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 Morrison government's manufacturing plan.

The Australian government's manufacturing plan, announced in October 2020, includes a $1.3 billion investment in modern manufacturing initiatives and a $150 million Modern Manufacturing Innovation Fund. 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 ongoing shift towards services-based industries.

However, Danielle Wood has warned that this focus on subsidising Australian manufacturing could create a two-tiered business system, with some companies becoming overly reliant on government support. In her view, this could stifle innovation and competitiveness in the long run.

According to Wood, there is a risk that some companies may become "addicted" to government funding and may not develop the necessary skills and capabilities to compete in global markets without it. This could lead to a situation where these companies are unable to grow and adapt in response to changing market conditions, while more innovative and agile competitors thrive.

Moreover, Wood has argued that the government's focus on specific industries, such as medical products and advanced materials, could create winners and losers within the manufacturing sector. Companies in these targeted industries may benefit from targeted support and tax incentives, while other manufacturers may be left behind.

It is important to note that Wood's comments are not a criticism of the government's intention to support manufacturing, but rather a call for caution and a focus on long-term sustainability. She has emphasised the need for a balanced approach that supports both established and emerging manufacturers, and encourages innovation and competitiveness across the sector as a whole.

In conclusion, the Productivity Commission's chair has raised valid concerns about the potential for unintended consequences from the government's manufacturing plan. While the intention is to create jobs and stimulate growth in the sector, there is a risk of creating a two-tiered business system with some companies becoming overly reliant on government support. It is crucial for the government to consider these concerns and adopt a balanced approach that supports both established and emerging manufacturers and encourages innovation and competitiveness across the sector.