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The government is backing the wrong industries, as our economy changes: Productivity Commission

John Wanna writes in The Conversation (29.7.17) about a new Productivity Commission report on 'rising protectionism', arguing that current government policy is penalising the sector of the economy where there is the largest proportion of existing employment and the best prospects for future growth.

'The Australian government is still protecting industries that employ a small number of people. This is while the largest employer, the services sector, is subject to the largest tariffs, a recent Productivity Commission report demonstrates.

'As a whole, manufacturing still receives 77% of net assistance, largely due to the remaining small levels of tariff assistance, plus some budget measures, according to the report.

'“Input tariffs” increase the costs of imported goods and services that go into making things. This makes a business’ activities more expensive for the consumer. And even though the services sector accounts for around 85% of employment, current government policy is penalising this sector, which has the best prospects for future growth.

'However, as the report states, it’s the construction industry that is most affected by input tariffs (A$1.5 billion worse off), followed by property and real estate (A$337 million), then accommodation and food (A$294 million). All of these sectors are labour intensive and employ substantial numbers of people, yet are forced to pay unnecessary tariff costs.

'Despite all of this, the government is still protecting primary industries such as horticulture, sheep, beef and grains, and in the manufacturing sector in food and metal production, wood pulp and oil and chemicals. All of these latter industries are basic supply or processing industries, that provide inputs into other industries, but not usually the final products.'

 

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