The final report of the Federal Government’s review of the Australian automotive industry, chaired by former Victorian premier Steve Bracks, paints a picture of an industry in difficulty, but not terminal decline.
It underlines the significance of the industry to the Australian economy, a necessary and perhaps long overdue recognition. It is our greatest manufacturing export earner, pulling in $4.7 billion in 2007. We earn more exporting cars than we do wool or wheat. We are one of only 14 countries with the skills and resources able to take the most complex consumer durable from an idea to production.
Given the need to accelerate the introduction of interim and post fossil fuel automotive technologies, the Bracks Report recognises correctly that this capability is a significant national asset. To this end, it calls for the doubling of the Green Car Innovation Fund, to $1 billion, in association with the inclusion of automotive transport in any proposed carbon emissions trading scheme.
Other aspects of the report’s recommendations are consistent with this carrot and stick approach.
It proposes, for example, that existing subsidies to the industry, under the Automotive Competitiveness and Investment Scheme, should be continued to 2020, with $2.5 billion worth of grants to car makers and component suppliers.
However it also recommends that tariffs on imported cars should continue to be reduced, from the present level of 10 per cent, to 5 per cent by 2010.
So the “Bracks plan” in essence is very similar to the Hawke government’s “Button plan” (named after then industry Minister, the late Senator John Button) of the mid 1980s in that it identifies export performance as the key to survival, (plus the new green technology imperative), while at the same time cutting tariffs further – in a market that is already one of the most open and diverse in the world – to provide consumers with a greater choice of cheaper cars.
The Productivity Commission, perhaps miffed by the fact that it was not asked to conduct the inquiry, earlier released its own assessment of the Australian car industry which, basically, called it a basket case and estimated that each of the 60,000 or so people employed in it are already subsidised by taxpayers to the tune of $300,000 each.
Unsupported, the Australian car industry would certainly wither and die, probably quite quickly. But there is an element of socialising losses and capitalising profits in the way it operates, which does seem illogical when you consider that it isn’t even truly Australian. The industry is 100 per cent owned by two American companies and one Japanese company, and all major strategic and product decisions are made by American and Japanese executives, who answer to their boards and shareholders.
Economic hardheads – an essential qualification for a job at the Productivity Commission – correctly point out that when times are tough it is taxpayers who bail the industry out, and when times are good its profits end up in Detroit and Tokyo.
When the next automotive industry review – and the one after that, and probably the one after that – submit their reports to the government of the day, it’s a fair bet that continued taxpayer funded assistance will be a key recommendation.
Is a domestic car industry worth having, or should we simply let the market take its course, abolish tariffs completely, and drive other countries’ cars?