The Howard Government has been accused of not having an industry policy or of making up industry policy on the run. This was exemlified by the one-off decision to slow the reduction in tariffs on imported cars. This week David Mortimer, the managing director and chief executive of transport giant TNT, brought down a report on industry policy. It could have been the base for a coherent industry policy, but its recommendations were far too profligate with taxpayers’ money for political comfort. Moreover, before the ink on the report had dried, key elements of it were rejected by the Government. In particular, the Treasurer, Peter Costello, rejected the setting of a growth target, a recommendation described by Mr Mortimer as pivotal.
In this Mr Costello’s arguments are sound. Merely setting a growth target will not cause it to be achieved. And politically, setting targets is dumb. When they are not met they are ammunition for Oppositions and the media, and when they are met it means little.
There is a more profound problem. Economic growth, of itself, is no guarantee of lower unemployment. And even if it were, economic growth is no guarantee of more fulfilling and happier lives.
There is a large conflict between the Mortimer report and the thinking of several key government ministers. Mr Mortimer has recommended a high level of taxpayer support for industry. That support was tempered by a recommendation that direct government support to individual businesses be put more an a user-pays basis. None the less, his central recommendation was a $1 billion fund to offer incentives to investment. He recommended a further $20 billion over five years in industry assistance. This would come after the present assistance 70 schemes were rationalised down to five industry groups.
The rationalisation recommendation is sensible, but these huge spending programs have rightly been met with some scepticism. The Government has already cut back industry assistance in the Budget; to restore it would look silly.
In economic terms the debate is between the dries, on one hand, who think government should be very small and all industry compete on a level playing field. On the other hand, are the pragmatists who think that it is possible for government to back winners, that certain industries or certain companies can be given special government support which will result in industry growth and more jobs. The pragmatists point to the success of the Asian tiger economies in targeting specific industries for support.
Clearly, Mr Mortimer sits with the pragmatists. But there are difficulties with the pragmatists’ position. In economies like those of the Asian tigers, seeding money and special help has done wonders. But the growth is coming off a low base. Moreover, in a mature economy with a long history of well-developed infrastructure targeted help might not be as effective.
Mr Mortimer’s recommendations are creatures of his business background. There are inputs in the form of investment and labour. There are outputs in the form of products and there is measurable profit. Mr Mortimer’s report is similar. The input is billions of dollars in government money; the product is growth and the “”profit” is a reduction in unemployment. All the inputs and outputs are measurable — a like a business’s annual accounts.
But the world outside business is not quite like that. It would be hard to justify the spending of huge sums of government money on business when other elements of Australian society feel they are being poorly treated — health, education, welfare and defence, for example.
That said, Mr Mortimer quite sensibly recognised artificial impediments to business: a complicated tax system and restrictive industrial relations. Indeed, these reforms will have a far greater impact on the success of Australian economy that large government-provided industry slush funds.