The Productivity Commission is required under its Act to report annually on industry assistance and its effects on the economy. The Trade and Assistance Review 2016-17 contains the Commission’s latest quantitative estimates of Australian government assistance to industry.
The report comes at a challenging time for trade policy. While the USA has long been a reliable advocate for trade liberalisation, it has now turned more towards using its leverage to protect domestic industries.
This year’s review explores how Australia should best respond. Protectionist populism can be fed here as readily as in the US, but with much greater capacity for self-harm. We do not have the leverage of the US and we are more internationally trade-exposed than it is.
The annual review provides information on government arrangements that may be construed as assistance, including their target, size, and nature. Views inevitably differ on what constitutes industry assistance and whether it is warranted. This report is valuable because it offers full transparency of all support measures and provides a basis for considered assessment of the benefits and costs of the arrangements.
One of the biggest changes in this year’s review is the inclusion of the small business tax cuts as sectoral assistance. While some may debate that it is assistance, it advantages one form of business over another. If it persists over time, it will skew growth and investment artificially.
In preparing this report, the Commission has received helpful advice and feedback from officials in Australian government agencies. The Commission is very grateful for their assistance.