Thursday 28th July 2016 - 5:51 pm

Who are our subs really protecting?

by Alan Thornhill

 

Analysis

 

 

 

A submarine led recovery?

 

That’s not advocated in any respectable economic text book.

 

Yet it is precisely the path the Federal government is taking us down.

 

At a cost of some $800 million over 10 years

 

Money the Productivity Commission says might well have been better spent elsewhere.

 

The government’s decision to build our new subs in Australia is being accompanied by the slow spread of what might well be called a ”barbed wire broadband.”

 

That is one based on copper wire, rather than the then superior fibre to the node system, that Labor was proposing when the two choices were first offered.

 

 

The slower copper wire system, that Malcolm Turnbull pushed, also ended up costing more than the snazzier Labor model.

 

 

Even though the man who is now Prime Minister said it would be substantially cheaper

 

 

And the man appointed to run it, has since described the Turnbull alternative as a “colossal mistake.”

 

 

However, as Mr Turnbull’s lieutenant, Christopher Pyne,  has since explained “Australians don‘t need a faster internet.”

 

So that’s alright, then.

 

The government has its explanations.

 

 

Mr Pyne, for example, also says it will make Australia “a defence hub.”

 

 

But the Productivity Commission won’t have a bar of it.

 

 

It notes that building a sub in Australia means that it will cost 30 per cent more than simply buying one overseas.

 

 

While necessarily based on hypothetical data, because of time differences, its example reveals that the effective rate of assistance provided to Australia’s submarine industry might well exceed that provided to tne nation’s vehicle industry and its textile, clothing and footwear indsustries,  while those payment  were s their respective peaks.

 

The commission also notes that paying more to have the subs built in Australia without getting sufficient value in return  diverts productive resources  such as labour, capital and land away from  more efficient uses that need less assistance. .

 

 

This damages Australia’s capacity to get the best possible benefits from the community’s resources.

 

Its report  leaves no room for its  readers to doubt about the fact that the commission regards the Federal government’s decision to promote with submarine construction in Australia was a dreadfully dud deal.

 

So why did it happen?

 

The commission notes that “iconic” factories were closing and local areas, particularly in South Australia and Victoria, were doing it tough, as a closely fought election, on  July 2, approached.

 

And those who suspect that political, not economic judgements prevailed in this case, won’t get much argument from the Productivity Commission.

 


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Alan Thornhill is a parliamentary press gallery journalist.
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