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 key sectors such as medical products, food and beverages, and resources technology and critical minerals.

However, Danielle Wood has warned that this push for subsidised Australian manufacturing could lead to a two-tiered business system, with some companies becoming overly reliant on government support. In her view, this could stifle competition and hinder the development of a more dynamic and innovative private sector.

Wood's concerns are based on historical precedent. In the past, similar attempts to protect and support domestic industries have resulted in a culture of dependency on government handouts. For instance, the car industry in Australia received significant support for decades but ultimately collapsed in 2017 due to its inability to compete with more efficient and cost-effective foreign competitors.

Moreover, Wood argues that the current manufacturing plan lacks clear criteria for selecting industries and companies for support, which could lead to favouritism and inefficiencies. She also believes that the government should focus more on removing barriers to entry for new businesses and fostering a more competitive and level playing field for all manufacturers.

In summary, Danielle Wood's concerns about the government's manufacturing plan revolve around the potential for creating a two-tiered business system and the lack of clear criteria for selecting industries and companies for support. Her views are based on historical precedent and a belief in the importance of fostering a more competitive and level playing field for all manufacturers.