Handouts favour the few
Craig Thomson isn't Tirath Khemlani - but he may as well be. A government clinging to office by a seat engulfed in a scandal involving trade unions and prostitutes is almost as interesting as a government trying to get billions of dollars in loans from Arab financiers using a dodgy commodities dealer.
At least Gough Whitlam cut tariffs. It's anyone's guess how the Gillard government will be viewed in 35 years' time. While the fate of the government hangs by the length of a credit card receipt, there's a few other things happening in the country.
BlueScope Steel announced this week it would cut 1000 jobs. The company said the decision had nothing to do with the carbon tax, a point gleefully seized on by the government. BlueScope can hardly say anything else. Its future is in the hands of the Minister for Climate Change and it still has a business to run with 18,000 employees.
Estimates vary of what a carbon tax will do to BlueScope's financial performance but on some estimates, if the company was not compensated for the tax, its earnings could be cut by half. Carbon tax compensation is entirely a gift of the government. It can be taken away as easily as it's given. Julia Gillard promised BlueScope it would have early access to $100 million of payments under the "Steel Transformation Plan". No doubt that money would still have been forthcoming had BlueScope come out and said that maybe, or possibly, or perhaps, the carbon tax had something to do with its decision.
Thankfully these days, no Labor or Liberal government would ever consider nationalising the steel industry. While in a technical sense the industry is not in government hands, the carbon tax has in effect made steel companies the plaything of ministers. BlueScope Steel now knows what it is like to be Telstra, Qantas, or a bank - a company nominally owned by shareholders but subject to ministerial whims.
Two days ago, Transport Minister Anthony Albanese threatened to veto any potential private equity bid for
Qantas on the grounds of "national interest". Under the Qantas Sale Act, as long as the company remains majority Australian-owned, the structure of Qantas's ownership is irrelevant.
Shadow treasurer Joe Hockey noted that the Transport Minister seemed to be suggesting that some forms of domestic ownership of Qantas are acceptable to the Labor Party (that is, Qantas as a listed public company), but other forms of domestic ownership are not acceptable (that is, Qantas owned by a private equity firm).
Government and opposition politicians have been quick to point out that industry protection is not the solution to the problems of Australia's manufacturing sector. That's a welcome development and a marked improvement on the situation from 10 and maybe even five years ago.
Former Queensland premier Peter Beattie, who was appointed this week to help manufacturing companies get contracts with resources companies, acknowledged that Australians can't afford to return to protectionism (Industry Minister Kim Carr likened Beattie's role to training elite athletes. "The least we can do is to train our companies to be able to compete," he said. Just how many companies will want to take lessons on competitiveness from the Gillard government remains to be seen.)
Treasury secretary Martin Parkinson followed the lead of the politicians when he said the future of manufacturing rested with innovation As he put it, companies don't move up the value added change "by handouts".
If only the government followed his advice. Unfortunately, the policy of "no handouts" is applied selectively. So steel makers don't get protection, but car makers do. Book producers get protection, but shoe manufacturers don't. Then there's the "clean energy" industry. This industry wouldn't exist if not for government handouts and subsidies. As part of the carbon tax package, there'll be a Clean Energy Finance Corporation with $10 billion of taxpayers' money to spend.
According to the government's advertising, the corporation will "drive innovation through commercial investments in clean energy through loans, loan guarantees and equity investments".
If such investments are indeed "commercial", there's no need for government handouts. The corporation was one of the perks the Greens demanded in exchange for supporting the carbon tax. The government's industry policy is one not so much for picking winners as picking favourites.