tip off

Time to get real on the (in)significance of the car industry

The car industry is a footnote in the Australian economy, not the huge employer it once was. Its loss will have limited economic impacts, and now is a good time for tough decisions.

The continuing focus on the future of General Motors’ local operation and the broader automotive manufacturing industry is wholly out of proportion to the industry’s significance in the wider economy.

The car industry employs 46,000 people. The total transport equipment manufacturing sector employs 76,000 people, according to Australian Bureau of Statistics data. That’s around 8% of the total manufacturing workforce, and two-thirds of one per cent of the entire Australian workforce. To put that in perspective, that’s around half of the number employed in food manufacturing and food retailing, and the same number as employed in each of the telecommunications, super and insurance funds industries.

Greens MP Adam Bandt today tried to claim that the closure of Holden, coupled with the government’s mooted 12,000 public service job cuts, might send the economy into recession. For a start, the 12,000 cuts are on hold because Labor got there first, and were intended to be over four years, while Holden wouldn’t close until 2016, so presumably Bandt is warning of a recession in 2016-17. And even if 58,000 jobs disappeared overnight, it would be well under 1% of total employment. There’s more risk of policy-makers and politicians talking us into recession than there is of the automotive sector’s closure pushing us into one.

Bandt and others, like departing Fairfax economics writer Tim Colebatch and even Robert Gottliebsen (who yesterday predicted “five tidal waves of unemployment”) are reflecting a 1980s mentality. Back then, vehicle manufacturing by itself provided nearly 2% of all Australian jobs in a huge manufacturing sector that employed 17% of all workers. Back then, vehicle manufacturing employed not much less than half of the entire professional services workforce. Now, it employs less than 10% of that sector.

And in any event, looming unemployment is no reason to avoid hard decisions. Unemployment was 9.5% and heading up when Bob Hawke announced his industry statement of March 1991 that slashed tariffs, including for motor vehicles (at that stage 35%!). At that point around one in seven Australian workers was employed in manufacturing.

If unemployment at below 6% isn’t a good time to take another step in that direction then when is?

Speaking of tariffs, if GM and Toyota do decide to pull out, then there will be no further point in maintaining the existing 5% tariff on imported vehicles or the punitive tariffs on second-hand imports (subject to suitably stringent safety standards). The removal will be a boost for Australia’s automotive retail sector, which employs nearly 70,000 people, as well as cutting the price of vehicles for all Australians.

The decision point comes as the US Treasury sold the last of its US$50 billion in shares in General Motors bought in a bailout during the financial crisis. “All three US automakers are profitable, competitive, and growing,” Treasury Secretary Jack Lew said.

One of the reasons they’re profitable is that governments around the world insist on throwing money at them for the privilege of making cars in their countries. It’s an obsession that Australia has no need to continue.

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  • 1
    Patrick
    Posted Tuesday, 10 December 2013 at 2:09 pm | Permalink

    Bernard, isn’t 8% of our manufacturing workforce a significant slice? Is there another manufacturing segment that contributes more than 8%? If not, then we are debating whether to shut down the biggest manufacturing employer in the country. Once these things go, they never come back, the skills are lost, and the hollowing out of the Australian workforce continues. Is there not a business case to consider here as the relative costs of support versus the economic benefits of retaining the industry.

  • 2
    Pedantic, Balwyn
    Posted Tuesday, 10 December 2013 at 2:37 pm | Permalink

    On this subject Bernard is just plain wrong. The leading industrial countries do everything to attract encourage and retain auto manufacture in recognition of the benefits in terms of jobs, technical advancement and economics; so they are all wrong and he is right?
    Bernard counter intuitively recommends that we destroy our car-makers because they are a footnote in our economy, not the huge employer they once were. Well, Bernard nowhere else have import restrictions been lifted to the extent that we now have more car makers competing here than in the USA.
    Each import lessens the opportunity for local car makers to make a quid, exacerbating their decline. Each import adds to the huge public debt burden, that we gloss over, whilst this Government blames its predecessor for the Australia’s massive debt, when the culprits are closer to home.
    And finally Bernard welcomes the day when we can import second hand cars from overseas; what so that shonky dealers can sell decrepit, unsafe vehicles to the disadvantaged in Australia? I’ll stick with locally made thanks.

  • 3
    Flickknifetipsy
    Posted Tuesday, 10 December 2013 at 2:45 pm | Permalink

    Bernard, the social cost of shutting this industry down is far in excess of what the industry package will cost. This is not a question of choosing a different path - this government does not want to invest in educating the workforce, present or future, to a first world standard.
    Remember Lehmann Bros? The economic dries would not help them and this miscalculation has cost the whole world trillions of billions!!!!
    Get real Bernard - the auto industry is supporting retail jobs at Coles, Woolies, Maccas and Newsagents. Cut it down as the mining boom is coming off and we have a perfect storm and an instant underclass of serfs.

