Have your say on the Bracks Report
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?
August 17th, 2008 at 7:30 am
If you loose the ability to manufacture vehicles in this country, then we loose the ability to be self sufficient. In times of war, natural disaster we need a sound manufactoring industry.
Are we to become a service based economy, were are are skills are in making coffees, rather than making cars? I hope not.
August 19th, 2008 at 3:37 pm
… Or alternatively we will finally recognise that we are competing on a world stage and that unless we smarten up and either work better or create really competitive products then we are doomed to either fail or end up forking out our tax dollars to save an industry that can’t stand on it’s own two feet.
Completely agree that we need to be able to be self sufficient but ultimately if we make crap products then it won’t matter anyway. Our government has no interest in backing and investing in manufacturing in Australia - but businesses are as much to blame as the government. Oh and so too are consumers.
It’s a complex problem. There are many european manufacturers that are profitable and create fantastic products - case in point Porsche - independently owned and extremely profitable.
Our issue is that our industry is run by morons who have been so protected by high-tariffs, taxes and government help that they have in effect become lazy and useless.
We are only one step away from the American industry that has through self protection and poorly educated consumers managed to stay afloat despite producing sub-par products.
I for one am dismayed that someone else is making decisions for me (via taxes and policy failure) about what cars I can buy at reasonable prices when compared with what the rest of the world pays for them.
August 20th, 2008 at 4:03 pm
No sense keeping businesses in business if they cannot compete on a international level playing feild, abolish the tariffs and the protection for local (internationally owned) vechicle maufacturing, and forget about trying to manufacture our own cars.
Perhaps then our local independant and local (internationally owned) will then start producing the vehicles for tommorrow, not the gas guzzlers we drive today.
August 20th, 2008 at 4:22 pm
This competing on a world stage is nonsense. When other countries have to pay superannuation and sick leave and all the other appropiate and justified employee costs. When other countries have to pay the same level of taxes as Australians do, when other countries have to wear the stupid burden of carbon trading, then we can talk competition.
I am fed up with people destroying manufacturing in Australia. China killed clothing manufacturers in Australia by using near slave labour and subsidising fuel. Failing to compete is not incompetance by Australian companies, it is anticompetitive behaviour of China. The clothes are poorer quality, include toxic chemicles and cost more.
These stupid economic theories have stuffed up world economies, just open the Financial Review. How bad does it have to get before economists get over egos and admit they got it wrong. We need manufactuing in Australia and we need Governments to protect whether it is tariffs or other appropiate mechanisms.
August 20th, 2008 at 4:26 pm
When the Australian Government allows local or imported unsafe vehicles (Holden Barina, Tata’s and many light commercials etc.,) onto the market without restriction and places penalty taxes on safer vehicles (all those above the luxury tax threshold), decisions are not being made in the interest of the population at large. And not much seems to be happening with the Australian Design Rules (ADR)! I hear alarm bells ringing………… Does anyone else?
August 20th, 2008 at 4:58 pm
Of course we should maintain a vibrant car industry in Australia. The problem has been the Australian manufacturers management have had their heads in the sand for generations. Blind Freddy could see 10 years ago that we needed compact fuel efficient vehicles but the managers still insisted in building heavier ,larger , unreliable & low efficiency cars. A sea change might come when the Bathurst races comprise of light weight fuel efficient vehicles. John Carswell
August 20th, 2008 at 5:22 pm
Why is the Government’s answer for solving the nation’s economic and social problems, to increase taxation? Is this what our politicians in Canberra want?
http://www.youtube.com/watch?v=BOFIt9iw1Fs&feature=related
There should be more effort from our government in keeping this sort of rubbish away from our shores and less effort in penalizing local manufactures who are producing quality, SAFE vehicles.
August 20th, 2008 at 6:01 pm
The first thing is that the market is ‘driven’ by demand - with fossil fuels becoming more expensive and of crucial importance climate change gases needing to be significantly reduced then car manufacturers need to adapt their product quickly to meet new demand requirements. Frankly, the need for this has been around for several years and the senior leadership of 2 of the 3 big manufacturers’ just missed the boat (exports and internal sales). I think the lame excuses by manufactuers is that they need time to adapt is a bit lame given the gravity of our situation. Think of it like a war - adapt and manufactuer what is required to survive - stop bleating and do it or get off the track. The new Govt has done the right thing by getting onboard with Toyota to manufacturer hybrids (first approach) but much more is required and if that means saying goodbye to Ford and / or GM then let em go; there is going to be a big need for other infrastructure projects and the workforce will be in big demand to do this (solar power stations; new water projects; etc) the economy could boom because of the need to move from one economic model to a new one.
