Future Made in Australia Act: Spare us this dog’s breakfast of failed thinking

Anthony Albanese in Brisbane on Thursday. Picture: Dan Peled / NCA NewsWire

Probably the best thing that can be said about the proposed Future Made in Australia Act is that it’s less misleading than the US Inflation Reduction Act. The IRA never had anything to do with ­reducing inflation; it’s all about handing out subsidies and tax concessions to green rentseekers.

Having said that, the Future Made in Australia Act is a classic case of back to the future. It tries to restore deeply discredited industry policy by painting it a different colour and hoping against hope that it will work this time. It won’t – it’s just a highway to even lower productivity and lost taxpayer money.

Even the Europeans eventually turned their back on handing taxpayer funds to mendicant business types pitching ideas with political appeal. It went by a name – Eurosclerosis – and the correct conclusion was drawn that investment should be governed by the impetus to make a return on capital. But the environmental movement and its commercial hangers-on saw an opening when the argument could be made that the planet needed saving and private markets would simply not do the job. All of a sudden, the rentseekers were back in business.

The title of the act, Future Made in Australia, is a strange one, pointing to a collection – should we call it a dog’s breakfast? – of government initiatives aimed at supporting mainly green-tinged local investment that would otherwise not stack up. The real reason for this choice is to create a political marketing device for senior politicians, particularly Queensland ones, to use when boasting about what’s being done.

According to the Prime Minister, “we can compete with the rest of the world, and we can beat the rest of the world with the natural resources that we have under the ground and in the sky”. This is wishful thinking at best.

There are plenty of other countries with natural resources – just think what Indonesia is doing with its nickel deposits – and it’s a big call to think the sky represents some sort of comparative advantage for Australia. I’m calling it ­Albonomics – something the Prime Minister has just dreamt up.

We are simply expected to ­believe the legislation will “grow emerging sectors in which Australia could be globally competitive and protect its sovereignty”. But why have allies if we can’t rely on them to help us out with secure supply chains? Anthony Albanese clearly hasn’t heard of the idea of friendshoring as opposed to the costly and often futile endeavour of onshoring.

Included within the purview of the act will be the National Reconstruction Fund. There will be green steel, green hydrogen, green aluminium and the already-­announced solar panel manufacturing plant in the Hunter Valley. The fact that there will be a $1bn taxpayer grant to support a plant in a highly competitive industry dominated by China has been widely criticised, but this is not ­deterring Albanese. The fact is that most manufacturing plants are ­energy intensive and our energy costs are going up. They are way out of line with those of most of our competitors. And just this week, the chief executive of Alinta ­Energy, Jeff Dimery, belled the cat on the future course of electricity prices – they are heading higher in line with the extraordinary costs of decarbonisation, Australian-style.

It is also surely ironic that we are expected to believe that Australian manufacturing has a strong future – in partnership with the government, of course – at the very same time that the two petrochemical plants in Botany Bay, NSW, and Altona, Victoria, hang by a thread. The closure of the Kwinana alumina smelter in WA has already been foreshadowed.

In fact, the tightening of the safeguard mechanism introduced by Chris Bowen, Climate Change and Energy Minister, will likely lead to the shutting down of a number of big-emitting manufacturing plants as they are hit by a rising effective carbon tax.

Of course, the world has changed a great deal since Australia had a substantial base of manufacturing. Albanese remembers that time as one in which our manufacturing sector was strong, providing high-paid jobs to unionists but high costs to consumers. The reality was the reverse: the minute that tariffs and other protective measures were removed (by a Labor government), the manufacturing sector collapsed, with those remaining doing so ­because of our cheap energy costs.

Without cheap (and reliable) energy now, it’s not clear whether manufacturing really does have any future here, even if extraordinary amounts of taxpayer funds are thrown at the chancers who ­always pop up. And let’s not forget the US is pushing on with its extraction of oil and gas while subsidising all manner of green projects.

Since becoming Prime Minister, Albanese has become something of dab hand at calling white black. Referring to other countries that are investing in the manufacturing base and economic sovereignty, he asserts “this is not old-fashioned protectionism or isolationism – it is the new competition”. Pull the other one.

Just because other countries are introducing foolish, wasteful policies, this shouldn’t be an ­excuse to follow suit. As for this being “bigger than the industrial revolution”, give me a break. It likely won’t even be a footnote in future textbooks.