The Turnbull government finally has an economic strategy — albeit one disguised as defence policy.

Today’s Defence white paper, while notionally about Australia’s long-term defence priorities, is actually a massive investment by government in Australian manufacturing. It’s government industry intervention of the kind a “truly Liberal” government might be expected to oppose but which, when cloaked in the garb of defence spending, gets scant scrutiny.

The Prime Minister made this plain yesterday, telling Parliament:

“Critically, this historic commitment is about jobs, innovation and regional Australia. The Defence white paper will provide incentives for Australian businesses to drive advances in innovation and technology in many fields, including cybersecurity and aeronautics. It will deliver jobs and investment in advanced, high-tech manufacturing. It will generate new economic activity in many parts of regional Australia, where Defence communities and Defence industries are so often based.”

Turnbull is in effect saying the government will dramatically ramp up buying from our advanced manufacturing sector in coming years. This isn’t about encouraging innovation, or providing the right tax incentives for start-ups, or giving advice to would-be exporters on how to break into foreign markets. This is good old-fashioned public sector support for a specific sector, regardless of whether that sector can offer taxpayers the best value or equipment.

Supporters of Australian manufacturing — and politicians and business in South Australia and Victoria — will be delighted with this huge investment. But like any government support, the question should always be whether this is the best way of facilitating growth, and whether taxpayers are getting value for money.

Once the word “defence” is attached to such spending, those sorts of questions tend to be forgotten very quickly.

Peter Fray

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