Labor's too-slow jobs plan

The innovation and 'buy Australian' package announced by the government yesterday presents a clear point of difference between Labor and Coalition. It's likely neither side's plan to prevent a post-mining-investment-boom employment slump will work, but at least we now know they're different.

The policy announced yesterday, 'A plan for Australian jobs', is aimed at making the September 14 election "a referendum on jobs", according to the Australian Manufacturing Workers Union – and so it will be, but only in the sense that we know the Coalition will cut public sector jobs if it forms government, and Labor will preserve and subsidise jobs if it somehow hangs onto power.

One of the three planks of yesterday's policy would force corporations (read miners) to look again at whether their suppliers could be Australian firms after all.

A new Australian Jobs Act would require projects worth over $500 million to create 'Australian industry participation plans' to show that they're offering work to Aussie firms, and for projects over $2 billion, would require companies to "embed Australian Industry Opportunity officers within their global supply offices".

There has been heated debate over this in the past six months. Some miners have protested that it's not just price that puts them off Australian firms for major construction work, but can come down to quite technical problems such as the grades of steel required not being made here at all.

But in most cases, Labor clearly believes that firms are making the wrong choices and could find competitive quotes at home if they only looked.

The Greens support this idea, but took it a step further, with lower house MP Adam Bandt saying yesterday: "Big projects should be required to use local firms, not just talk to them. With some big resource projects using as little as 20 per cent Australian steel, we could be doing much more to support local industries. This is another example of Labor's lack of courage and inability to stand up to the big miners."

It's also an example of Labor not wanting to start a WTO trade stoush over behind-the-border protectionism. Forcing those evil miners to accept uncompetitive quotes from Aussie firms would certainly fit that description.

The other two planks of the policy have been more warmly welcomed by industry groups.

On the innovation front, Labor would build up to 10 Industry Innovation Precincts to "bring firms, research institutions, technology experts and business service providers together to achieve the innovations, connections and scale our businesses need".

ACCI and AiG both welcomed this part of the plan, although neither liked the source of the funds to cover it – $1 billion taken from 15 to 20 large companies by the cancelling of some large tax credits. However, its objective must be seen for what it is: pretty optimistic. While it's right to try to lift Australia's lagging innovation record, in the near term it is just not possible to innovate our way around the high dollar and start selling smarter things to Asia's burgeoning middle classes as if the dollar didn't matter. Innovation is a long-term project that the centres can help to kick-start, but not an effective means to dealing with a jobs downturn in 2014 and beyond.

The third plank of the policy is part of Labor's broader attempt to beat the Coalition on its home territory – the SME sector. It plans to use a "new $350 million round of the Innovation Investment Fund to stimulate private investment in innovative Australian start-up companies."

That sounds a bit like state-owned venture capitalism → always a worry. But the policy also includes changes to venture capital tax arrangements to "improve clarity and certainty for investors and encourage participation by 'angel' syndicates", which is certainly better that watching bureaucrats gamble public funds on 'great' ideas.

So where does this all leave Labor vis-a-vis the Coalition?

Actually, about level. There is chronic delusion on both sides about dealing with the post-mining-boom economy.

Labor is unlikely to cut any taxes, will not balance the budget, will retain its unpopular mining and carbon taxes and will increase red tape (at least for miners, as described above). But it will also force companies to support Australian jobs in sectors that stand little change of returning to competitiveness until the dollar inevitably corrects to a value not driven as much by carry trades as commodity price spikes. And it won't sack thousands of public servants.

An incoming Abbott government would cut taxes slightly, streamline business red-tape, kill off the carbon tax and mining tax, and balance the federal budget through some hefty expenditure cuts across the public service. That, so the Coalition believes, will boost business confidence and investment, lead to the birth of many more SMEs, and provide the jobs and GDP growth to get Australia back on track. It might work, but it's a hell of a gamble for a country that still has one of the best sets of top-line economic figures in the developed world.

The 'referendum on jobs', then, is now quite clear – keep Aussie jobs and let our competitiveness continue to erode, or slash jobs and hope the private-sector spirit of innovation replaces them quickly.

Neither is much of a fix for what lies ahead in the near-term, so voters will have decide which they think will actually shore up our uncompetitive sectors in the long term.

Not much of a choice, but at least we know they're different.