Jan 23, 2014

In Holden’s wake, let the market, not government, pick winners

The evidence is mounting that government grants for business don't work. InDaily journalist Kevin Naughton finds past subsidies to businesses have done more harm than good.

Government-funded assistance programs for businesses hit by the Holden departure make little economic sense. And Michael O’Neil, the head of Adelaide University think tank the Centre for Economic Studies, also says subsidies and grants made to businesses that haven’t been able to secure funding from normal investment channels are a “poor economic model”.

The view backs previous analysis of structural adjustment funds, innovation and investment funds and other schemes that follow manufacturing upheavals, such as the closure of Mitsubishi, which shows a high failure rate.

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12 thoughts on “In Holden’s wake, let the market, not government, pick winners

  1. MJPC

    This is the cargo cult mentality of government’s not understanding the capitalist mindset of the quick buck (ably assisted by a compliant media).
    Yesterday I heard some government aparatchik waxing lyrical about the promise of biotechnology jobs to take up the slack of unemployment in the car manufacture.
    So, come December 2015, we have Joe Average building Holdens, January 2016 he is developing the next antibiotic.
    Give us a break!
    Why do they continue to treat the public as idiots with annnouncements such as this?

  2. Chris Hartwell

    MJPC – well, they did get voted in … I suppose they put 2 and 2 together?

  3. Dulong Ttil

    If we want our country’s manufacturing industry (including car making) to be successful, a competitive $A is crucial to strengthen our car exports. To cite a good example, Japan has been applying an assertive Monetary Easing Policy, which drives the YEN downwards successfully. The immediate result shows that their Export and Tourism industries have picked up swiftly. Japan is now enjoying healthy export growth and has much more tourists visiting Japan.

    With the sound and robust stimulation by Japan’s Monetary Easing Policy (which in fact mainly injecting more printed notes into the market by their Central Bank), the Nikkei has soared from 10,398 to 16,291 just in 2013. Nikkei marks its best performance in forty years, and also the top performer among Asian markets in 2013. Analysts name this “Nikkei Ends Year on a High in Quiet Asia”. This is the power of an aggressive Monetary Easing Policy.

    Australia should consider this as a viable option to improve our economy outlook , so that our export can be improved instantaneously.

    A lower $A can help to improve our Export competitiveness, save the Australian farmers, exporters and manufacturers and reduce our trade deficit. It can also help to improve our Tourism industry, which was seriously damaged due to the high $A.

    Another thought is to engage a linked currency with USD, (e.g. A$1:US$0.80), which can give overseas investors good confidence in our economy stability.

  4. mook schanker

    Does the article contradict itself by suggesting to pour money into R&D instead? Surely if the economic model was successful then private investors would stump up the capital for R&D, otherwise it just seems like subsidisation by another means….

    The article should go for the ‘other’ heavy subsidy hitters though like the heavy electricity subsidisation and the mulitude of corporate tax rebates going around – surely these are just subsidies too? Want to make the economic model perfect in all areas – just sayin….

  5. Mike Wilson

    Fair enough not supporting Golden. The next logical step is to stop supporting Tasmania. It’s never likely to turn a profit, employs fewer people than the auto industry, and is highly unlikely to perform well at Mount Panorama. Can we afford to keep it?

  6. Mike Wilson

    Loving how auto correct makes GMH seem better than it is…

  7. Hamis Hill

    Is it only co-incidental that all those involved with the failed companies benefiting from government largesse are likely to be associated with conservative politics?
    You know, “business people”?
    Heaven knows what they have lined up for rorting under Abbott.

  8. The Pav

    As a hypothetical I would love to know how Holden would have developed had it been a truely Australian company.

    How many decisions were made to comply with a global car plan where other wise a small nimble company would have innovated/ marketed to niche markets.

    Was the Monaro canned because it competed with say the Comaro and Detroit didn’t want that?

  9. Dan Dair

    The trouble with ‘the market’ is that it will do what is commercially viable.
    It won’t put jobs where the people are.
    It will put jobs where it is commercially viable.
    So all you South Australian blue collar conservatives remember that this is what you voted for…..
    When you have to sell-up at a massive loss in order to relocate to a different state because that’s where the work is.?

    mook schanker,
    Good point, rebates for the deserving & withdrawal of subsidies for the undeserving….
    Who decides which is which, why & how do you find out about these decisions.?

    The Pav,
    It seemed to me that the core problem with Holden was that it made cars for Australians. Nice cars, but not generally the stuff that the rest of Asia wanted to buy.
    If it made cars that were more saleable overseas, maybe it would have done better.
    I think it vital that any new car manufacturing in the region MUST export to survive. Australia isn’t a big enough domestic market to support a car industry on it’s own.

  10. Dan Dair

    The article trumpets the number of failures it’s found.
    Has anyone got the figures on successes.?

    Or is no-one here interested in success……?

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