Productivity Commission questions process for $1bn investment in solar panels

The Productivity Commission says a $1bn commitment to make more solar panels in Australia should be retrospectively subjected to a new national interest test being proposed by Labor.

Treasurer Jim Chalmers holds a press conference to address inflation data. Picture: NewsWire / John Gass

The Productivity Commission says a $1bn commitment to make more solar panels in Australia under Anthony Albanese’s Future Made in Australia program should be retrospectively subjected to a tougher “national interest framework” test.

In a submission to a Senate committee, the economic advisory body said the yet to be legislated national interest framework should be “enhanced” to ensure any government interventions achieved compelling value for money.

The Productivity Commission said that a mandatory and transparent Treasury assessment process needed to be enshrined at the heart of the Future Made in Australia program to ensure the optimal use of public funds.

It suggested several amendments to the government’s Future Made in Australia bill establishing the new “national interest framework”, which is currently before the parliament.

As drafted, the new framework would allow the government to request a “sector assessment” to help determine whether an economic activity is deserving of government support.

But the Productivity Commission recommended the sector assessments become mandatory. It said government support should be limited only to sectors that passed the assessment process.

“As currently drafted, sector assessments are only required if requested by the minister,” the Productivity Commission said in its submission. “Allowing sectors to bypass the National Interest Framework (NIF) process would undermine its role in disciplining spending.”

The PC says the commitment to make more solar panels under the FMIA program should be subjected to a tougher ‘national interest framework’ test. Picture: Picture: Wikus de Wet / AFP

It also questioned what process was undertaken for testing the value for money of government investments already announced under the Future Made in Australia program. It specifically singled out the $1bn investment in the Solar Sunshot program announced on March 28 by the Prime Minister. “Programs already announced under the Future Made in Australia (FMIA) program to-date should be subject to the National Interest Framework (NIF) sector assessments,” the Productivity Commission said. “It is unclear to what extent initiatives already announced as part of the FMIA – such as the Solar Sunshot program and the Battery Breakthrough Initiative – were subject to FMIA sector assessments prior to announcement.”

“Subjecting these areas to a rigorous and transparent sector assessment would build public confidence in the case for their support.”

While Labor’s legislation would require completed “sector assessments” to be tabled in parliament within 30 sitting days of being provided to the government, the Productivity Commission said more transparency was needed.

It argued that the “data and reasoning underlying any sector assessment” should also be made public and for the assessments themselves to be “periodically evaluated and reviewed by an independent process or body”.

It also elevated the importance of “off-ramps”, arguing that Future Made in Australia support should be “time-limited and withdrawn from activities and sectors that are found by independent periodic reviews not to be achieving net community benefits and their stated policy goals in a cost-effective way”.

Under Labor’s legislation, entities that apply for Future Made in Australia support must prepare plans explaining how government assistance would benefit the ­community.

Projects would need to show how they advanced a series of “community benefit principles” including the promotion of safe and secure jobs, the development of more skilled workforces, the delivery of better outcomes for First Nations communities and the strengthening of domestic industrial capabilities.

The Productivity Commission said these principles should not be used as an alternative pathway for projects to win Future Made in Australia support.

In April, Productivity Commission chair Danielle Wood warned Labor’s Future Made in Australia plan would divert ­investment from more productive parts of the economy and lead to higher-than-necessary costs for taxpayers.