Former chair of Australia’s Productivity Commission (1998-2013), Gary Banks, took aim at a couple of the nation’s recent “policy sore thumbs”:
“We have a tax system that is more about redistribution than growth and looks set to become even more so. Much infrastructure spending seems to be about short-term politics rather than long-term economic benefit. And regulatory obstacles to new projects are becoming almost prohibitive, especially in the resource sector.
We are seeing a return to subsidy programs for favoured industries. This started under the Coalition with a lazy couple of billion of taxpayers’ money, but has been greatly ramped up under this government. History is clear that the main beneficiaries of such public largesse are the private interests best able to curry favour with the government of the day.”
This government, like the Morrison government before it, loves industrial policy. Rather than putting a price on carbon and letting households and businesses economise where it makes most sense, they prefer to don their hardhats and, with taxpayer cheques in hand, determine who will win and who will lose from the energy transition.
The problem is if they’re wrong, we’re all going to be losers. According to Banks, Australia’s advantage used to be in energy – we’re resource rich, so we were able to use “low energy costs partly offset the high self-imposed burdens of our rigid labour market”. But with energy costs now rising due in part to “the monumental bungling of the so-called energy transition”, and the costs of a rigid labour market also going in the wrong direction, we’re not likely to get the productivity gains we need to pay for this government’s “redistributive agenda”.
Banks concludes that:
“[A] government cannot redistribute what its economy has not produced. Without adequate productivity growth and the income gains this makes possible, the ability to redistribute “other people’s money” must eventually falter.”