The Productivity Commission has released the 50th annual Trade and Assistance Review (TAR), which reports on the amount of assistance provided to industry by the Australian Government in 2022-23.
It finds that industry assistance fell to $15 billion in 2022-23, principally due to the end of remaining COVID-19 stimulus measures. This figure is mostly comprised of a small number of large, long-standing programs.
The services economy received the most budgetary assistance in absolute terms, but primary production received approximately five times more in budgetary assistance relative to its share of the economy.
These figures do not include all forms of industry assistance that occur ‘behind-the-border’ in Australia. This year’s TAR takes a close look at the effects of two such forms of industry assistance: domestic price control mechanisms and local content rules.
Behind-the-border industry assistance is likely to grow further in coming years, as policy support under the Future Made in Australia (FMIA) program begins to flow to industry. This year’s TAR does not evaluate the effects of the FMIA program (as it looks at data from previous years) but observes that it is part of a global trend.
“For the past fifty years the TAR has been a vital resource for measuring and assessing the effects of industry assistance. With global and domestic industry assistance expected to rise in coming years, policymakers should continue to look to the TAR to guide decision making,” said Deputy Chair Dr Alex Robson.
“It is important that industry policy is well-articulated and subject to rigorous and public cost benefit analysis. Policy discipline will ensure industry assistance is focused on achieving clear goals at least cost to the Australian community, without inadvertently becoming a new form of trade protectionism,” said Dr Robson.
An essential aspect of this analysis is identifying points of comparative advantage – the areas in which an economy performs best relative to other economies. The 2022-23 TAR explores several approaches to this task.
“A strong economy is one that makes the most of its relative strengths – but identifying points of comparative advantage is not straightforward. Governments should be cautious in pursuing industry policy on this basis and build in off-ramps to allow a timely exit if these policies fail to achieve their stated aims,” said Dr Robson.
The release of the 50th TAR coincides with the Australian Government’s move to eliminate 457 nuisance tariffs, a development that continues the trade liberalisation project of the last few decades.
“Getting rid of these tariffs will reduce unnecessary administrative costs and compliance burdens for business without meaningfully affecting government revenue. Eliminating tariffs entirely would reduce business costs and the costs to household budgets,” said Dr Robson.
The Trade and Assistance Review 2022-23 can be found at www.pc.gov.au.
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