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The car industry, six billion dollars and another blunder.

November 12th, 2008 · Greg Atkinson · 1 Comment

Well done Kevin Rudd, just weeks after causing chaos in the financial markets with his bank deposit guarantee, he has been able to pull another blunder out of his magic hat and found a way to potentially waste six billion dollars of Australian taxpayers money. Let’s be totally clear from the start here, the bailout package for the Australian car manufacturing sector is a political stunt aimed at shoring up support with the unions and Australians who seem to think we have a car manufacturing industry.

In Australia we host car manufacturing plants that are graciously based here by their foreign masters in the U.S and Japan. Over the years state and federal governments have given millions of dollars away in the form of tax incentives etc. to these foreign car manufacturers, and they have continued to turn out relatively small numbers of vehicles because it made economic sense to do so. Of course when it no longer makes good business sense to manufacture in Australia, then these foreign car companies will simply pull up stumps go elsewhere. (just like Nissan has done recently)

Now if all Australians purchased mainly locally made Australian cars then maybe we would have a viable car manufacturing industry. But as with a range of other products, Australians have a taste for imports and imported cars flood the Australian market even with tariffs imposed and a luxury car tax. We Australians you see, like to rattle on about protecting Australian industry while stuffing our shopping trolleys with cheap imported goods or driving the latest imported vehicles. We cry “buy Australian” but very often do the opposite. (I wonder by the way how many cabinet ministers drive Australian made cars?)

At the moment the major car manufacturers are looking at ways to cut costs, some of them are running out of cash and will be looking at massive cutbacks as well. This means perhaps Rudd’s six billion might buy some time, but it will not save the industry as we know it today over the longer term. When the foreign companies decide that Australia is no longer a viable place to manufacture vehicles or it is time to scale back operations, they will do so.

So rather than give handouts to foreign companies why doesn’t Rudd (who thinks of himself as a visionary) put the money to better use and invest in areas that would help Australia’s long term future? For example:

– Instead of imposing a back door tax via an Emissions Trading Scheme why not be a little more creative and give companies a tax cut if they meet certain “green” criteria? Not only will this help reduce pollution etc. but it will also make Australian companies more globally competitive. If you use a carrot rather than a stick you often get better results.

– Focus on medical research and invest in this area heavily. Australia could be a major player in this field and it is an area where our distance from other countries is not an issue. Australian hospitals could become world known medical research centres and perhaps we could even have a hospital system that does not kill people because of delays in getting treatment? Wouldn’t that be better than a locally made/assembled Toyota?

– Allowing someone (even the tooth fairy) to build a decent broadband internet network covering major Australian cities. We are almost through the first decade of the 21st century and we are not wired into the information age. I think Australia will be better served by a high speed communications network rather than propping up a few car plants for a few years.

In short, I think the government has made another blunder. The bailout plan for the car industry is not a forward looking measure that will help Australia’s long term future, it is a short term populist measure that will result in tax payers money being wasted. If Australians loved the car industry so much then the industry would be viable, it isn’t, so let’s get over it and focus on the future.

1 response so far ↓

  • 1 Greg Atkinson // Sep 28, 2017 at 2:51 pm

    2017 update: Toyota will shut down its Altona factory on Tuesday, putting more than 2700 workers out of a job. (The Australian. 28th September)

    The car manufacturing industry in Australia will basically be extinct by the end of the year.

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