August 20th, 2008 at 6:38 pm
John Carswell, your Bathurst sea-change occurred 10 years ago! The 2L Super Tourers were the category that were going to conquer the world – light weight, small motors, fuel efficient - a vision of the world’s automotive future. And, as history shows, around the globe they conquered precisely nothing – the world conquered them. V8Supercar dominates Australian motorsport, NASCAR is the biggest motorsport category on earth, Super Tourers are a largely forgotten footnote on the pages of the history of motorsport - and in the open market Holden sold more V8s last year than ever before.
Yes, it is to our benefit to have a viable and vibrant local car industry, but we need to recognise that the primary drivers of the industry are what the consumer wants and what the consumer can access.
Years ago the Australian market was characterised by a huge gap between these two elements. On the demand side, many drivers were forced into the corporate –issue Commodore / Falcon /Magna / Camry, regardless of what they may have wanted to drive. The ready availability of large numbers of second hand versions of these cars drove that profile out into the second hand market. The advent of Novated Leasing (and associated tax concessions) changed all that. Companies were able to move vehicle assets off their books and employees could drive whatever they wanted to drive. On the supply side, many great cars available in other markets weren’t available in Australia due to tariffs / duties / taxes in various forms making them excessively expensive, the mis-alignment of the Australian Design Rules to global standards and the poor quality of the fuel available. The Button plan fundamentally addressed these issues.
The result of these collective factors was the narrowing of the gap between what the consumer wanted and what they could access – and the capacity for any one model or category of vehicle to dominate the market like the “big family six” and its derivatives had done in Australia for so long was eliminated. The totally unnatural, distorted beast that was the Australian automotive market space was normalised like no other, resulting in a market that is about 6% of the size of the North American market, but has more manufacturers and models available in it. Local manufacturers needed to produce more models to cover the wider range of segments, build volume through exports or develop an economically viable downsized local manufacturing business model. Some have, some haven’t. Some survive to this day, some didn’t. Some will survive in the long term, some won’t.
The local industry produces some amazingly good product in a limited range of market categories, particularly the large passenger car and medium SUV segments, both of which will continue to be significant segments in an increasingly splintered and segmented market. The local market will never have the volumes to allow local manufacturers to compete across many segments, but here’s hoping that the manufacturers have the flexibility and responsiveness to continue to do what they do so well for many years to come.
August 20th, 2008 at 7:22 pm
I’m with the Productivity Commission. There is no good case for taxpayers subsidising an Australian automotive industry.
August 20th, 2008 at 7:49 pm
Yes, we must keep manufacturing cars in Australia, we need the jobs!!!!!!
August 20th, 2008 at 7:55 pm
The Australian market has already moved over time to follow the drivers of fuel efficiency, capital cost per unit, reliability and style. The Australian market parallels the World market. The result is a continuing loss of position for the cars made in Australia even though in their class they represent reasonable offerings. Markets overseas that exist for these segments are very competitive because they are covered by lots of old technology from the world manufactures. The Australian industry only survives today because it is subsidised.
Fuel cost and the further impost of carbon cost will drive this change faster and no amount of fostering an inefficient industry against the tide of public preference will change that market reality.
At least some elements of the Bracks Report would support the one chance that we will have to maintain any automotive manufacturing here and that is efficient production of technology backed products that suit the market need. That is for hybrid and other fuel efficient technologies. Well done to Steve. It is an important industry segment as it maintains strategic manufacturing in this country.
New investment in Australia for companies also will be difficult to justify in a corporate environment until there is a competitive taxation situation for company profits so there will be and are now considerable hurdles for a Government that wants to grow a vibrant efficient industry.
August 20th, 2008 at 8:16 pm
Of course we should manufacture cars in OZ, it is the Pollies who have killed off the car industry.
Remember it was the Button plan that killed the MITSUBISHI COLT, so why would any one listen to politicians and what qualifies Bracks to raise such a report. Besides there is supposed to be a level playing field is that what tariffs should be. So called third world countries that OZ supports have far better Transport infrastruce than OZ.
Yes Ford and GMH have been extremelly to respond to the manufacture of small cars.
August 20th, 2008 at 8:45 pm
Australians ceased building Australian cars when the Hunter/Bolwell etc type vehicles were eliminated by the various state and Federal Departments of Transport. The vehicles fabricated in this country over the last 30 years are simply the cast off refuse from the USA and Japan.
Our State and Federal Governments of every persuasion have not been able to see past the “Big Manufacturer” for a “Big Bucks=Big Bang” policy.
