Government Assistance to Industry

Import tariffs, budgetary grants and tax concessions provided Australian industry with the equivalent of around $7.5 billion in net assistance ($14 billion gross) last financial year, according to a Productivity Commission report.

Trade & Assistance Review 2005-06 sets out the Commission's latest estimates of industry assistance provided by the Australian Government.

Most Australian industries have relatively low rates of assistance by historical standards, but pockets of high assistance remain.

The textiles, clothing and footwear and the automotive industries remain the most highly assisted manufacturing industry groupings, although the Government has announced continuing transition programs designed to move both sectors to lower levels of assistance.

Assistance to the primary production sector has increased recently, not least because of the substantial 'exceptional circumstances' drought support provided for farmers, which totalled around $400 million last financial year.

The report notes that some forms of assistance, such as R#38;D subsidies, can deliver net community benefits if well designed. But it also indicates that industry assistance can entail significant costs to consumers, taxpayers and other industry - for example, tariffs on manufactured imports effectively penalised businesses in the services sector by around $4 billion in 2005-06.

In relation to the current impasse in World Trade Organization negotiations, the report points to a lack of understanding about the source of benefits from trade liberalisation as a key underlying cause. The report supports calls for WTO member countries to bring greater transparency to the costs and benefits of protection. This would help counter the influence on trade policy of sectional interests.