  • 4
    Dulong Ttil
    Posted Tuesday, 10 December 2013 at 2:45 pm | Permalink

    The latest China’s international trade figures, which were released during last weekend, are good but only limited to the Export from the Chinese side. The figures of Imports into China are weak and have actually dropped significantly. It means China’s demands on importing goods from other countries, e.g. Australia etc. has been reduced substantially.

    This is a not a good signal to Australia.

    In such unfavorable case, the Australian government should consider to adopt stronger monetary easing policy to drive the AUD downwards healthily. So, our Export competitiveness can be strengthened again and, our economy can be improved.

    This should also help our car exports to oversea markets.

  • 5
    John Anderson
    Posted Tuesday, 10 December 2013 at 2:53 pm | Permalink

    Your article is a very poor put-down of the arguments marshalled to keep the auto vehicle industry going. Indeed it was petulant and demeaning of Colebatch. You give me the impression that you think you have lost the argument when you have actually written better stuff than this arguing for no protection. Quoting Adam Bandt’s view won’t help your case. Not mentioning the high Australian dollar in your put-down is an awful look.

  • 6
    bushby jane
    Posted Tuesday, 10 December 2013 at 3:25 pm | Permalink

    I’m with Tim Colebatch. Bernard, you don’t mention the enormous subsidies to the mining industry far in excess of that of the car industry (as usual), and they employ a lot smaller percentage of the workforce. In fact, the success of the mining industry seems to have mucked up the rest of our economy.

  • 7
    Simon Mansfield
    Posted Tuesday, 10 December 2013 at 4:06 pm | Permalink

    >> In fact, the success of the mining industry seems to have mucked up the rest of our economy

    According to the intellectual elites, that’s a good example fo the benefits of the mining boom - via a high dollar etc - being spread across the rest of the economy - Gittins, Keane et al(2010, 2011, 2012).

  • 8
    Frank Birchall
    Posted Tuesday, 10 December 2013 at 4:10 pm | Permalink

    I agree with all the above — the negative multiplier effect on the workforce would be potentially disastrous. By all means wait for the Productivity Commission’s report but I expect there will be a good case for continuing subsidies, albeit with benchmarks and accountability. Once the MV manufacturing industry goes it will never return. The bad effect on expectations, confidence and morale would start immediately, not in 2016. The trend would be towards a tradeable economy based on mining, agriculture and tourism (not that there will be much of the latter remaining after the Barrier Reef depredations have concluded).

  • 9
    Tom Jones
    Posted Tuesday, 10 December 2013 at 5:09 pm | Permalink

    It seems like a diversion from the main game which is the Transport Pacific Partnership which is likely to affect the whole economy, possibly the environment and the health and welfare of all Australians - and yet no government minister is saying a word about that. Christmas is a great time and it is quite tradìtional for governments to slip through the most significant changes while everyone else is looking elsewhere - and what better diversion than arguing over cars.

  • 10
    michael l
    Posted Tuesday, 10 December 2013 at 6:00 pm | Permalink

    A qualified automotive engineer from South Australia must have bullied Bernard Keane at school.

  • 11
    AR
    Posted Tuesday, 10 December 2013 at 6:06 pm | Permalink

    For purely strategic reasons I would like there to be significant manufacturing industry in this country (TCF anyone?)purely because of the multiplier effect on training apprentices (remember that quaint concept?),ancillary commerce and the small point that making widgets is better than idle, resentful workers with no prospects.
    However that does not mean beseeching overseas behemoths with a fandance of subsidies - here’s novel idea, we could build vehicles - not just car but trucks, trains, coaches, ships, tractors (check the country with which we have the largest trade deficit and for which import - agricultural machinery)using a national bank (call it something like, I dunno, the bank of Common Weal..?)doing something useful with fiat money instead of snaring consumers and choking executives with bonuses.
    Tell me I’m dreamin’

  • 12
    Simon Mansfield
    Posted Tuesday, 10 December 2013 at 6:13 pm | Permalink

    Well spotted Mr Jones.

  • 13
    Mike Slater
    Posted Tuesday, 10 December 2013 at 6:48 pm | Permalink

    Bernard, are you on drugs?

    Maybe you have n’t noticed the political national disregard and abandoning of the manufacture section of the Australian economy.

    What’s left of it after the massive outsourcing of engineering and light manufacturing projects by the mining companies and multinationals, is still the heart soul of our communities. Without it, we are belly-up.

