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

The Productivity Commission is an independent Australian government agency that provides research and advice to help inform policy decisions. Its role is to promote productivity and efficiency in the economy. In recent news, its chair, Danielle Wood, has expressed concerns about the potential unintended consequences of the Australian government's manufacturing plan.

The Australian government's manufacturing plan, announced in late 2020, includes a $1.3 billion investment in manufacturing projects and a $500 million Modern Manufacturing Initiative. The aim of these measures is to create jobs and stimulate growth in the manufacturing sector, which has been hit hard by the COVID-19 pandemic and the shift towards services and technology-driven industries.

However, Danielle Wood has warned that this focus on subsidising Australian manufacturing could create a "business class" system, where some companies become overly reliant on government support and lose their competitiveness in the global market. In her view, such companies may not be sustainable in the long term and could end up being a drain on the economy rather than a driver of growth.

Wood's concerns are based on historical precedent. In the past, similar attempts to protect and support domestic industries through subsidies and protectionist policies have led to inefficiencies and a lack of competitiveness. For example, the car industry in Australia received significant government support for decades but ultimately failed to compete with more efficient and cost-effective producers in other countries.

Moreover, Wood argues that the government's focus on manufacturing should not come at the expense of other sectors, such as services and technology. She believes that a more diversified economy is better positioned to weather economic shocks and create sustainable jobs.

It is important to note that not all in the industry share Wood's concerns. Some argue that targeted support for manufacturing is necessary to help the sector recover from the pandemic and to build resilience against future shocks. They point out that other countries have successfully used similar measures to support their manufacturing sectors and maintain their competitiveness in the global market.

In conclusion, the Productivity Commission's chair has raised valid concerns about the potential unintended consequences of the Australian government's manufacturing plan. While the aim is to create jobs and stimulate growth in the sector, there is a risk of creating businesses that become overly reliant on government support and lose their competitiveness in the long term. It remains to be seen how the government will address these concerns and balance its support for manufacturing with its broader economic goals.