Trade and Assistance Review 2010-11

• Government assistance to industry is provided through tariffs, budgetary outlays, taxation concessions, regulatory restrictions on competition and other measures.
  • Assistance generally benefits the industry receiving it and, if well targeted and designed, can deliver wider community benefits, but it can also come at a cost to other industries, taxpayers and consumers.
• For 2010-11, total measured assistance by the Australian Government to industries was $17.7 billion in gross terms.
  • It comprised $8.7 billion in tariff assistance, $3.6 billion in budgetary outlays and $5.4 billion in tax concessions.
  • After allowing for the cost to industries of tariffs on imported inputs, amounting to $7.9 billion, net assistance to industry was $9.8 billion.
• In the 12 months prior to the May 2012 Budget, the Australian Government announced further budgetary assistance of over $700 million, mostly to be expended over the next five years.
  • Most of this is directed at forestry, rural activities, R&D and innovation.
• The Australian Government also announced the Clean Energy Future Plan involving budgetary support to industry over several years amounting to around $28 billion, a large part of which is compensation for the carbon price.
  • Around $10 billion of this is for investments by the Clean Energy Finance Corporation, while a further $8.6 billion relates to the Jobs and Competitiveness Program.
  • The Plan also includes a number of activity and industry-specific support measures, such as for the coal and steel industries.
• The Commission has identified 70 budgetary measures by the Australian Government since 1996-97 that have provided adjustment assistance to business.
  • Total estimated support was equivalent to about $22 billion in present day values (2010-11 dollars).
  • This adjustment assistance represents about 20 per cent of estimated total budgetary assistance to industry over the 16-year period.
• Given program costs and uncertainties about efficiency, there would be merit in a more detailed assessment of different adjustment assistance programs, in order for any lessons to be incorporated into future program design and delivery.
• The Doha Round of multilateral trade negotiations remained stalled during 2011 under its conventional negotiating framework.
  • Attention has therefore turned to negotiating strategies that may advance specific elements of the Doha Development Agenda where consensus might be reached.

Background information

Wayne Crook (Research Manager) 02 6240 3295