In Australia,the Productivity Commission said organisations such as the Clean Energy Finance Corporation and the National Housing Finance and Investment Corporation were already providing taxpayer-supported assistance to businesses.
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The Albanese government is also creating new funds or using tax concessions in its critical minerals strategy,its Hydrogen Headstart program,the National Reconstruction Fund and the National Battery Strategy.
The commission said handouts to businesses here and overseas were no longer quotas or tariffs but “less visible” protections such as subsidies,concessions,budget spending on favoured sectors and local content rules.
“Collectively,these measures risk winding back some of the gains in living standards of recent decades,by encouraging countries to direct their scarce national resources towards sectors that are not a natural fit for their economies,” it said.
The commission said tax concessions now accounted for $5.6 billion of the $13.8 billion in assistance to businesses. The rest was made up of direct assistance.
The property,professional and insurance services sector received almost a quarter of the $7.7 billion in help that went to services businesses. The mining sector received the least assistance of any part of the economy.
The government is using its $15 billion National Reconstruction Fund to help address what it says are key risks to the nation’s supply chain network.
But the commission said this ignored the full economic cost of sinking money into areas that were better off conducted elsewhere.
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“While the costs of disruptions to Australia are likely to be limited,the costs of building and maintaining a domestic production capacity in non-comparative advantage sectors are likely to be large,” it found.
“Each dollar spent on subsidising domestic production capacity in non-comparative advantage sectors is a dollar taken away from sectors in which we enjoy a comparative advantage.
“This trade off is particularly binding in a near full-employment economy,where the redirection of labour towards one sector inevitably comes at the expense of another.”
The government is also spending billions on overhauling the nation’s electricity system,moving it away from fossil fuels toward renewable sources of power.
The commission said the absence of an economy-wide price on carbon meant there were now a “proliferation of piecemeal” sectoral policies that appeared to operate like assistance programs for private power companies.
The commission,which has long championed the end of tariffs on imported goods,also found the revenue raised by tariffs was less than the economic problems they caused for local businesses.
It estimated the federal government collected $1.8 billion in tariff revenues in 2021-22 but the compliance costs borne by businesses because of those tariffs was between $1.2 billion and $3.6 billion. Almost 90 per cent of imports now enter the country tariff-free.
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