There is much talk about governments “needing to invest in the future.” This included critical minerals and rare earths, renewable energy, national defence industry and energy security infrastructure. What is never mentioned is that these things are demonstrably inefficient and lead to lower standards of living for all Australians overtime.
Government subsidies to industry are a payment made to companies for production of a given goods. The Australian government currently subsidises hydrogen production, solar and critical minerals.
The largest are the $2.4 Billion for the Whyalla steel works to transition it from coal to an electric arc furnace. $2 Billion in production credits to hydrogen. $1 Billion for domestic solar panel production through solar sunshot. In total, the National Reconstruction Fund Corporation (NRFC) is worth $15 Billion in total, targeting an annual return
Subsidies are bad for the economic welfare of Australians because they distort the price signals sent by markets. Prices contain information about the relative scarcity of resources. By ignoring these price signals, governments incentivise a misallocation of land, labour and capital resources to inefficient industries. Because no one person or group (government) can ever gather the amount of information required to make investment decisions, government intervention will be inherently inefficient. Subsidies turn business people in beggars who spend their time lobbying for more tax credits and grants that trying to compete with other firms, creating a system of crony capitalism. This inefficient allocation of resources will decrease production in the Australian economy, decreasing incomes and employment for all Australians by far more than any perceived gain in the subsidised industry.
While there is an argument to be made that these subsidies will improve our national security in case of war, the arguments that they will increase employment and incomes for Australians is false. Arguments for government subsidies are almost always from businesses that stand to gain from them and are enabled by the view that governments can know better than individuals and businesses about how to best allocate our scarce resources.