Like most debates that enter the political sphere, the discussion around the demise of the Australian car manufacturing industry is plagued by emotionally charged falsehoods, meaningless rhetoric and ideological blinkers. A more impartial analysis suggests that while there is a case to be made for the free market to take its course, the human cost of the broader structural shift demands attention.
Just admit it: watching a gold medalist, tears streaming down their cheeks, standing on the podium to the sound of “Advance Australia Fair” elicits a feeling of pride in most Australians.
Yet how, might we ask, does one put a price on gold medal glory? What trade offs do we face by allocating millions to our few sporting champions? And what are the opportunity costs involved in subsidising an athlete’s preparation for an event held once every four years?
Earlier this year the Grattan Institute published Graduate Winners, a report which suggested that government subsidies for tertiary education should be cut, given the already strong incentives to pursue higher education, and the low net public benefits that students of certain disciplines accord to society.
To paraphrase, the private benefits that a person gains from attending university, for example, their future income as compared to someone without tertiary qualifications, is large enough to motivate higher education, even if today’s government subsidies were cut. Therefore students should pay more for their tertiary studies. Government subsidies for higher education therefore seem somewhat redundant when an ample incentive already exists for students to undertake further study.
The Federal government announced recently that they will continue to support the Australian car industry through ‘co-investment’ – i.e. through tax-payer funded direct subsidies to industry. This is funneling money to multinational co-operations so they can maintain production of Holdens and Fords in Australia. All this is for one reason – to protect Australian car manufacturing jobs.
The government argues that this investment is important to maintain a car manufacturing industry in Australia, and if there no support, they would cease producing locally-made cars. For example, the government granted $34 million in subsidies to the Ford Plant in Melbourne to keep it running until 2016. Decisions such as this have been branded as important to Australia’s ‘national interest’, a clever political line to justify protectionist policy initiatives.