The Productivity Commission has published its Trade and Assistance Review 2009-10 outlaying the state of trade and sovereign assistance in the country over the last two years.

 

The report finds that the Australian Government assists industries through ‘an array of measures’, including import tarrifs, budgetary outlays, taxation concessions and regulatory restrictions on competition.

 

The report found that ‘assistance generally benefits the receiving industry and businesses, it can penalise other industries, taxpayers and consumers’.

 

“Industry assistance measures are more likely to yield a net pay-off to the community when targeted at significant market failures. For instance, support for R&D funding and some measures with environmental objectives may deliver net community benefits, if well designed and implemented. Assessing whether the benefits of any particular support program exceed the costs requires detailed case-by-case consideration — a task beyond the scope of this Review.” The report claims.

 

The report found that over the 2009-10 period, assistance to industry by the Australian Government was valued at $17.3 billion in gross terms, broken down as follows:

  • $9.4 billion in tariff assistance
  • $3.7 billion of budgetary outlays
  • $4.1 billion in estimated tax concessions

The report also found that allowing for the cost of business of tariffs on imported inputs  was estimated to be a net assistance of $9.3 billion.

 

The primary sector received the majority of its assistance in the form of budgetary outlays. The level of support to this sector in 2009-10 declined from previous years with the ending of widespread drought. The manufacturing sector continued to receive the majority of its assistance through tariffs. For the service sector, the tariff penalty on inputs significantly exceeds its measured budgetary assistance.

 

The major findings of the review are as follows:

  • Government assistance to industry is provided by tariffs, budgetary outlays, taxation concessions, regulatory restrictions on competition and other measures.
  • For 2009-10, total measured assistance to industries was $17.3 billion in gross terms and $9.3 billion in net terms.
  • In the 12 months prior to the May 2011 Budget, the Australian Government announced budget outlays affording industry assistance of around $700 million, mostly to be expended within five years.
  • Following the 2010-11 floods and other natural disasters, the Australian Government announced changes in funding arrangements for existing programs and new funding to support regions and businesses affected by natural disasters.
  • State and Territory government expenditures on programs and services identified as supporting industry policy objectives are estimated at around $4.1 billion in 2008-09.
  • In April 2011, the Australian Government released a major Trade Policy Statement that responded, amongst other things, to the Commission’s report on bilateral and regional trade agreements.

The full report can be accessed from the Productivity Commission’s website here