Monday, March 03, 2008

Labor policies that definitely damage Australia's economy

Labor is driving Australia along an unnecessarily difficult path by pushing the Productivity Commission to one-side, by ignoring Ken Henry’s advice to allow the forces of competitive advantage to work in the economy to address structural adjustments associated with the commodities boom, in evaluating the case for continuing protection of the car and textiles, clothing and footwear industries and by seeking to impose an ‘industry policy’ generally. Moreover, this is not only the stance of a few leftist maddies like Kim Carr and Anthony Albanese - it is mainstream Rudd.

The inquiry into continuing protection of the automobile industry has bypassed the Productivity Commission and been handed to protectionist ex Labor Premier Steve Bracks – he has previously opposed tariff cuts andd supports a sustainable car industry so the results of this inquiry are already obvious. The man expected to be appointed by Senator Carr to head the Government's review of protection for the textile, footwear and clothing industry is Roy Green who has argued against Dr Henry's prescription, proposing instead that government should support innovation to assist industries retain competitiveness. Left-wing economists will support these moves partly in the hope that they can get their hands on lucrative board appointments and consulting contracts.

It is a mistake to attribute the efforts to articulate interventionist industry policies simply to left-wing ministers such as Kim Carr and Anthony Albanese. Rudd is quoted as saying:

‘If I become the next Prime Minister of Australia I don't want to be Prime Minister of a country which doesn't make things any more," Rudd said in the lead-up to last year's election. He argued throughout the campaign that the mining boom would not last and that more needed to be done to support other sectors.’
He has plenty of supporters among his trade union hack colleagues:

‘Industry Minister Kim Carr is channeling his leader when he argues that national strength requires that an advanced economy needs manufacturing.

"The Government has definite plans to reinvigorate Australian industry to prepare us for a future beyond the mining boom," says Carr.

The reviews Carr has announced into the motor industry and innovation, along with the one he is due to announce into textiles, are all designed to identify the most effective method for government to support manufacturing industry.

The idea that government can shape industrial destiny is expressed by many other members of the Government.

The new parliamentary secretary for defence procurement, Greg Combet, last week outlined how prime contractors for defence equipment would have to detail opportunities for Australian industry in their tender documents. "This will help Australian industry get a fairer go for high-value acquisitions. This is about us using the leverage available through procurement contracts to secure the right for Australian companies to bid into the global supply chains of the large primes."

Minister for Energy and Resources Martin Ferguson has foreshadowed support for companies investing in gas and coal liquids projects to reduce Australia's dependence on imported oil, and possibly also for exploration.

"These industries are going to become more attractive because of need. But I might also say that is an absolute priority to the Government to secure our economic future."

He said it was not acceptable that Australia's dependence upon imported oil should rise from 20 to 80% of our requirements.

Trade Minister Simon Crean has commissioned a review of trade policy with a goal of revitalising trade facilitation programs, particularly for elaborately transformed manufactures, services and small business sectors.

Infrastructure Minister Anthony Albanese has asked the newly formed authority, Infrastructure Australia, to come up with a priority list of infrastructure projects for public and private investment.

The common thread is that active government intervention in industry policy can produce superior outcomes for the economy.

Albanese harks back to Ben Chifley's Snowy Mountains Hydro Scheme and Gough Whitlam's Department of Urban and Regional Development, while John Button's industry plans are seen by many within Labor as delivering a manufacturing revival as happened during the Hawke government’. (my bold)

Note that Labor has also foolishly committed to involving the trade unions in assessing the case for (among other things) continued protection. This provides a forum for the economically illiterate supporters of protection to voice their views.

What will the left-wing cheerleaders for Rudd and the leftist blogs say about these inanities – I’ll bet nothing at all. It shows their prejudice and hypocrisy that, while they loudly support the empty symbolism of Rudd (Kyoto and meaningless apologies to aboriginal people), they do nothing to criticise Rudd when he acts to destroy the basis for Australia’s recent prosperity.

The long-term implications of this bunch of peanuts trying to outguess markets and to impose their own vision on an economy that is performing so well by transforming itself is worrying.


Anonymous said...

Come off it Harry. Your hyperbole is unbecoming.

The Howard Government got the PC to inquire into car and TCF industry assistance several times. The PC recommended that assistance be wound back, and how did Howard respond?

He ignored the advice totally, and did not reduce tariffs at all!

Your attempt to paint Rudd as an arch industry interventionist compared to the free market John Howard just doesn't wash. If Howard was such a non-intervener, then after 12 years of him as PM there wouldn't need to be an inquiry into assisting the auto and TCF industries, because there would no assistance to inquire about.


Bring Back CL's blog said...

Actually Harry is on the money with this although I did not notice him critise Howard for equally silly industry 'results'..At least Rudd has Treasury front and centre in most polcy areas now.

hc said...

It is not hyperbole. The Howard Government did get the PC to carry out these inquiries - as is its job.

The schedule was for tariff protection to fall to zero and in the face of that Labor appoints two protectionists to hold an inquiry into the case for doing this. It is totally disgraceful.

Look too at the long list of 'industry policy' interventions Labor is coming up with.

I didn't paint Rudd as anything - his comments and those of his dimwit ministers - which I quoted at length - is that for me.

Spiros, Are you going to continue to defend Labor at every turn irrespective of its policies? This is a foolish stance.

hc said...

Is that right Homer? Try the search button and ACIS or automobile.

I have been a consistent opponent of tariff protection for a decade irrespective of who was in power.

Anonymous said...

Harry, I'm not defending Rudd, because it's too soon to tell what he will do (note: "do", not "say".)

As for Howard, there was a schedule to put wind auto tariffs to 5%, not zero, and there was no schedule to do anything to TCF tariffs.

But auto tariffs were supposed to be wound back years ago, until Howard caved in to the auto companies and put it all off until later. You reckon he wouldn't have caved in again?

You're making a big virtue out of the fact that Howard appointed the PC to conduct inquiries. But he then ignored their recommendations. What's so virtuous about that?

It doesn't what the process is and it doesn't matter what ministers say. Talk is cheap. What matters is what governments do. You're so biased against Rudd you're thundering against him before the inquiries have even been conducted, let alone the government responded to their recommendations.


Anonymous said...

Terminating the Seasprite helicopters shows that this bunch of clowns at least understands about sunk costs.

There is also more chance that they will listen to people like Ken Henry on issues like water and the national reform agenda (the latter having been largely driven by Victoria under Bracks).

As some others have said ealier, judge them by what they do, not what they say.

Mark U

Matt Canavan said...

Spiros, you are wrong. Howard delayed tariff reductions following PC reviews in the late 90s (a stance labor supported). Both TCF and car tariffs were then reduced in 2005 (against labor opposition) as well as more scheduled reductions legislated for 2010 (again for both cars and TCF). Of course, these scheduled reductions now look under threat.

derrida derider said...

Well, I wouldn't try and defend Kim-il-Carr's latest folly - it's a pretty dodgy choice of process and personnel. The fact that the previous lot were also very dodgy in this area is irrelevant.

But I too urge Harry to wait and see how the recommendations of this industry group get through cabinet. Treasury has a helluva lot of influence in this government, for a start.

Anonymous said...

Exactly so. In Cabinet, Swan will argue for cutting tariffs. So will Tanner. Rudd's economic advisers will also tell him to cut tariffs.


Anonymous said...