Supporting manufacturing industry

Despite the growing significance of the free-market 'Dries' in the Liberal party, the Fraser Government was cautious about further tariff reform in a difficult political and economic environment. In June and July 1982 Cabinet considered a series of reports from the Industries Assistance Commission (IAC) on further tariff reductions. The IAC suggested 'modest' reductions, which would equate to an overall cut of between 7 and 14 per cent, although the reduction would increase to 35 per cent if the clothing/textiles and passenger vehicle industries were included; the latter industries had specific 'sectoral' assistance plans and Cabinet had already decided against amending them. The reports were taken to Cabinet by Industry and Administrative Services Ministers Phillip Lynch and Kevin Newman, who set the tone of their response by describing government tariff policy as one of 'predictable gradualism'. They noted that average tariffs had dropped from 24 to 14 per cent between 1968 and 1982 and that the long-term gains from further cuts had to be balanced against the shorter-term pain to specific industries and areas. Treasury strongly endorsed cuts, with varying degrees of support from most of the other major departments. However, the trade and industry departments opposed further cuts until the intentions of our trading partners were clearer and increased government assistance was provided.

The steel industry was hit hard by the recession and by excess capacity at home and overseas. The IAC reported in May 1983 that the industry had lost competiveness because of wage increases and declining productivity, with both raw steel production and BHP’s steel workforce falling by around 25 per cent in a year. The IAC commissioners were divided over remedies, the majority recommending an end to temporary assistance and a continued phasing out of tariffs, while the minority argued for volume-based tariff quotas for 10 years. Hawke’s Industry Minister Senator John Button persuaded Cabinet to endorse a steel development plan which would provide bounties for five years to retain between 80 and 90 per cent of the domestic market for local producers. In return, the unions gave undertakings on work practices and improved productivity, and BHP committed in principle to $800 million of new investment. Button also made a general submission on industry policy to Cabinet in September 1983. He identified long-standing structural weaknesses in Australian manufacturing, including inefficiently small and scattered plants, entrenched union and management attitudes, high wage costs and inadequate investment in training and research. He suggested a range of reforms, although he accepted that tariff protection would still have an important role to play.

Selected documents

	Series title	Date range	Series number
	[Fraser] Submission 5502, 24 May 1982, Approaches to general reductions in protection	1982	A12909, 5502
	[Hawke] Submission 348, 1 August 1983, Steel development plan	1983	A13977, 348
	[Hawke] Submission 418, 15 September 1983, Review of recent developments in industry policy	1983	A13977, 418