The ALP National Conference is proving expensive for taxpayers. $19m yesterday alone.
That was the price of buying off the union campaign to impose protectionism on Government procurement.
The most logical response to the campaign by the Australian Workers Union and the Australian Manufacturing Workers Union for bidders for Government work to be punished on the basis of nationality is to laugh it off as equal parts economic and historical ignorance and self-promotion by union leaders.
But so eager is the Government to ensure that absolutely nothing of any note will be the subject of disagreement over the next three days that Kim Carr thrashed out a deal costing $19m over four years to help local businesses compete more effectively for Government procurement.
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That doesn’t include the cost to business — probably significant — of complying with a new tender requirement to explain how they’ll bend over backwards to source locally when they bid for Government contracts.
There’ll be $2m a year spent on “Supplier Advocates” who will “champion Australian industry in the government marketplace”. On the face of it, that looks like the Government will be appointing people to tell it how good local industry is, but that sounds so absurd it can’t be right.
While Kim Carr was announcing the package, Lindsay Tanner was demolishing the union case in a speech to the exciting-sounding Chartered Institute of Purchasing and Supply Australia’s “Public Sector Procurement Conference.” While ostensibly complementing the Carr’s announcement by revealing the faintly lewd position of “Procurement Coordinator”, Tanner undercut the entire union position. He’d run the numbers on 2007-08 purchasing, he told the gathered procurers, and found that, once you took out weapons systems, military transport equipment — like fighter jets — and ICT equipment that we don’t make, the total of imports purchased by the Commonwealth is not much more than $1 billion.
It is pretty obvious that the introduction of discrimination in favour of Australian producers would have a very modest impact. Given that price discrimination would certainly not cause all imports of items that are produced in Australia to cease, the net shift could be as little as a few hundred million dollars of purchasing. The downsides to such a strategy would overwhelm any benefits it delivers. If Australia takes such a protectionist stance, the adverse international implication would be very serious. And there’d be a domestic cost. We’d be paying more for the same things.
In simple terms introducing local price discrimination into our procurement policy isn’t worth the candle.
Nevertheless, $19m later, Paul Howes and Dave Oliver can declare victory to their members and the Government is spared even the most trivial of genuine debates at the conference.
While the union movement is behaving like unemployment is already 12%, the RBA appears to be in full recovery mode. Glenn Stevens — who, incidentally, warned of the need for governments to resist protectionist tendencies — has followed the lead of the Prime Minister in talking about managing the recovery, with predictable consequences for interest rates. Fiscal and monetary rhetoric are now in sync, with both Prime Minister and Reserve Bank talking about the need to manage the withdrawal of stimulus.
Stevens’s more interesting comments, however, were about housing and the need for governments to use the economic lull to “add to the dwelling stock” in order to avoid the risk of a housing bubble once economic activity returns to more normal levels.
If you recall the political debates of 2007, housing affordability was one of the issues on which Labor successfully differentiated itself as “getting it” in a way that Howard and Costello didn’t. They managed the same trick with groceries, fuel prices and health. Summits were held, ministries promised, and commitments made.
The economic crisis and the extension of the First Home Owner’s Grant/Boost as a core component of the first stimulus package gave the Government a painless opportunity to appear to deal with the issue. The funding of social housing as part of the second stimulus package has helped, too.
But the longer-term problem is that Australia continues to be relatively under-supplied with housing stock while we’re still importing people at a rate of knots. As Stevens suggested, if this problem isn’t rectified either by the market or Government intervention, it will have both social and economic costs — the latter potentially significant, in the form of “over-leverage and asset price deflation”.
Rising interest rates may not be the only housing-related problem the Government faces in the lead-up to the next election.