Australian Politics and Policy - Senior, 2019a

Australian Politics and Policy
(noting that definitions in the literature vary considerably). This may include
research and development, the environment, skills education, human capital,
infrastructure investment, innovation stimulus and so on. 31 Vertical industry policy
is targeted at particular industries. Policy instruments such as tariffs and quotas are
generally considered protectionist, and therefore inconsistent with modern ideas
concerning global markets. Vertical industry policies, on the other hand, are not
inconsistent with the rules established by the World Trade Organization if the
intervention is focused on a particular outcome in the short term.
It is not unusual for governments to use a combination of horizontal and
vertical measures to bring about structural change in the economy. For example,
tariffs on Australian exports of sugar were not excluded from the Australia–United
States Free Trade Agreement, which meant that the Australian sugar industry
wouldnotbecompetitiveandwouldrequiretransformationtoadjusttothemarket
conditions. The Howard government introduced the Sugar Industry Reform
Program to help sugar cane farmers and harvester operators cope with the loss of
protection. This program included welfare payments, crisis counselling services,
industry-exit assistance, business planning and diversification assistance, retraining
andotherfundingtoassistthoseaffectedbythechanges. 32
Similarly, the Gillard Labor government introduced a carbon pricing taxation
scheme, which was generally horizontal in that it was intended to affect industries
other than road transport and agriculture, and later become a carbon emissions
trading scheme. However, the Abbott Coalition government replaced the policy
with the Direct Action Plan to fund carbon emissions reduction projects through
an Emissions Reduction Fund, among other ‘green’ projects.
One of the challenges for vertical industry policy is the difficulty in ‘picking
winners’. Some of the outcomes from recent industry policies include:
• The Rudd government’s Green Car Innovation Fund did little to stimulate the
industry, and, once elected, the Abbott government wound up the scheme and
did not support the industry further. In 2017, the last Holden vehicle rolled off
the production line and car manufacturing in Australia ceased.
• The Rudd government’s Home Insulation Program led to the tragic deaths of
four workers, numerous house fires resulting from the use of poor materials,
the demotion of then Environment Minister Peter Garrett, and subsequently
the Royal Commission into the Home Insulation Program.
• The Gillard government’s carbon pricing scheme was labelled a ‘carbon tax’, and
a coalition of industry groups, known as the Australian Trade and Industry
Alliance, launched a major campaign against it. The competition regulator, the
Australian Competition and Consumer Commission, investigated complaints
from consumers about false justifications for price increases, particularly
31 Emmery 1999; Pelkmans 2008.
32 Thompson et al. 2010.
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