It's time to reveal car subsidies

Bookmark and Share Economics & Deregulation | Tim Wilson
Australian Financial Review 7th February, 2013

Informed debate about government largesse is meaningful debate, especially when private corporate and political interests are involved.

Yesterday The Australian Financial Review reported that the Commonwealth Industry Department blocked access to data about levels of car industry subsidies.

According to the department, the information requested under Freedom of Information legislation would not "contribute in any meaningful way to informing debate on a matter of public importance".

The department clearly has a warped sense of "meaningful" and "public importance", unless it randomly interchanges them with "helpful" and "political interest".

Meaningful debate is informed debate, even if it is not helpful to government policy.

Considering the cost structures exporting manufacturers face and financial limitations on tightening government revenue, the extent and time frame for continued taxpayer subsidies to the car industry is an entirely appropriate subject for newspaper inquiry and debate.

Every taxpayer dollar that enlarges the revenue and profits of a corporate welfare recipient needs to be justified. And with Holden collecting subsidies valued at $89.7 million last financial year, a figure that perfectly mirrors its profit, there are serious questions to be asked about subsidy levels.

The car industry is not alone.The same principle applies to all industries that enjoy government support.

As the Productivity Commission's 2011-12 Trade and Assistance Review outlines, total government assistance to industry is estimated at $17.7 billion. The beneficiaries ranged from renewable energy to food manufacturing.

But the nature of assistance to the car sector makes it particularly important that it be transparent.

As tariffs have been cut, there has been a rise in subsidies to the car sector, arguably undermining the structural adjustment intended.

Throughout the Rudd and Gillard governments, the objective of these subsidies has changed from assistance to wean companies off tariffs to "co-investment".

Co-investment is not like past subsidies that were designed to wrongly protect private interests under the disguise of public interest.

Co-investment is about achieving a public interest through private companies, in effect making taxpayers pseudo-shareholders in these companies and their future.

The need is even greater considering the private political interests involved.

The same car companies that receive subsidies with public money are concurrently striking very generous deals with ALP-affiliated unions for their members.

A government that likes to claim the reform mantle of the 1980s and '90s should understand that getting government out of business, not co-investing in it, is key; as is decreasing the incentive for rent-seeking provided by tariffs and subsidies.

Instead the legacy of the Gillard government has been to re-inject government into the heart of the economy.

The cost ultimately is paid by taxpayers and consumers. The least the government could do is tell us how much we pay and who benefits.