The rising price tag for Labor's Future Made in Australia raises difficult questions over whether the nation's existing industrial base can be sustained, let alone expanded into hydrogen-fuelled green dreams.
The $2.4 billion state and federal government bailout to avoid a Whyalla steel-making wipeout is supposedly a one-off, assuming that whoever ends up running the promised new electric are furnace can turn a profit out of it.
But it follows federal Labor's 10-year,
$2 billion "green aluminium production credit" subsidy aimed at funding Rio Tinto's hopes of powering its energy-hungry aluminium smelter near Gladstone with wind, solar and batteries, possibly with gas backup.
Australia has become even more of a high-cost economy that has lost the cheap energy advantage that helped build its steel plants, aluminium smelters and industrial processing operations in the 1960s, 70s and 80s.
High hopes shared by Andrew Forrest and others that renewables-based hydrogen would turn Australia into a green energy superpower processor of its rich natural resource base have faded. The Whyalla steel bailout is based on using gas, rather than hydro, to replace coal.
Now Australia's steel and aluminium
industries are caught in the crossfire of Donald Trump's trade war tariffs and
China's over-production.
Chinese money pumping up dirty nickel production in Indonesia led BHP to shut its West Australian nickel mines, refinery and smelter last year.
Other resource processing operations are at risk, including Glencores Mt Isa copper smelter.
Now Australia is offering subsidies not just to keep old industries alive but for future-facing minerals processing to supply batteries and electric vehicles.
Federal parliament last week passed a $7 billion, 10 per cent production tax credit over a decade for critical minerals such as lithium, where projects have had to be mothballed because of a global price collapse.
More or less plausible-sounding cases can be made for individual examples of these multiplying industry policy subsidies.
In Whyalla yesterday, Anthony
Albanese bagged the former Coalition government for telling American-owned car makers to "bugger off" from South Australia.
Yet the Rudd-Gillard government wasted billions of dollars of taxpayer money on a "
'green car plan" that just
lined the pockets of American and Japanese car companies on their inevitable way out the door.
It would be great if greenish steel-making could be sustained at Whyalla given its established steelworks, its access to high-quality magnetite and its nearby harbour.
But not enough is being done to tackle the impediments to investing private risk capital in Australias high-cost economy, including an internationally uncompetitive 30 per cent company tax rate.
Labor's scattergun Made In Australia subsidies extend to manufacturing solar panels in a market that has been flooded by cheap Chinese product. "We make bugger all here," Albanese complained in Whyalla yesterday.
The bailouts come with the moral hazard of investing political capital, as well as taxpayers' money. Who knows if either federal or state Labor will end up with some sort of equity stake in Whyalla, as now being flagged for the collapsed regional airline Rex
Meanwhile, the mining and energy industries that have supported Australia's modern prosperity are being unnecessarily handicapped.
Federal Environment Minister
Tanya Pliberse this week delayed approval of an extension of Woodside's
North West Shelf gas project.
As The Australian Financial Review reported, the assessment process for approving the extension to an existing project has taken more than six years.
Gas is part of the low-carbon energy transition. Yet Labor is reluctant to approve more gas supply because it could lose votes to the Greens and teals at the WA and federal elections.
It seems to be more politically rewarding to put taxpayers on the hook for industries where Australia's comparative advantage is less clear