Wednesday, February 05, 2014

We've drawn a line in sand on industry support. Sure.

Within minutes of treasurer Joe Hockey declaring an end to “the age of entitlement” on Monday the assistant infrastructure minister Jamie Briggs stood on a highway on the outskirts of Hobart and announced a grant of $3.5 million to a Tasmanian seafoods manufacturer, Huon Aquaculture.

It would help “provide the equipment to process fresh fish, as well as smokehouses and other machinery for boning, skinning, portioning and mincing,” he said.

The Tasmanian government was kicking in $1.5 million, the Commonwealth $3.5 million and Huon Aquaculture itself $7 million.

As it happens the proportions are roughly similar to those asked for by SPC Ardmona to save its fruit canning plants in Victoria. SPC had suggested $25 million from the state government, $25 million from the Commonwealth and $90 million from itself. In fact as a proportion of the total SPC had asked the Commonwealth for less than Huon - two dollars in every ten rather than three.

Why did the Commonwealth reject one, creating “an important marker” and not the other? On Tuesday finance minister Mathias Cormann tied himself in knots explaining that one was a “grant” while the other was a “co-investment”, although at it wasn’t always clear which.

“Let’s just be very clear,” the finance minister said.

“We were not being asked to make a co-investment, we were being asked to make a grant from the taxpayer to an individual business so that they would be able to invest in a $12 million dollar restructure of their business. We were not being asked to make an investment, if you make an investment you actually get a share in the business and you end up getting a return from your investment.”

Governments of all persuasions support businesses, sometimes by direct grants, sometimes by tax breaks, sometimes by tariffs and sometimes by the provision of services such as Austrade, subsidised water and electricity, technical colleges and the CSIRO.

Often the support has a broader justification. We are told the grant to Huon Aquaculture will “support Tasmania's contribution to this vital industry”.

The $16 million to Cadbury in Tasmania is “essentially an investment in tourism infrastructure” according to the prime minister.

What will eventually be $750 million per year in “direct action” grants to carbon emitters is as much about the environment as it is the businesses that benefit.

It’s the same with the $5.5 billion per year private health insurance rebate. It’s about the patients as well as the funds...

Government support for business is as hard to escape as it is to quantify.

The Australia Institute says the mining industry receives $4.5 billion per year in subsidies and tax concessions, half of it from fuel subsidies. The Productivity Commission comes up with a lower total - $700 million per year.

The motor vehicles industry costs $621 million, and another $785 billion in tariffs. Food manufacture costs relatively little in terms of grants and concessions ($45 million and $62 million) but a whopping $1.7 billion in tariffs.

All up the Productivity Commission says Australian governments deliver $10 billion per year in industry support.

An end to support - “a line in the sand” as a backbencher put it - would be something to see. But we’re nowhere near it and we probably never will be.

In The Sydney Morning Herald and The Age

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