Some quick facts about Australia’s automotive industry:

  • Rather than employing 250,000 people “directly and indirectly” as Labor currently claims, it employed 68,000 people in 2006, according to the Productivity Commission, including component production outside the big three manufacturers. With a succession of job cuts since then, it employs probably 60,000 now. That’s around 6% of Australia’s manufacturing workforce.
  • In 2006, again according to the PC, the cost per job of assistance to the automotive industry, both via tariffs and via handouts, was $23,500. The current figure, following the 2010 tariff cuts, is around $18,000 per worker.
  • Australia’s GDP would increase by around $1.7 billion in net terms if all assistance to the industry were removed, the PC calculated. That includes a substantial redistribution of wealth from the automotive industry — i.e. three transnational corporations based in the US and Japan — to consumers through cheaper vehicles.
  • The benefits of automotive assistance flow almost entirely to two states, South Australian and Victoria. The ending of government assistance, even if tariffs were maintained, would result in net increases in gross state product for New South Wales, Queensland, Western Australia and Tasmania.

In looking at the industry in 2008, however, the PC also commented any changes in assistance would be “swamped” by the impacts of a resources boom-led currency appreciation, which subsequently has been exactly what happened. Australians are now buying cars in record numbers, but most of them are imports, courtesy of both the 2010 tariff cuts and the dollar. And for Australian manufacturers competing with Japanese manufacturers, that’s only going to get worse, with the Bank of Japan engineering a significant depreciation of the yen.

The bulletproof dollar, however, has done us a favour in laying bare the extortionate nature of our automotive policy, which entails the payment of billions of dollars to transnational corporations for a relatively small number of jobs. Advocates of assistance insist that since other countries willingly participating in this game, Australia should as well. But as the PC modelling shows, it’s actually economically damaging to be protecting local industry this way. Just because other countries are inflicting damage on themselves through protectionism doesn’t mean Australia should join in the self-harm.

And there are not any nebulous “strategic” benefits generated by supporting automotive manufacturing. We already spend billions of dollars via the defence budget in supporting a local defence manufacturing industry, for those who worry we might (literally) be left to our own devices in the event of a major conflict. Nor is it clear that the steady reduction in both automotive manufacturing and manufacturing more broadly over the last two generations had an economic impact in terms of lost skills, certainly not in any measurable sense, given two decades of uninterrupted economic growth.

If we’re not going to get rid of this damaging policy, at least the direct assistance available to the automotive sector should be opened up to the rest of the manufacturing sector, which employs 94% of Australian manufacturing workers, on a competitive basis. This might reduce the intense bias toward South Australia and Victoria present under current assistance arrangements. Now is also the perfect time to remove the prop of automotive industry support, when the economy has low unemployment and low interest rates, which will make the transition to alternative employment for affected workers easier than it is ever going to be again.

None of this, of course, will happen under this government, not when manufacturing-based unions (from both the Left and the Right of the party) remain highly influential, and not while protecting Australian jobs is Labor’s election mantra. There’s been much talk lately about the Hawke-Keating era, particularly from the government’s internal critics on the backbench. Hawke, Keating and John Button in 1991 committed to a program of automotive tariff reductions through to 2000 even as recession overtook the country. It was a courageous decision in far worse times than any contemporary politician has lived through since.

Compare and contrast with the current generation of politicians.

Peter Fray

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