivity Commission

The Productivity Commission is an independent Australian government agency that provides advice on economic, social, and environmental issues. Its role is to conduct research and inquiries and provide recommendations to the government and the public on how to improve productivity and efficiency in various sectors of the economy.

Recently, the Productivity Commission's Chair, Danielle Wood, expressed concerns about the potential unintended consequences of the Australian government's manufacturing plan. The plan, which includes subsidies and other forms of financial support for local manufacturers, aims to boost the competitiveness of the sector and create jobs.

However, according to Wood, there is a risk that some businesses may become overly reliant on government handouts and create a "business class" system. This means that these companies may not focus on becoming self-sufficient and profitable in the long term but instead continue to depend on government support indefinitely.

Wood's concerns are based on historical precedent. In the past, similar initiatives have led to the creation of industries that became overly reliant on government support and failed to innovate or adapt to changing market conditions. This can result in inefficiencies and higher costs for consumers and taxpayers.

Moreover, such a "business class" system can also create distortions in the market and hinder competition. Companies that receive subsidies may have an unfair advantage over their competitors and crowd out more productive and innovative firms. This can stifle innovation and prevent the development of new industries and technologies.

Furthermore, there is a risk that the subsidies may not reach the intended recipients and instead benefit larger and more established companies rather than small and medium-sized enterprises (SMEs) that are more likely to create jobs and drive growth.

To mitigate these risks, the Productivity Commission recommends that the government carefully design and implement its manufacturing plan. This includes setting clear objectives and targets, ensuring transparency and accountability, and avoiding distortions in the market. The commission also suggests focusing on measures that support productivity and competitiveness rather than just providing handouts and subsidies.

In conclusion, while the government's manufacturing plan aims to boost the competitiveness of the sector and create jobs, there is a risk of unintended consequences, including the creation of a "business class" system of companies that rely on government handouts indefinitely. The Productivity Commission recommends careful design and implementation of the plan to mitigate these risks and ensure that taxpayer funds are used effectively and efficiently.