Defence corporate welfare

Crikey yesterday ran a handy little summary (free subscription required) of the latest Productivity Commission report on the financial assistance that government provides to various industries. Crikey reports a recent increase in 'industry assistance', which is a polite term for what could more accurately be called hand-outs, subsidies or soft protectionism.

The Crikey piece says nothing about Australia's defence industry. But the Sydney Morning Herald today touches on the huge price Australian taxpayers pay for the Government's support of local industry:

...most of (Defence's) money vanishes in vast multibillion-dollar deals to buy new weapons. One of the current projects, the purchase of new destroyers, is a neat illustration. In 2004 the public was told that for as little as $4.5 billion, four of these massive new vessels would be delivered from 2013. But just a few years later, the project was recosted at $8 billion, and suddenly we were getting only three ships, not four, from 2014.

Frustratingly, the Herald article does not ask why this program has become so inflated. It just refers to 'cost overruns' and then returns to the sexier but financially insignificant subject of perks like first class travel. But as ASPI's Andrew Davies told The Interpreter last October, it's the Government's insistence on local production that has inflated the cost of these destroyers by 30-40%.