At best, government can redistribute wealth but usually it just destroys wealth. The government's $1 billion jobs plan announced yesterday falls into the ''destroys wealth'' category.
It seems obvious that any plan promoting business at home and abroad and encouraging small business must be good. Yet the Prime Minister's announcement was long on rhetoric and short on serious policy.
To argue that Australia needs a ''real plan'' to deal with the consequences of a high dollar misses a very important point. Australia as a nation doesn't need government plans — individual businesses need to plan. For every business suffering the ill effects of a high Aussie dollar another business is prospering.
Government needs to create an environment where individual businesses can plan and prosper.
Ms Gillard wants the government to plan for business, a tried and tested model known as ''picking winners''. The problem is that government is very good at picking losers.
The Australian Industry Participation Plan is a recipe for increased red tape. Rather than making it easier for foreign business to operate in Australia, this plan will punish those who do business here.
It will create public service jobs in Canberra where bureaucrats will be allowed to second-guess business choices. This government has never understood that make-work schemes detract from profit making and so deter business.
Small business is the work horse of the economy but what can Ms Gillard promise? Well, she wants to make it easier for small business to raise finance. She provided no detail but hinted at a grant system. That is just picking winners.
It is not just access to finance that crushes the small business sector. Red tape, compliance costs, BAS statements all make it hard for small business to expand. Not to mention state-based payroll taxes, ever-increasing compulsory superannuation and minimum wages.
It is true the Aussie dollar is high, and that does make it tough for Australian business to compete on world markets. Ms Gillard is correct when she says there are limits to how much cost-cutting can be done. Business has to work out how to provide higher value products in international markets.
Innovation and smart thinking will play a huge role. It isn't clear that government can add value beyond making it easier to do business.
Another round of picking winners and provide grants to small business isn't a sustainable way to improve business profitability and ultimately productivity. Turning businesspeople into bureaucrats won't create jobs or add to our prosperity.
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