  • 14
    Microserious
    Posted Tuesday, 10 December 2013 at 7:05 pm | Permalink

    Perhaps Bernard Keane is trying to draw some remote correlation between saving the Holden car manufacturing industry, and at tax payers expense, saving one of those Too Big To Fail entities, like the banks.

    If so, I see a point, but the more we oppose privatisation of govt utilities etc etc and support the preservation of jobs by supporting local manufacturing then the stronger we are in the long haul.

    Economies flourish when working families have money burning a whole in their pockets.

  • 15
    macca
    Posted Tuesday, 10 December 2013 at 7:11 pm | Permalink

    I would have thought that the staff (?) car park (shown in your pic) should be full of holdens ….

  • 16
    Ken Dally
    Posted Tuesday, 10 December 2013 at 9:36 pm | Permalink

    Given that both state and federal governments subsidise coal and gas mining to a far larger extent why the reluctance to subsidise an industry which is strategically highly valuable. We have no land links to other countries and are totally dependent on easily cut sea links for trade. Should a future situation arise where our sea links are threatened we would be without a capability to build our own vehicles. Not a situation any sane government would put our country in.

  • 17
    Mr Tank
    Posted Tuesday, 10 December 2013 at 10:12 pm | Permalink

    :)

  • 18
    Savonrepus
    Posted Tuesday, 10 December 2013 at 10:22 pm | Permalink

    Yay Bernard got it right for a change. It is insane for the Australian Government to be making gifts to American shareholders. If we want to support industry then we should be supporting those where we have a natural advantage like mineral reprocessing - Gove or Qantas International to support out tourist industry but Qantas can not be helped whilst it still has a domestic operation because then the Government just gets involved in cross subsidisation and the true value of its support is lost.

    Federal Government industry support can be very successful - CSIRO and wifi but then failing to assist technology means that great advances we make can be lost to overseas = University of NSW and solar power

    There is nothing wrong with appropriate Government support but not for natural loss makers like GMH who have no interest in supporting our economy only leaching whatever it can from it. We are great at making electricity (without a carbon tax) so lets start a home grown battery car industry instead.

  • 19
    macca
    Posted Tuesday, 10 December 2013 at 11:26 pm | Permalink

    How can the government use taxpayers money to support such outrageous working conditions and remuneration?

  • 20
    Bo Gainsbourg
    Posted Tuesday, 10 December 2013 at 11:41 pm | Permalink

    Fairly blase about unemployment. If there is a serious reform and structural change going on, or a great public good for that money, make the case. But if not, sneering at people about to become unemployed is not a great look.

  • 21
    J Strain
    Posted Wednesday, 11 December 2013 at 8:20 am | Permalink

    Bernard Keane’s articles about automotive manufacturing in Australia is an unbelievably shallow analysis of its significance to our nation and our future.

    For example should we lose the automotive industry and God forbid we find ourselves caught in a war involving USA and China, how will be able to defend ourselves if we cannot build any vehicles, etc. As WWII drew us into conflict with Japan we had to rapidly develop a military industry. If we lose our automotive industry, because if GMH leaves Toyota operation will not be viable either, what skills will have to support a war effort.

    Bernard makes no effort to analyse the skills and knowledge we will lose or how this will affect other areas of manufacturing or other industries.

    I wonder if he is just another ignorant economist? Or is he driven by the same mindless ideology of many conservatives?

    The US government managed to provide huge support for their automotive industry including buying large portfolios of the companies’ shares. Why are we so different?

    Do we intend to depend on vehicles imported from countries which one day may become our enemy?

    Maybe Crikey can find a journalist who can develop a much broader analysis. Maybe?

  • 22
    Faris Abdi
    Posted Wednesday, 11 December 2013 at 9:16 am | Permalink

    could you stop being a free market ideologue for once bernie? we’re talking about 50,000 workers and their families, ever heard of the multiplier effect? every time I read your articles, it’s cut this cut that, “cut cut cut” religious hymn- you never provide pragmatic solutions ever, just the typical slash-n-burn run away with the tail between your legs neo-liberal “solutions”.

    God, It’s like I’m reading “theaustralian” here - might as well join your fellow troglodytes over there.

  • 23
    Flickknifetipsy
    Posted Wednesday, 11 December 2013 at 1:35 pm | Permalink

    Sometimes we need to look at the past. Libetarian or free market economics is extreme capitalism, the corporations have bought and paid for government.
    I suggest you read the article under the link below:

    http://www.theguardian.com/world/2013/dec/08/david-simon-capitalism-marx-two-americas-wire

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