Impassioned discussions in the media about the quality and appeal of the latest batch of Australian films are an annual sport. Judging from both the fervent support and the level of vitriol, people feel strongly about Australian film. But how informed really are these regular public outbursts?

In order to satisfy the media’s appetite for controversy and the bad news story, most ‘state of the film industry’ stories begin with a commentator lumping all the films together and arguing that they’re just not good enough. They might quote observers wanting to know why Australian films aren’t as entertaining or appealing as US films. The flurry of responses and debate that follows is always interesting and offers more food for thought.

What is largely ignored in these debates, however, is that the nature of Australian films is significantly determined by how they are financed. And, in Australia as with many other filmmaking nations, government is central in setting the environment within which films are financed.

When Australian films have Hollywood budgets, they are almost always big hits. Four of the top five local films of all time fit into this category: Australia (2008), Babe (1995), Happy Feet (2006) and Moulin Rouge! (2001). (The fifth is Crocodile Dundee, 1985, which was paid for by Australian taxpayers and cost much less). The involvement of the world’s most powerful filmmaking community was a significant factor in the success of these four films, with talented directors given the resources they needed. Australia, the most recent, is rumoured to have cost $150 million. By contrast, in the last decade or so, most Australian features were produced for less than $3 million.

In the last few years of this decade, the prevailing view has been that Australian films are too dark. Filmmakers have been told to lighten up and make more comedies and feel-good films. Several years earlier they were advised to tell more serious, mature stories because the popular notion was that all Australian films were coming-of-age tales.

It’s commonly assumed that it’s film directors who decide what kind of films get made. But consider for a moment the influence of the federal government, the biggest consistent investor in Australian films. A policy decision by it or one of its agencies to cap the amount of money it will invest in an individual film, for example, imposes a limit on the overall budget which, in turn, acts as a barrier to the emergence of certain kinds of films. Dark or coming-of-age stories can be told fairly simply on a low budget.

Romantic comedies and action films are not so easy to do on a shoestring. Expensive star power drives romantic comedies. And dozens of action films were made in Australia in the 1970s and ’80s – as the documentary Not Quite Hollywood (2008) illustrates – but there are now more rules around work practices and safety making the car chases, explosions and special effects that are fundamental to the genre prohibitively expensive.

In most years, governments pay for half to three-quarters of the core Australian film slate. So government film funding agencies are very influential in deciding what kind of films get made. If the AFC in the mid-‘90s had not decided to proactively foster Indigenous filmmakers, Samson and Delilah (2009) might never have been made.

And when government changes its method of funding films, the flow-on effects can be seen in the type of productions that get made. This happened in the late 1980s and, some argue, led to less diversity in the types of films that got made. Throughout the 1980s, generous tax deductions stimulated heavy private investment in film. In other words, the government supported film by forgoing tax revenue. There were no selection committees or funding guidelines – just a prospectus and a guaranteed tax saving. No limits were imposed on how much investors could claim and filmmakers had more freedom to make whatever films they wanted without bureaucrats breathing down their necks. And they did. Amid cries against those rorting the system, the level of deductions were reduced and a more direct government-controlled financing system put in place in 1988 with the establishment of the FFC.

The justification for tax revenue supporting film production, via any method, is cultural. Significant government support for a film production industry arrived in the 1970s when Australian accents, places and stories had not been seen on our big screens for decades. And while there is no question that explorations of a society’s characteristics, values and behaviours through storytelling is culturally important, trying to stipulate what makes a film culturally important is tricky.

There is a school of thought that believes any film made by Australians is culturally relevant but until the FFC made handsome profits from investing in Wolf Creek (2005) many refused to see horror films in that category.

Commercial considerations have to come into an agency’s investment decisions. If nobody sees a film it has no cultural value and making profits allows more money to be returned to the agency for further investment in film production. Being seen outside Australia also capitalises on a film’s potential to deliver tourism, business and other advantages by showcasing the country.

In its production funding guidelines, Screen Australia, the federal government’s key film agency since 1 July 2008, says it aims, across all types of production, to invest in films that engage audiences and are culturally relevant. In the case of features, it will also take into account the commercial, artistic and critical merit of the project. But culture seems to disappear in the assessment criteria, possibly because it is so difficult to define. Instead, the guidelines state that applications will be assessed on the track record and skills of the producer-director-writer team, their creative vision and proposed cast and key technical personnel, the quality and readiness of the script, the film’s perceived potential to reach audiences, the commercial potential in relation to budget, and the viability of delivering at the specified budget and production schedule.

These criteria acknowledge that making a good film requires enormous skill, determination and vision, but also illustrate that there is enormous room for subjectivity by those making the decisions.

It was announced in 2007 that Screen Australia would replace the FFC and other federal government agencies. At that time too, a mechanism known as the producer offset was introduced. In very general terms, the offset enables anyone who spends more than $1 million to make an Australian film to claim back 40 per cent through a rebate on their tax. It represents a move back to indirect financing and is already leading to bigger budget films that tell bigger stories and involve more known and experienced directors and actors. There are indications it will also lead to more co-productions with other countries, so more international stories.

Early in 2010 the government confirmed it would review these new funding mechanisms, and its initial discussion paper states that the intention is that the producer offset becomes the primary funding mechanism. So expect this trend towards more ambitious films with greater potential to compete in the cutthroat world of the multiplex, to continue. Unless the government uses its movie mogul status to change everything again.

But all this said, Australian filmmakers always have the central role of raising all the finance, whatever government help is in place, and that is usually almost as challenging as making a film that captures the zeitgeist.

In February and March Screen Australia CEO Ruth Harley hosted a series of forums to discuss the issues and challenges facing the screen production industry. The Screen Australia Melbourne forum is webcast online (registration required).