Where’s the mutual obligation with this dole?

First subscriber email December 22

You lucky b*stards. Do you know that $11 billion of your money got
handed out in business welfare last financial year? Did you even know
you had that much to give away?

That’s what the Productivity Commission found in its Trade and Assistance Review 2003-04, released yesterday.

It says that, er, enterprise, got an $11 billion dole from Canberra –
with $six billion going to manufacturing – through direct grants,
tariffs and tax breaks.

“Most Australian industries have relatively low rates of assistance by
historical standards,” the Commission says, “but pockets of high
assistance remain.”

“Textiles, clothing and footwear and the automotive industries remain
the most highly assisted manufacturing industry groupings, although the
Government has announced continuing transition programs designed to
move both sectors to lower levels of assistance.”

Pretty wimpy programs, mind you. And look at the polite way the Commission reports RARA rorting:

“The dairy industry received the highest rate of assistance in the
agricultural sector, although its assistance has fallen significantly
since dairy deregulation in 2000. Additional assistance has been
announced recently for the sugar industry.”

What does it mean for us? Here’s some of the Commission’s summary:

“The report notes that particular forms of assistance, such as R&D
subsidies, can deliver net community benefits if well designed. But it
also indicates that industry assistance can entail significant costs to
consumers, taxpayers and other industry — for example, tariffs on
manufactured imports penalised businesses in the services sector by
some $2.8 billion in total in 2003-04.”

Indeed, the report finds “direct business subsidies increase returns to
recipient firms and industries, but to fund subsidies, governments must
cut back on other spending or borrow additional funds”.

And we lose both ways. Our tax dollars get wasted on dole payments to
businesses who then charge us more for the privilege of consuming the
products we’ve already subsidised.

As the Commission finds, “While tariffs provide some price relief to
domestic producers, they result in higher input costs for some local
businesses and higher prices for consumers, who then have less money to
spend on other goods and services.”

How about a bit off mutual obligation for the top end of town, the rustbelt and the RARAs?

The report and the accompanying media release and other statements are here.

Slugging consumers to pay $11 billion in corporate welfare
Second subscriber email December 22

By Don BoredWalkhas another take on the huge corporate dole program John Howard is running:

It’s the Howard
Government’s dirty little secret. Amidst all the huffing and puffing
from our Federal Treasurer yesterday about taxes, budget surpluses,
spending and the future of manufacturing, the Productivity Commission
slipped out a report that says Federal Government help to Australian
industry topped $11 billion last financial year.

And direct
Government assistance by way of tax concessions and payments through
the budget will reach $4.6 billion in the 2004-2005 financial year, the
highest since the early 1990s in the days of the Hawke-Keating

Now that’s an achievement Peter Costello and Australia’s second longest serving Prime Minister will keep quiet about.

Check out the ABC coverage here and the full Productivity Commission’s report here.

This Productivity
Commission report in fact details all the industries that received some
sort of benefit from the Federal Government in the year to June 30.
Either tax concession or budget grant, or through the protection impact
of tariffs.

If you like it’s the definitive list of those industries still on the corporate welfare teat.

There’s an irony
here that with Australian corporate profits at their highest for years,
unemployment easing, dividends to shareholders rising, sections of
corporate Australia still have their hands out.

Go to Tables 2.1 and
2.2 in the second chapter which detail the budgetary and tax assistance
and benefits (2.1) and the size and beneficiaries of tariffs (2.2).

Tariff assistance
was worth more than $7.5 billion, according to the productivity
Commission’s 2003-2004 review of trade and assistance to industry.

It said the
budgetary assistance in the year to June was steady on $4.3 billion (on
2003), but would rise by an estimated $300 million this year. Looking
at the figure 2.2, that would make the amount of around $4.6 billion,
the largest since 1991-92.

But the value of
tariff assistance is due to fall in 2005 when protection levels for the
motor vehicle industry drop. Car tariffs will again decline in 2010.

That will be about
time as the multi-national dominated manufacturing and component
industry is by far the largest recipient of budgetary assistance
(mainly tax concessions) and still receives substantial net benefits
from tariff protection.

The tax concessions
will remain in place and totalled $677.1 million in the year to June.
Net tariff protection for the motor vehicle and parts industry was
estimated at $780.1 million.

Looking at both
tables you see how the biggest part of the economy, the services
sector, and the efficient rural industries are hurt by tariffs, even
though there are some that get government help through tax or budget

Primary industry
received $1.159 billion in grants and tax concessions (with the dairy
industry a big recipient) but had net tariff assistance estimated at
minus $50 million.

The efficient mining
industry received $117.3 million in budget and tax concessions, but
minus $170 million in tariff assistance (ie the tariff assistance to
industries supplying mining).

attracted $1.781 billion in tax concessions and budgetary assistance,
plus net tariff protection valued at a massive $4.908 billion.

The services sector,
however, while receiving $793.1 million through tax concessions and the
budget, was hit by a huge negative impact of $2.722 billion in tariff
assistance (to suppliers and others).

There were a further
$417.9 million in tax concessions and budgetary assistance to a group
of ‘unallocated’ activities, but no tariff impact was estimated for
this group.

In terms of our
total GDP, the net amount of total assistance is around the one per
cent mark. That’s a lot of money in our terms, but miniscule compared
to the help given in Europe, Japan, China and the US.

But remember when
next you hear industry leaders and others urging more government help,
or John Anderson and the pork driven National party urging more
spending in the bush, that substantial amounts of money are already
being spent directly through the budget and tax concessions, and paid
by Australian consumers and end users through prices being made higher
than they should otherwise be.

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Peter Fray
Peter Fray
Editor-in-chief of Crikey
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