Australia cannot afford to ignore offshore subsidies

afr.com:

The Productivity Commission has been chided as “naive” over its criticism of government subsidies for batteries and other clean energy products, with proponents of the support saying Australia has little choice even in areas where it has comparative advantages.

The independent advisory body on Thursday challenged the Labor government’s eagerness to establish a taxpayer-backed battery making industry, warning it would not boost national welfare and would entrench rent-seeking.

Battery manufacturing such as that going on at this British plant may be more efficient than a home-grown industry, the Productivity Commission warns. Bloomberg

Labor is developing a national battery strategy with the support of unions and companies such as Chris Ellison’s Mineral Resources, which is confident the Albanese government will come up with some meaningful incentives to encourage investment in downstream processing of critical minerals.

But supporters say the scale and lure of offshore subsidies means Australia cannot afford to ignore what is happening.

“The Productivity Commission is still singing from a 1990s songbook with no relevance to the modern world,” said Paul Farrow, national secretary of the Australian Workers’ Union. “The Australian government is not being ‘protectionist’ by supporting its battery manufacturing sector, it’s recognising our national interest in the real world.”

“It is, at best, deeply naive to the sort of reality of the world we now live in,” said Cane Thornton, chief executive of the Clean Energy Council, which the commission quotes in its annual tally of industry assistance as one of the primary supporters of intervention.

Mr Thornton also cautioned that falling behind in the global development race by