Ideas@TheCentre
No need to heed the ACTU’s nonsense
Economic illiteracy is not a new phenomenon in the union movement. But one might expect more from their peak body, the Australian Council of Trade Unions (ACTU).
This week Ged Kearney, secretary of the ACTU, claimed that companies receiving government subsidies should do more to ‘give back’ to the community and be required to ‘buy local.’
Kearney’s novel idea was a response to the Gillard government’s plans for tough new procurement rules on large resource and infrastructure projects. Gillard and her ministers are set to release the new rules as part of a statement on innovation policy next month.
Any government has the right to attach whatever prerequisites and restrictions it likes to the subsidies it doles out, but requiring companies to ‘buy local’ would be foolish for a number of reasons.
Firstly, Australian companies exist in a global and interconnected marketplace. Very few goods are wholly produced in one country, and goods often cross international borders several times before reaching the end consumer. Simply buying products or services from an Australian company does not guarantee that the money will stay in Australia. Nor does it guarantee that the Australian company will use local products and local labour to produce its goods. Moreover, a local company may be comprised of predominantly foreign shareholders, meaning the profits will be sent abroad rather than kept at home.
Secondly, if businesses aren’t already ‘buying local’, it probably means that it is more expensive to do so. Many businesses receive subsidies because they cannot contain costs on their own. Forcing these businesses to buy more expensive local products simply puts them in further financial strife, making them potentially even more dependent on the government.
This sort of policy is a recipe for blowouts and wasted tax dollars.
All businesses, whether they are receiving subsidies or not, should be free to buy from whomever and wherever they please. Not only will this give business the best return on their investment dollar, it will also give taxpayers the best return on their tax dollar.
Alexander Philipatos is a Policy Analyst at The Centre for Independent Studies
