Despite everything we know Australia can't shake protectionist instincts

Australia was built on the foundation of protectionism. In the early years of the colony and Federation large tariffs were placed on imports and Australian producers thrived. The practice continued until the 1980's without serious challenge.

The result of Australian protection was exactly as economic theory predicted. Short-term advantage and long-term harm. By the 1980's Australia was uncompetitive, produced low quality goods and vested interest groups from industry and trade unions demanded more not less protection.

Great progress was made after the Hawke government began to dismantle barriers and the benefits were seen in lower prices and greater variety for consumers. Australian industry competed or died. Short-term pain, but long-term gain.

It is particularly disappointing then that politicians revert to protection whenever it is easier to do so than dealing with the root cause of uncompetitiveness. We saw it when the carbon-tax was repealed in the 'why should we suffer' argument that let the rest of the world disadvantage itself by doing the right thing.  Now we see it with steel and shipbuilding.

The Productivity Commission has described the insistence on building the new Australian submarines in Australia using Australian steel as adding 30% to the costs of the project. The only justification is to keep jobs in Australia. They point out that this isn't the only areas that are getting regular, although often disguised, protection, with agriculture particularly benefiting.

The people paying the extra $15bn cost of the submarines are the taxpayer, (so much for reducing the deficit too), generally the consumer pays the extra price.

The ABC covers the story here

This article is useful for VCE students as it represents examples of current trade and supply side policy. It also represents a significant charge on government expenditure and so influences the Budget. IB students will be able to use this as an example of (shameless) protectionism and an illustration of the pros and cons of undertaking such a policy.