Analysis and Commentary

Not sure about spending priorities in this flawed budget – by Tim McLean

Analysis and Commentary

The first Labor budget in a decade has been generally well received, but not by Tim McLean. Here he mourns the loss of AusIndustry’s Entrepreneurs Programme, a victim of government cuts.

Read the media and you would think that the #federalbudget was a undisputed boon to Australian manufacturing.

However hidden in the detail is the news that the AusIndustry Entrepreneurs Programme is to be cut.

This programme has existed in several guises since 2007 and helped thousands of manufacturers. Unlike many grant programs it is also a net winner for the government budget with each company participating adding an average of 2-3 new jobs and 15 percent increase in revenue.

Working with government programmes around the world, I believe that the Entrepreneur’s Programme is probably the most effective government assistance to growing manufacturers anywhere – and now it is to be cut.

Particularly disappointing, and symptomatic of the superficiality of Australian journalism today, is the way this cut has been covered, with suggestions the programme was controversial and poorly managed.

In fact this relates to one matter, which was the selection process used to select the current programme partners. A National Audit Office review found that this process did not follow Commonwealth guidelines and that the grievances of some of the unsuccessful bidders might have had some justification.

However, having read the ANAO report there is no suggestion that the programme itself has not been well managed, that it isn’t delivering great value for Australian business or that the partners aren’t doing a great job of administering the programme.

Far from being ‘controversial’ most of us who interact with the programme would say it has probably become more effective since the reduction of the number of partners that resulted from the tender.

So where has the money gone for manufacturing? It seems like back to the future.

Among a range of similar investments in ‘legacy’ industries there is $50m to save a zinc smelter in Hobart.

Now no one wants to see that smelter close and the people lose their jobs. However direct government investment like this in private businesses inhibits the ‘creative destruction’ that is at the heart of a thriving innovative economy.

If the smelter is viable, then the owners will raise the capital to upgrade it. If not, why invest government money, when it could be invested elsewhere.

What is great about the Entrepreneur’s Programme is that it has acted as a catalyst for businesses to improve and grow their businesses.

The grants were relatively tiny ($20,000), but combined with some free of charge advice from an experienced business advisor often provided the impetus for companies to invest, grow, export and employ.

If you doubt my theory about creative destruction, read the attached article with news from from the Geelong Manufacturing Council.

Despite the withdrawal of subsidies and subsequent closure of Ford and Alcoa, manufacturing jobs and output in the Geelong region have grown in the past five years.

Further reading:

Tim McLean has had a long career in operational management for major manufacturers including Hoechst, Southcorp Packaging and PPG Industries. He is an author and is managing director of TXM Lean Solutions.

Picture: Geelong

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