Dutton squints at Labor's industrial vision

True to form, Dutton's initial response has been negative - to shout, without any evidence or detail, that Albanese is taking our country down a "dangerous path". However, he won't be able to get away with slogans and one-liners when it comes to the parliamentary debate on the prime minister's promised legislation, which has been positioned as a response to United States President Joe Biden's comprehensive Inflation Reduction Act. Indeed, the government's proposal is built on whole-of-government reform, pulling together a number of initiatives already announced, and building on them.

Most importantly, there are initiatives for affordable and reliable clean energy, a better and fairer education system, skills development and secure jobs with better and fairer wages, modernising of infrastructure, government capital working with private capital, regulatory reform and a revamp of foreign investment rules. On each of these fronts, the opportunity is there for Dutton to make informed comment and, where he disputes a proposal, to provide some detail of his alternative.

While Dutton seems to love prattling on and scaremongering over national security, the challenge here is for him to understand and accept, as Albanese is doing - and as many other developed nations have done - the very important link between economic security and national security. Specifically, he must recognise that addressing climate change and embarking on an effective decarbonisation of industrial and transport processes is fundamental to Australia's national security.

The most controversial aspect of the government's proposal relates to the use of taxpayer monies to support or encourage particular industries or sectors rather than relying exclusively on market forces, individuals, companies or communities to make the necessary adjustments. It has become something of a global trend for governments to step in, offering their strategic capacity to facilitate the process and to absorb some of the risk. This government refers to the trend as a "new economic reality". The list includes the US, the European Union, Japan, South Korea and Canada. It is not seen as protectionism, but a new form of global competition.

However, the International Monetary Fund has warned recently about the newfound government interest in industrial policies. Specifically, IMF economists warned in a blog post this month that "[i]ndustrial policy … can drive innovation if done right. But striking the right balance is a crucial consideration, as history is full of cautionary tales of policy mistakes, high fiscal costs, and negative spillovers in other countries." Another challenge is to develop "well-designed fiscal policies that support innovation and technology diffusion more broadly, with an emphasis on fundamental research that forms the basis of applied innovation, [that] can lead to higher growth … and accelerate the transition to a greener and more digital economy".

The focus will now be on the government's budget, due on May 14, to see what assistance - in terms of spending and targeted tax concessions - they plan to deliver.

In their recent media appearances, Albanese and Treasurer Jim Chalmers seem to be well on top of the risks involved in this type of large-scale policy undertaking, such as those highlighted by the IMF and the textbook criticisms from the Productivity Commission concerning the potential for resource misallocation.

In an article published in The Australian this week, the treasurer wrote that "anything the government does will only ever be a tiny sliver of what's needed. Private investment will and should continue to do most of the heavy lifting." He stressed this point in light of estimates that a further $225 billion of investment might be necessary by 2050, "above business-as-usual levels, to build an integrated clean-energy and industrial system that sets up Australia's heavy industries for the future including green hydrogen, metals, and chemicals."

Chalmers has drawn particular attention to the need to review our foreign investment rules and guidelines. As a country that has been heavily dependent on foreign investment to underwrite much of our growth, this review will be very important, especially if one of the government's aims is to work with the private sector on project finance.

Labor should also pursue government-to-government arrangements within which the private sectors of both participating countries can cooperate and co-develop technologies and transition pathways. This could provide a very effective means of broadening our relationship with China.

Against this backdrop, it is important to recognise the pathetic track record of the Coalition on industrial policies while in government. Moreover, neither Dutton nor his shadow treasurer, Angus Taylor, has shown any interest or capacity on issues such as this. They are more likely to claim market forces and the private sector can be depended on to do the job. Even in circumstances where markets have clearly failed to deliver the appropriate, affordable and adequate services - say in the provision of aged care, as evidenced by a royal commission - the Coalition has been deficient in terms of policies to deal with the structural failings of the sector and proposals for funding the desired improvements or more generally how to provide better service.

Equally, if the opposition really does believe in minimal government intervention and in the need to rely on market forces to the maximum extent possible, they sure haven't applied this approach to the climate challenge. Most economists would argue the most effective response is to put a market price on carbon. Yet Tony Abbott as Liberal Party leader ran a massive and totally dishonest scare campaign against former prime minister Julia Gillard's attempt to price carbon (which admittedly wasn't ideal and could have been improved). The Coalition appears still to believe that objection to the tax was instrumental in Abbott's subsequent election victory, which allowed him to then oversee what was the worst government in our history, at least until Scott Morrison took that mantle.

I suspect Dutton and his team are yet to do the hard yards of policy development, let alone collect the necessary proposals and supporting research and evidence, to integrate them into some overarching framework or vision for the country. Denial and criticism are not policies. I also suspect on most important policy challenges they simply don't have an alternative plan.

In these terms it seems Dutton will not offer a detailed vision for Australia but will continue to obstruct on almost every issue. He is likely to try to undermine the government by picking other specific issues to create fear around - most probably immigration and refugee detention. Obviously buoyed by the success of his essentially racist "No" campaign against the Voice to Parliament referendum, he has begun to run Donald Trump-style arguments against the government's immigration policies, with little regard for the facts. Unfortunately, there seems to be no low he won't sink to in this desire to avoid constructive comment and dodge any responsibility to provide policy detail.

All up, I fear the next election contest will be particularly unedifying, with Albanese and his team somewhat alone, and generating little media interest, with their focus on the potential future of the Australian economy and society. I see Dutton persisting with his scare campaigns, hate speech and general negativity on all issues, failing to rise to the occasion to prove his capacity to lead the country or, indeed, offer any detailed insight into how he would respond to the policy challenges that are proliferating in a fragile global economy bedevilled by geopolitical tensions.

By ducking and weaving around the government to score short-term points on every possible issue, instead of developing a credible set of opposition policies, Dutton is running the risk of Albanese deciding to go early to the polls. Though the prime minister has given assurances he will run full term, he may move earlier to secure a clear mandate for his overall economic and industrial strategy, which would certainly increase the heat on the opposition and could catch its leader flat-footed.

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