During a recent visit to Queensland, Prime Minister Anthony Albanese announced the government’s intention to create the Future Made in Australia Act this year.
The aim of the Act will be to “boost investment, create jobs and seize the opportunities of a future made in Australia” through a coordinated package of new and existing initiatives.
There are longstanding debates on the extent and limits of government intervention, and especially the role of subsidies to shape the national industrial landscape.
Some argue that new and emerging industries require government support in the initial stages to get off the ground and remain competitive with other nations.
Others, however, not least current Productivity Commission head Danielle Wood and her predecessors, have opposed the idea, arguing that such supports distort the market and draw resources away from more profitable or competitively viable ventures.
The former is clearly the prime minister’s stance, and he went to some lengths to stress that this is “not old-fashioned protectionism, or isolationism – it is the new competition”.
Mr Albanese justifies the investment program on grounds of national security and developing sovereign manufacturing capacity, as well as progressing Australia’s clean energy agenda and competing against other jurisdictions that have introduced their own future funds.
Certainly, the Inflationary Reduction Act in the US, the EU’s European Economic Security Strategy, and Japan’s Economic Security Promotion Act stand as examples of the new link between economic security and national security.
So, how is Western Australia placed to take advantage of initiatives linked to the Act?
Manufacturing is currently the state’s fifth largest sector, worth around $17.4 billion in gross industry value added: the equivalent of around 4.5 per cent of total industry output.
Previous Bankwest Curtin Economics Centre research shows WA is well positioned to take advantage of the global decarbonisation agenda and support nations in meeting net zero goals; both areas highlighted by Mr Albanese.
WA’s resources endowments, knowledge base and technological advantage in producing ‘green products’ is high (ranking 12th globally on BCEC’s green complexity index).
This creates strong opportunities for the state to draw on the Future Made in Australia funding, and secure additional investment for the development of green products and clean energy initiatives.
Despite increases in open trade, the manufacturing sector remains strong in WA with a shift to advanced manufacturing and highly skilled, well-paid workers.
The Future Made in Australia Act proposes to focus on providing the infrastructure, education and research, and skilled workers to enable industry to capitalise on existing comparative advantages and attract new investment.
Such initiatives are to be welcomed. But there should also be restraint in a more visible hand from government.
Investment decisions need to build on existing capabilities as well as emerging industry strengths – we need to be smart in developing new manufacturing specialisations.
Clear monitoring and evaluation frameworks – as well as credible exit strategies – are essential as a way of controlling the inherent risks from picking winners.
Australian industry certainly needs to be in it to win it, but the road to industrial diversification is littered with failures.
So tread carefully.
- Dr Daniel Kiely is senior research fellow at the Bankwest Curtin Economics Centre
