Picking winners – yes we do this now in Australia, thankfully

By Peter Roberts

I have just been reminded by a former colleague of the bad old days when policy, any policy, favouring manufacturing was seen as protectionism and picking winners.

Those times lasted for decades, with the Productivity Commission and the Coalition weaponising the words against manufacturers.

My former colleague asked: what government policy is supporting manufacturing’s renaissance, and ‘is it just a return to protectionism in another guise?’.

While no-one wants to go back to the high tariffs of the past, the public today has a more benign attitude to the naming of a list of critical industries the country should pursue. They even wave through direct assistance to manufacturing companies.

Ironically it was the Coalition itself which broke the taboo against picking winners among sectors and companies, making a meal of it during their recent terms in office.

The new embrace of industry policy came when the Coalition feared losing seats in South Australia over its mishandling of submarine construction, (Some things never change), and Christopher Pyne (pictured) was appointed defence industry minister.

Suddenly, defence was a strategic industry with far-reaching policy ambitions such as continuous naval shipbuilding, and subsidies for innovation and for installing key equipment in local firms.

With that chink in the floodgates, the Coalition moved on to naming a wider list of critical industries we had to have such as battery metals, AI and quantum computing.

Then there were the direct grants to manufacturers including the Modern Manufacturing Initiative – at $1.3 billion the grand daddy of them all.

That these were exactly the policies that the Coalition used to attack Labor over was swept aside.

So much so that as the coalition left office it committed a $1 billion loan to a single company – Iluka Resources – to produce critical rare earth metals in Western Australia.

Labor trumped even this with a $15 billion National Reconstruction Fund, though instead of grants there is the more rational idea of the government co-investing with industry and expecting a financial return.

It is just as well we have left the old kneejerk arguments against manufacturing behind, because competitors the United States with its Build Back Better Framework and the European Union are massively ramping up spending supporting strategically important sectors such as semiconductors and rare earths.

Just last week it was announced Germany was planning to make two billion euros ($2.1 billion) available to fund a green steel plant to be built by a single company, Thyssenkrupp.

Two decades ago the idea of an Australian government investing a billion dollars in BlueScope Steel at Port Kembla or GFG Alliance at Whyalla would have been anathema.

Today such a thing would probably be waved through.

Yes, we do pick winners in Australia but it is not protectionism – it is what every country that wants to make things needs to dos.

Further reading:
Iluka Resources plans Australia’s first rare earths refinery
Rescuing the Productivity Commission from itself – By Phillip Toner and Roy Green

Picture: pyneonline.com.au/Christopher Pyne