The government’s plan for a future ‘made in Australia’ has failed to win over the productivity commissioner — and that’s a problem

The government’s plan for a future ‘made in Australia’ has failed to win over the productivity commissioner — and that’s a problem
  • PublishedApril 25, 2024

Anthony Albanese and Jim Chalmers have a pre-budget problem. They haven’t yet won over one of the most important voices in the economic debate on their bold plan for a “Future Made in Australia”.

Productivity Commissioner Danielle Wood still has concerns, despite a concerted effort over the past two weeks by the prime minister and treasurer to win this debate. They’ve spent a fortnight insisting “the world has changed” and “substantial” government investments are needed to drive chosen industries forward in the net-zero future.

Wood is not convinced.

The commissioner’s concerns create far more difficulty for Labor than other critics, including former prime minister John Howard, who tried to hit Labor where it hurts by suggesting Albanese’s big idea was akin to the sort of industry protectionism Bob Hawke dismantled more than 30 years ago.

“I respect John Howard,” an untroubled Chalmers said in response, “but those comments belong to another era”.

On Background: Can we manufacture a future in Australia?

‘We need to be very cautious’

Wood, by contrast, is very much from this era. She was hand-picked by the treasurer for this job. He even gave the productivity commission a new “statement of expectations” which specifically included a greater focus on “climate change and the net zero transformation”.

And yet, Commissioner Wood doubts more government intervention is the best pathway to achieve that net zero future.

“I think we need to be very cautious about stepping into this space,” Wood told the Insiders On Background podcast, where she responded to each of the government’s main arguments.

While Albanese says we’re in a “race for jobs” with other countries offering big government subsidies and can’t afford to be “left behind”, Wood isn’t sure this is a race we should even be in.

David Speers speaks to the head of the Productivity Commission, Danielle Wood.

“One view of the world is when other countries subsidise their production, we say thank you very much,” Wood says. “That means lower prices for Australian consumers [and] where that relates to green products that’s actually going to help us with our own green transition.”

What about the “economic security” argument, that we’re too reliant on China for critical goods? “That’s not necessarily an argument for producing here,” Wood says, “it can be an argument just for making sure that we’re sourcing more broadly from friends and allies”. 

And as for the suggestion taxpayer money is needed to help get “infant” green technology off the ground, Wood warns: “Your infants grow up, they turn into very hungry teenagers and it’s kind of hard to turn off the tap.” Exhibit A: the local car-making industry.

Woman in red smiles at camera.
Productivity Commissioner Danielle Wood doubts more government intervention is the best pathway to achieve that net zero future.(ABC News: Peter Healy)

Are we fetishising manufacturing?

While governments continue to feed these hungry industries, they’re diverting jobs and investment away from other, more productive parts of the economy.

The productivity commissioner even echoes the concerns of others about the “danger to fetishise” about manufacturing. Services are also very valid things to produce and trade, she says.

Wood isn’t completely closed to the idea of some greater government intervention if there’s a clearly defined security or economic reason and taxpayers know what they’re getting into. “There may be these policy rationales, but we need to be super clear that this comes with costs.”

The productivity commissioner also makes a powerful point about the need for independent oversight. “We need some kind of process for independent assessment otherwise we risk sort of a giant pork-barrelling scheme or lobbying dictating where these big pots of government money are going to go.”

Jim Chalmers says he listens very closely to Danielle Wood. The Treasurer says she has “raised some important points, but also some obvious and self-evident points”. Appearing on Insiders last week, the Treasurer agreed, for example, on the need for “exit ramps” from government subsidies.

Chalmers insists the plan here “is not replacing private investment but attracting more private investment in areas where we have obvious advantages and compelling imperatives”.

Is the program backing winners?

The problem for the government is the areas it’s already identified aren’t areas the productivity commissioner thinks are winners.

We already know the Future Made in Australia plan will include previously announced subsidy schemes, including the $1 billion “Solar Sunshot” program, unveiled by the prime minister last month to “help ensure more solar panels are made in Australia”.

Wood is not a fan of government-subsidised solar panels, to put it mildly. A month on from that announcement, she says the case has not been made for this billion-dollar taxpayer spend.

Indeed, the commissioner says there’s “nothing wrong” with buying cheaper solar panels from China or anywhere else. “That’s what trade looks like”.

This view is also backed by former ACCC boss Rod Sims, now chair of the Superpower Institute, who worries subsidising local solar panels will only slow down the net-zero transition. “How can we have low-cost renewable energy if we are saddled with high-cost solar panels, wind farms and electrolysers through a ‘buy local’ imperative?,” Sims says.

The government remains quietly confident it’s on a winner with its Future Made in Australia plan, both economically and politically. It genuinely believes the global game has changed and is betting voters will strongly back more local manufacturing.

But Labor has found itself more on the defensive than the offensive so far with this big-picture, pre-Budget announcement. And while Wood may not be the most vocal critic, her concerns carry more weight — and political pain for Labor — than most.


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