Logic versus vested interests but the vested interests seem to have the ear of the Labor party government
A key government economic adviser has launched a scathing attack on Labor's industry policy, railing against a "new protectionist" push for extra assistance and slower tariff cuts for car, textile and other manufacturing industries. Productivity Commission chief Gary Banks has rejected arguments by Kevin Rudd and his Industry Minister, Kim Carr, that Australia must act to protect its manufacturing base. And as the Government prepares to release special reviews into car and textile industry assistance, Mr Banks has insisted the economy would be better off by billions of dollars a year if the Government proceeds with scheduled plans to wind back tariffs and government payments.
In a speech that has deeply angered the Government, the Productivity Commission chairman also criticised Labor's recent decision to give Toyota a $35 million grant from its $500 million green car fund, which he said would neither help innovation nor cut greenhouse gas emissions.
He also attacked the Government's commitment to a "mandatory renewable energy target" - to encourage power sources such as solar and wind - and its promise to compensate electricity generators for the loss of asset value under its new emissions trading regime.
The Government controversially decided not to get the Productivity Commission to conduct its car and textile reviews, instead setting up "expert panels" with secretariats in the Industry Department - a decision Mr Banks said was unprecedented and meant the Government ran the risk of not being "properly informed". Senator Carr said yesterday "the Productivity Commissioner appears not to understand that these reviews are not reviews of tariffs but are in fact much broader than that". Senator Carr has received, but has not yet released, a report from former Victorian premier Steve Bracks into the automotive industry.
Some sources suggest the report will recommend proceeding with the scheduled cut in tariffs on imported cars and components from 10 per cent to 5 per cent in 2010 but will argue for a continuation, in some form, of the Automotive Competitiveness and Investment Scheme, which is worth $2.8billion over the five years to 2010 but is scheduled to be phased out by 2015. Mr Rudd has promised "a new car plan" as a result of the review.
Senator Carr has said Australian carmakers require a "level playing field" with the substantial industry assistance offered by other carmaking nations. He repeated yesterday that in achieving this outcome "tariffs remain a second-order issue".
But Mr Banks, who was appointed Productivity Commission chairman by the Howard government, said arguments about a "new world order" were really "old wine in new bottles", like the discredited arguments for protectionism in the past. "As illustrated by the latest reviews of auto and TCF (Textile, Clothing and Footwear), ongoing pressures from globalisation and emerging exporters, exacerbated by exchange rate appreciation caused by the mining boom, have been prompting calls for new measures to provide relief against imports or other assistance," Mr Banks said in a lecture at the University of Queensland on Wednesday.
He cited Productivity Commission findings that current car industry protection costs consumers and taxpayers $2 billion a year, or $300,000 a year for every car industry job. He said that slowing tariff reductions or offering new financial assistance could make industries less innovative because they were shielded from global pressures. He said the Government's response to the two reports and a separate review of its broader industry assistance was critical and would "effectively set the course for industry policy and its contribution to Australia's economic future".
A spokesman for Wayne Swan said the Government "listens closely to the Productivity Commission's views, but at the end of the day we will take our decisions in the national interest". The Prime Minister voiced his support for the manufacturing sector by saying he did not "want to be the prime minister of a country that doesn't make things any more".
Senator Carr has said he is determined to ensure a future for manufacturing. But Mr Banks said "manufacturing should not be seen as having any special place - maintaining any particular industry should never be an end in itself". Federal Chamber of Automotive Industries chief Andrew McKellar said the speech was "a reflection of the Productivity Commission's ongoing struggle to define its relevance".
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