U2
22nd Dec 2004, 02:47
Canberra doles out $11bn to business
Katharine Murphy
December 22, 2004
AUSTRALIAN business won $11billion in handouts from Canberra last financial year, with the manufacturing sector the biggest winner of government support, through direct grants, tariffs and tax breaks.
The Productivity Commission, in its annual stocktake of business welfare, has found Canberra subsidised the manufacturing sector to the tune of $6billion in 2003-04. Manufacturing secured half of the net tariff and budgetary assistance on offer.
The commission also used its annual business review to criticise recent origin rules agreed by Australia in two landmark bilateral trade deals -- with Thailand and with the US.
It said the new origin rules were "more restrictive than those applying in pre-existing agreements made by Australia".
The commission has previously argued against bilateral trade deals and talked up the benefits of the multilateral framework.
In its latest report, it says: "Rules of origin raise costs and lower productivity and can erode the potential benefits that may otherwise accrue from the formation of a preferential trade agreement."
The commission found the textile, clothing and footwear industry and the automotive sector remain the most highly assisted industries in Australia. The Automotive Competitiveness and Investment Scheme, worth about $2billion, was the biggest tax concession offered to business.
Among Australia's agricultural sectors, the dairy industry secured the highest level of assistance from Canberra, although the level of support has declined significantly since the Howard Government proceeded with deregulation of the dairy industry in 2000.
The commission also points to a significant increase in the level of assistance to farmers through drought relief over the past few years, but it does not include the available estimates as part of this review.
The Government has previously estimated that $1billion in direct support will be provided for drought relief by the end of the 2006-07 financial year.
The commission backs subsidies for research and development as being in the public interest but argues that other forms of government support can impose net costs on the community.
"For example, 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," it says.
"Similarly, 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."
The commission finds that support for R&D and commercialisation makes up a large proportion of Canberra's assistance to industry -- a third of total budgetary support.
In 2003-04, manufacturing received 46per cent of budgetary assistance, primary industries 30per cent, services 21per cent and mining 3per cent. A breakdown of business tax breaks confirms ACIS, at 29 per cent, is the largest, with tax concessions for R&D worth 17per cent.
Katharine Murphy
December 22, 2004
AUSTRALIAN business won $11billion in handouts from Canberra last financial year, with the manufacturing sector the biggest winner of government support, through direct grants, tariffs and tax breaks.
The Productivity Commission, in its annual stocktake of business welfare, has found Canberra subsidised the manufacturing sector to the tune of $6billion in 2003-04. Manufacturing secured half of the net tariff and budgetary assistance on offer.
The commission also used its annual business review to criticise recent origin rules agreed by Australia in two landmark bilateral trade deals -- with Thailand and with the US.
It said the new origin rules were "more restrictive than those applying in pre-existing agreements made by Australia".
The commission has previously argued against bilateral trade deals and talked up the benefits of the multilateral framework.
In its latest report, it says: "Rules of origin raise costs and lower productivity and can erode the potential benefits that may otherwise accrue from the formation of a preferential trade agreement."
The commission found the textile, clothing and footwear industry and the automotive sector remain the most highly assisted industries in Australia. The Automotive Competitiveness and Investment Scheme, worth about $2billion, was the biggest tax concession offered to business.
Among Australia's agricultural sectors, the dairy industry secured the highest level of assistance from Canberra, although the level of support has declined significantly since the Howard Government proceeded with deregulation of the dairy industry in 2000.
The commission also points to a significant increase in the level of assistance to farmers through drought relief over the past few years, but it does not include the available estimates as part of this review.
The Government has previously estimated that $1billion in direct support will be provided for drought relief by the end of the 2006-07 financial year.
The commission backs subsidies for research and development as being in the public interest but argues that other forms of government support can impose net costs on the community.
"For example, 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," it says.
"Similarly, 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."
The commission finds that support for R&D and commercialisation makes up a large proportion of Canberra's assistance to industry -- a third of total budgetary support.
In 2003-04, manufacturing received 46per cent of budgetary assistance, primary industries 30per cent, services 21per cent and mining 3per cent. A breakdown of business tax breaks confirms ACIS, at 29 per cent, is the largest, with tax concessions for R&D worth 17per cent.