Productivity Commission misleads on submarines, say critics

Image: DCNS

A Productivity Commission review criticising the decision to build submarines locally has been disputed by the SA government, Australian Industry Group and others.

As The Australian Financial Review and others reported earlier this week, the Productivity Commission’s Trade & Assistance Review 2014 – 15 was scathing of the Future Submarines agreement, calling it “a major step back from the historical reduction in using government procurement preference as industry policy.”

The PC report used a much-cited 30 per cent claimed premium from a Rand Institute report on building submarines in Australia, which SA defence industry minister Martin Hamilton-Smith said was both dated and inflated.

The Rand Corporation report estimated construction at 15 per cent more expensive for a continuous build and the 30 per cent figure was for an intermittent build, said Hamilton-Smith

The Commission also neglected to consider spill-over and tax impact. AAP reports that an estimated $21 billion benefit to the national economy would come through the contract.

“You can’t just look at the sticker price – and this is what the Productivity Commission has done in its assessment – and say, ‘Couldn’t we save money by buying overseas?’” Hamilton-Smith told The AFR.

“When you add those [tax] revenues back into the picture, you get a completely different sum.”

The Ai Group said that submarine building as industry protectionism was a “false argument”.

“Australian business needs to be competitive, or as competitive as it can be to gain the skills and to take the potential out of this project that we believe that it has,” Ai Group CEO Innes Willox told the ABC.

Industry minister Christopher Pyne said the 30 per cent premium was “wrong”.

3 thoughts on “Productivity Commission misleads on submarines, say critics

  1. PC reviews often don’t look at the entire impact on the Australian economy and the people living here. This review is just another example of how their reports don’t tell the whole story and is based on flawed ideology that all countries are playing by the same rules and that globalisation should be pursued at any cost. Other examples of where they have got it wrong are the dumping of products into the Australian market and the Australian car industry. The modus operandi of the PC should be to make recommendations which will advance the Australian economy, improve the lifestyles of people living in Australia and enhance future prosperity.

    1. I agree. They also lump in the tariffs (miniscule in percentage by global standards) with things like R&D tax relief and grants – all very different things. Most of manufacturing’s overall assistance was in tariffs.
      The total figure that comes out is presented to make you go “Wow! Don’t our manufacturers get a lot of free money” but it’s pretty close to meaningless.
      Also, tariffs of “up to 5 per cent” (their words) on imported goods are negligible.

      The reality is that every advanced economy has done things to stimulate their industrial sector, because it’s kind of important to have it around.

  2. Its obvious free trade benefits multi national companies who have the ability to sell their goods anywhere in the world.Australia needs Tariffs to rebuild our Industry,and this is the contradiction.We must suffer due to the pressure (orders) dictated to us by the Banks and multinationals.

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