More than a quarry: Economists back Albanese’s $23 billion gamble

A large group of economists has backed the federal government’s Future Made in Australia policy, accusing critics of consigning the country to an “extract and export” business model while ignoring the potential for hundreds of thousands of well-paying industrial jobs.

The economists and policy experts, from institutions including the universities of Sydney, Melbourne, NSW, Monash, Western Australia and Newcastle, have signed an open letter declaring Anthony Albanese’s $23 billion budget plan represents a chance to rebuild the manufacturing sector and support regional jobs while slashing greenhouse gas emissions.

Critical minerals such as lithium are a key part of the government’s Future Made in Australia policy.Credit: Christian Sprogoe

In last month’s federal budget, the government unveiled a suite of measures, including production credits to support the development of critical minerals and green hydrogen, plus direct investment in quantum computing.

Key elements of the policy have been criticised by some economists, including the Productivity Commission, as a possible waste of money due to the government in effect “picking winners”.

But this masthead can reveal that almost 70 economists have used their letter, a copy of which has been obtained by this masthead, to reject the criticism as short-sighted and a threat to the nation’s economic development.

Accusing the Productivity Commission and other critics of knee-jerk responses predicated on “outdated laissez-faire thinking”, the economists say the world of economic statecraft is changing rapidly, which threatens to leave Australia behind.

“Australia faces a vital choice. Decades of policy neglect for manufacturing, combined with support (including subsidies) for mineral extraction and export, have left Australia with a distorted and unbalanced economy,” they wrote.

“Among all OECD nations, Australia has the smallest manufacturing base (relative to overall GDP and employment) and is most reliant on net imports of manufactures to meet its own growing needs for manufactured products.

“This exposes Australia to a wide range of economic, social, environmental and geopolitical risks. Meanwhile, powerful corporate interests keep pressuring to extend and expand their extract and export business model.”

Among those to sign the letter are the University of Sydney’s Lynne Chester and Bradon Ellem, Monash University’s Svenja Keele and Nick McGuigan, the University of NSW’s Bronwen Morgan and Elizabeth Thurbon, and Australian National University’s John Falzon.

In the budget, Treasurer Jim Chalmers said the Future Made in Australia package would help the country become an “indispensable” part of the global economy by attracting investment in key industries and making the nation an energy superpower.

The Coalition has attacked the production credits aspect of the package, which offers up to $7 billion of tax support for the processing and refining of critical minerals, describing them as “billions to billionaires”.

Several high-profile economists, including long-time independent analyst Chris Richardson, have raised concerns the program will in effect amount to smoking “$100 notes”.

But one of the organisers of the letter, the chair of discipline for political economy at Sydney University, Gareth Bryant, said it was important to show there was support for a policy that recognised the changed global economic environment.

“We decided to organise this letter to put on record our support for Australia joining the emerging global consensus around the need for governments to actively drive and steer the green transformation of our economy,” he said.

“We support the Future Made in Australia agenda as an important step in this direction, but we also want to push the government to make sure it is getting a return on its investments for workers, regions, and the environment, rather than handing out a blank cheque to the private sector.”

The economists said Australia had become overly dependent on raw resources that had diverted labour and investment into one small area that led to an overvalued Australian dollar, distorted fiscal policy and added to regional imbalances.

They said Australia, without a policy such as that proposed by the federal government, risked missing a “historic opportunity” to rebuild the economy.

“We could continue exporting raw minerals (including critical minerals like lithium). But we would squander opportunities to add value to those minerals and develop a more diversified and sustainable industrial mix,” they said.

“We would remain on the losing end of lopsided trade relations, selling unprocessed resources to buy back more expensive value-added products (like transmission equipment, batteries and electric vehicles).

“Our future prosperity would be jeopardised by failure to seize the economic and industrial opportunities of the global energy transition.”

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