A better alternative to Albo’s “Made in Australia” boondoggle


Productivity Commission chair Danielle Wood has expressed concern about the federal government’s Future Made in Australia Act, claiming it risks entrenching industries that would always be dependent on government subsidies for their survival.

Former Commission chairman Peter Harris agrees with Wood that “this is a slippery slope and most times the investment fails”.

Bill Scales, who headed the Commission’s predecessor agency the Industry Commission from 1992 to 1998, said the Act will lead to lower productivity and living standards.

Erin Molan of Sky News interviewed me about the plan on Friday, and I provided a better option than pouring tax dollars into industries where Australia will most likely never be competitive.


Edited Transcript:

This is a classic example of the government trying to pick winners.

It will also be inflationary because it’s going to throw subsidies at areas where Australia will never be competitive, such as solar pan panel manufacturing.


This is at a time when Australians are already being compelled into into renewables. So, the government is going to force up your costs by requiring us to either purchase Australian-made or to subsidise such panels, which means that we will pay one way or the other.

If the Albanese government genuinely wants to boost manufacturing, it should really just fix the gas market and deliver us cheap energy. Because that’s where the problem is.

On the East Coast, we export about 80% of our gas. We have no domestic reservation policy and as a result, we pay some of the highest gas prices in the world, which then means we pay some of the highest electricity prices in the world.


That is helping to make our manufacturing uncompetitive. It is also driving up electricity prices.

So, all we need to do is basically copy Western Australia and have a domestic gas reservation policy.

Western Australia is a major gas exporter but also has some of the lowest gas and electricity prices in the world.


It is utterly ridiculous. We are an energy superpower in Australia. We have oodles of the stuff. But we sell about 80% of it overseas, mostly to China.

We do not reserve it on the East Coast. It is the only jurisdiction in the world that exports gas and does not reserve it.

As a result, we pay roughly world prices, whereas our cousins in Western Australia did the smart. They reserved their gas and they have gotten cheap gas and electricity prices, and they don’t suffer the way we do over here.


We could have competitive manufacturing if we had low costs, simple as that.

I wish they would abandon this sort of stuff and just fix the gas market.

For reasons I’ve just mentioned, if we did that, we would have cheap gas and electricity prices, and we wouldn’t have to do all these Band-Aids on top of Band-Aids that end up costing us more in the long run.

About the author
Leith van Onselen is Chief Economist at the MB Fund and MB Super. He is also a co-founder of MacroBusiness. Leith has previously worked at the Australian Treasury, Victorian Treasury and Goldman Sachs.