Danielle Wood pricks Albanese’s industry policy balloon – but leaves him with good advice

Among the critics emerging to find fault with Anthony Albanese’s interventionist industry policy, the one who gave the most damaging prick to the Prime Ministerial balloon was Danielle Wood, the new head of the Productivity Commission,

Wood, former chief of the Grattan Institute, a policy think tank, made extensive comments to the Australian Financial Review and The Australian on Thursday, the day of the PM’s speech.

She said that while the government was responding to a changing world (a point stressed by Albanese), “we shouldn’t pretend … that this is going to be costless”.

“If we are supporting industries that don’t have a long-term competitive advantage, that can be an ongoing cost,” she said. It meant workers and capital were diverted from other parts of the economy.

“We risk creating a class of businesses that is reliant on government subsidies, and that can be very effective in coming back for more.” An “exit strategy” was needed, where support was stepped back from or at least reviewed.

The Productivity Commission is well known for its free market approach. In that sense, the views of its current head were not just unexceptional but the sort of thing someone in the role would likely say. The commission, there to give advice to the government, is (up to a point) independent.

But two factors made Wood’s contribution both surprising and potent. She had been appointed by Treasurer Jim Chalmers. And she was being very forthright, immediately after its launch, about what is a major government economic and political initiative.

Where it can’t manage the messages the Albanese government likes to be able to anticipate where the counter-messages will come from.

It was blindsided by the Wood critique – not least because it was before the full detail of the policy, centred on a yet-to-be-released Future Made in Australia Act, are known.

While Wood going public might have been unexpected, the substance of what she said was not. Everything she’s argued in the past would have led you to think she wouldn’t be a fan of the Albanese policy.

By her strong comments, Wood has sent a clear signal that she is determined, on occasion, to have a public voice in the economic debate. That can only be a good thing.

Former treasurer and current ALP president Wayne Swan fired off a salvo, telling morning TV Wood was “completely out of touch with the international reality”. Swan said: “We need energy independence and to do that, we’ve got to make up for a lost decade”.

Chalmers held his tongue. He and Wood get on well personally. When he does publicly respond, you can be sure he’ll be a lot more diplomatic than his old boss Swan.

Chalmers, for all that he might be uncomfortable that Wood has spoken out, will know her remarks contain some significant warnings.

With the new interventionism the government is embarking on a risky (and expensive) strategy. It will be vital the policy, when fleshed out, contains whatever safeguards can be mustered to ensure if wrong decisions on support are made, they are spotted early and there is, indeed, an “exit strategy”. One of the prime dangers in interventionism is that it become a rort for the rent seekers.

Wood’s advice is important, even if it was delivered inconveniently for the government through a megaphone.