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Why the State Government is ‘NUTS’ to offer Scottish beer giant BrewDog industry assistance

There are times to offer industry assistance and then there are times not to, such as the State Government’s announcement of ‘luring’ BrewDog to Brisbane.

There was much fanfare over the announcement BrewDog will open a $30 million brewery in Brisbane including a 50 hectolitre brewhouse, canning facility, tap room and restaurant on an 11,000-square-metre greenfield site in Murrarie. 

BrewDog is expected to employ more than 150 people in the next five years and 235 jobs created over the next 10 years which is great news for the Sunshine State. However, it also represents a very poor decision on the part of the State Government in offering a series of financial incentives through the $65 million Advance Queensland Industry Attraction Fund.

“The incentives our government is providing through our industry attraction fund were instrumental in BrewDog choosing to base its Australian operations here in South-East Queensland, providing another feather in the cap of our state’s growing manufacturing industry.  Minister for State Development, Manufacturing, Infrastructure and Planning, The Honourable Cameron Dick

I have been a long-term opponent to financial incentives and tax holidays targeted towards particular enterprises.  By definition it means that remaining taxpayers pay more than they need to (ie it is inequitable) and it distorts competition as well. The financial incentives offered to BrewDog will never be known as it is obfuscated under the mantra of ‘commercial in confidence’.

What I am interested to know though is ...... has anyone within Government bothered to ask how the 20 plus breweries already established in Brisbane and on the Gold Coast feel about a new competitor launching underpined by State Government funding?  Yes that’s right, taxpayer dollars are being used to set up an overseas company in Brisbane to compete against an already mature Queensland run and owned industry in SEQ. 

Gold Coast and Brisbane Breweries

  • Aardvark and Arrow, Varsity Lakes
  • Aether Brewing, Milton
  • All Inn Brewing Co, Banyo
  • Bacchus Brewing Co, Capalaba
  • Balter Brewing Company, Currumbin
  • Black Hops Brewery Burleigh Heads
  • Brews Brothers, Woolloongabba
  • Brisbane Brewing Co, West End
  • Burleigh Brewing CompanyBurleigh Heads
  • Catchment Brewing Co, West End
  • Fortitude Brewing Co. North Tamborine
  • Fortitude Brewing Company
  • Four Hearts Brewing, Ipswich
  • Gold Coast Brewery Nerang
  • Green Beacon Brewing, Newstead
  • James Squire, South Bank
  • Laughing Lizard Brewing Company, Arundel
  • Lost Palms Brewing Co, Miami
  • Morgan's Brewing Company, Yatala
  • Newstead Brewing Co, Newstead
  • Oxenford Brewing, Oxenford
  • Scenic Rim Brewery, Mount Alford
  • XXXX, Milton

Amongst over things BrewDog may have been offered a payroll tax holiday as many State Governments in Queensland and interstate have and do for certain companies but doing it for this company is plain wrong for a number of reasons.

The Queensland Competition Authority conducted a really good Inquiry into this subject and concluded the rationale to provide industry assistance is strongest only when there is a significant policy problem that should be corrected through government action. However in respect to the BrewDog example there is no policy problem to warrant intervention nor need to achieve a critical mass to spark an industry to take off. This industry has already launched and spectacularly so.

This decision has the initial short-term gloss of being an ‘announceable’ and creating jobs but in the medium to long term our economy will lose out. At the very least the costs and benefits of providing this assistance should be transparent and in the public domain. The amount of assistance, as well as the evidence base that underpins the government's decision to provide it, should also be publicly available.  

And if you don’t believe me then read what the Queensland Competition Authority has to say ……

“Government intervention to alter consumption or production (through industry assistance) will generally lead to a net loss for society.

The evidence that is available suggests that, although a number of industry assistance measures are beneficial, many others are ineffective and result in a range of costs, including resource allocation distortions, lower productivity, lower household incomes and harmful environmental impacts.

A significant portion of industry assistance in Queensland is directed towards supporting certain businesses or sectors over others, rather than towards correcting market failures. In a number of cases, the primary objective is to directly increase the profitability of private sector businesses. This assistance is unlikely to lead to a higher level of economic activity than would otherwise occur. Much is captured by private firms with limited or no positive effect on the welfare of Queenslanders as a whole.

The findings from this inquiry suggest that selective industry assistance is generally not a successful policy to generate economic growth — it is only suitable to address a specific set of policy problems and, as such, should be reserved for those circumstances. There is general agreement, even within assisted sectors of the economy, that businesses not government assistance, drive productivity and economic growth. “

So there you have it. I am not a fan of this decision and I suspect it may become the ‘holy grail’ of the wrong type of State Government industry assistance in Queensland.

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Nick

I think you are being too kind regarding this policy decision. The company has set up a fake competition between Brisbane and Newcastle in a rent-seeking act which has worked perfectly. One part of Australia is stealing from another. Taxpayers are subsiding a business. Existing operators in the sector are disadvantaged despite having been first movers. BrewDog is bringing no new technology. What a waste of taxpayer funds and a slight on the innovation and entrepreneurship of existing operators.

Great post Nick. Completely agree. Love the list of all the breweries here already.



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