Economy

Productivity Commission boss says government hand-outs to manufacturing don’t save jobs

James Thomson /

The automotive industry has hit back at claims from the head of that Productivity Commission that government hand-outs to the manufacturing sector don’t help protect or create jobs.

Productivity Commission head Gary Banks spoke out against government subsidies of the manufacturing industry at a lunch yesterday for the Committee for Economic Development of Australia. 

Banks says improving the quality of work done was the key to growth and jobs not propping up unproductive enterprises with subsidies.

“Job losses are concentrated in the least competitive industries and sectors of manufacturing,” says Banks.

“This also tells us that industry assistance, whatever it might achieve, is not very effective in helping people to retain jobs.

“It’s not a job-creation or a job-retention form of policy.”

But Banks’ comments were met with opposition from Richard Reilly, chief executive of the Federation of Automotive Product Manufacturers, who claims government support is vital to manufacturers such as those in the Australian automotive industry.

“Our argument is that it is a co-investment scheme, for every dollar that government puts in a company has to put in multiples of that dollar”, says Reilly. 

“It is a bit of a time of restructure and we acknowledge that, but governments throughout the world support their automotive industries and that is the global nature of the industry.

“The car companies have indicated, as we have, that if the government ceased supporting the industry, the industry would struggle to survive in Australia.”

Acting Australian Manufacturing Workers Union national secretary, Paul Bastian, also dismissed Banks’ claims.

“The Productivity Commission doesn’t get what most Australians understand – that we need a diverse economic base, not one with all our eggs in the mining boom. Booms do go bust.

“Support for industry is vital to keeping the economy balanced and making sure a boom in commodities doesn’t leave us without a competitive, technologically-advanced sector like manufacturing in the long-term. If we lose our manufacturing base, we won’t get it back.

“The type of assistance that the Federal Government has been providing – on a co-investment basis – has done excellent things to attract investment and secure jobs we would have otherwise missed out on, but it has hardly been a free-kick for those companies.

“For example, Holden had to put in more than 3 times what the government put up last week. With Gary Banks’ attitude, there’s more than a billion dollars worth of investment we could kiss good-bye.”

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James Thomson

James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review's companies & markets editor, and a former BRW editor.

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