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 manufacturing projects and a $1 billion Modern Manufacturing Initiative (MMI) to support local industries and create jobs. The MMI aims to target specific sectors such as medical products, food and beverages, and resources technology and critical minerals.

Danielle Wood's comments came during a speech at the National Press Club in Canberra, where she warned that the government's manufacturing subsidies could create a "business class" system, with some companies becoming overly reliant on government support. She stated that "the risk is that we create a class of businesses that are addicted to government support and are not able to stand on their own two feet."

Wood's concerns are based on historical evidence from other countries where similar initiatives have led to a dependency culture among certain industries. For instance, in South Korea during the 1960s and 1970s, the government heavily invested in industries such as shipbuilding and steel, which led to a strong industrial base but also created a culture of dependency on government support.

Moreover, Wood emphasized that while the government's manufacturing plan has the potential to create jobs and stimulate economic growth, it is essential to ensure that the support is targeted effectively and does not create unintended consequences. She suggested that the government should focus on industries with high growth potential and competitive advantages, and provide support in a way that encourages private sector investment and innovation.

In conclusion, Danielle Wood's comments highlight the importance of carefully designing and implementing government support for manufacturing industries to avoid unintended consequences such as creating a dependency culture among businesses. The Productivity Commission's role is to provide advice and research to help inform policy decisions and ensure that government support is effective and sustainable in the long term.