Opposition Leader Bill Shorten believes industry assistance should be the exception and not the rule.
The closure of car-making in Australia within three years has triggered a debate over whether the government should have provided a lifeline to save thousands of jobs, mainly in Victoria and South Australia.
Treasurer Joe Hockey has argued the "age of entitlement" is over and all businesses need to trim their costs and make better wage and conditions deals with workers in order to thrive.
Mr Shorten told the Melbourne Press Club on Thursday Australian industry could adapt and prosper in this time of change.
As he laid out an innovation-led jobs growth plan, Mr Shorten stressed that government assistance for industries should be "the exception, not the rule", and should be provided only to industries that are willing to embrace innovation.
But the government had a "moral obligation" to keep people in work where public money could be used to achieve broad benefits for the economy.
"If we leave companies to wither, or seek to accelerate their demise we are putting Australian jobs, skills, innovation and technology at risk of permanent and severe damage," Mr Shorten said.
He said the death of the car industry was a tragedy but could also be a defining moment for Australia - to move past the idea of picking winners to "a time when government, investors and business turn their energies to supporting a new generation of research, development and innovation," he said.
Mr Shorten said science and innovation should be a national priority to foster new jobs in genomics, quantum computing, bionics and nanotechnology.
"We need an innovation-led growth plan," he said.
The plan would help innovators commercialise their ideas, provide health and medical benefits, educate a new generation entrepreneurs and draw on science and technology to improve all areas of industry and business.
The Labor leader said his approach to opposition would not be to oppose everything and propose nothing.
"The Abbott model worked once - I firmly believe it will never work again," Mr Shorten said.
"I prefer to take my inspiration from the New Year's resolution of John Curtin when he was elected opposition leader: 'To act and think helpfully, and not play faultfinder'."