Those old enough to recall what actually happened during WW2 will know that the Armed Services could not get enough ammunition, guns, planes, tanks, ship or fuel from local sources during 1942 to deal with the enemy on the doorstep. A local manufacturing industry for strategic purposes never has existed and never will.
We have been in the same position ever since. So nothing has changed.
Car manufacturing should be treated like any other industry. No subsidies, no tax breaks, no industrial relations deals and no political support.
August 21st, 2008 at 9:07 am
While I am not in favour of dismantling local car manufacture it is obvious that the locals are not building the cars that Aussies want to buy. The days of the large gas-guzzling Fords & Holdens are over so therefore the government should dictate the types of vehicles they build locally before handing over any more of our money.
August 21st, 2008 at 9:55 am
Norman the Foreman is from the same school as me.If its a public utility the government can throw money at it, the motor industry is privet enterprises just like any small business and we don’t get Tax deals or big MD pay outs for not being able to do our job, be competitive or get out, Go dig a tunnel that we can use, thats what our tax’s are meant to be used for. one more privet enterprise still only a small business with big overheads, (MD Pay outs)
August 21st, 2008 at 11:55 am
I would have to agree with Francoise, we need to maintain our local car industry and if that means subsidies to it and tariffs on imported cars then so be it. After all, our cars are world renowned as being well-built safe cars; please allow the manufacturers to grow this reputation.
Vehicles should be taxed on two things: Firstly their carbon footprint and secondly on their safety rating. A stepped tax rate, based on the price of the vehicle just reeks of a money grab.
August 21st, 2008 at 12:45 pm
who are we kidding - there is no international level playing field, every other country provides some form of benefit to their local industries: tarrifs, fuel/power subsidies, tax breaks, government financial props etc. Not just cars but across many industries. Australia seem to have a niave view of what the rest of the world really does for their ‘locals’.
Maybe we have far too much choice, more choices than you see on the streets of Europe or Japan or Kopea or China. Restricting the depth of the market would make life much easier when buying a car.
I drive European, but I’ll happily pay the extra for the advance level of engineering and safety. Environmentally it would be nice to have no local industry, but on a global stage Australia has a better chance of a positive track record of thinking/being green than countries outside Europe; do we want to push the problem somwhere else? do we think is carbon neutral to bring the cars to Australia in big, old, diesel driven ships?
August 22nd, 2008 at 12:59 pm
We have to maintain our local car manufacturing industry. We have to support local industry irrespective of what our econimic hardheads state. If we lose this industry then the next attack will be the steel industry which is what our competitors want. Time and again we have seen good local industreis move off shore leaving employees to be supported by the taxpayer. Surely its better to provide people with work than leave them on ths scrap heap.
August 22nd, 2008 at 4:02 pm
I see where we have stopped building Corollas in Australia, but not Camrys, indeed we will have a petrol/electric Camry. In view of the fuel crisis, which will get worse, why not build Corollas?? I see where Ford will build Focus in Australia, this move should succeed.
But then what about Holden?? Any plans to build a small car in Australia, if so I haven’t heard of it. They must consider this, but not Daiwoos.
John Carswell’s comment is spot on in regard to Manufacture.
August 23rd, 2008 at 11:19 am
Industry works when you manufacture things people actually want. Pretty simple from where I’m standing.
As others have stated, the car manufacturing industry in aus has died because the manufacturers here have been making stupidly big, stupidly thirsty vehicles which are no longer relevent, not in the least because petrol prices are rising and rising.
There would be no problem if car companies in the country made cars that suited the times. There’d be even less of a problem if the prices of these cars benefitted us… then we’d actually buy these products and therefore support the industry. That way companies wouldn’t have to rely on fleets to buy their product.
August 26th, 2008 at 3:30 pm
Why don’t we use the absence of an international level playing fiild to our advantage. If all the other government’s of the world are subsidising their car makers to make better and cheaper cars than we do… why fight it?
Instead lets remove the subsidies from our uncompetitive, unsustainable car industry, free up scarce labour and resources for those industries that we are world leaders in (eg. mining, insurance and banking) and import better cars at cheaper prices.
The only thing worse than an ineffective subsidy is a subsidy which benefits the taxpayers of another country. The way to benefit from this is to stop subsidising the US and Japanese shareholders of GM, Toyota and Ford and instead import the cars that other governments subsidise. In the meantime Australians can pay less tax.
October 2nd, 2008 at 10:12 pm
we live in troubled times
instead of kneejerk reactions vision is needed to make sure all decisions are carefully made to overall policy objectives which include climate change criteria and measure the interventions clearly.
if the workers are subsidised $300000 each where is the money going? to the fat cats who cry poor? and persist in moronic efforts to do the least, confident that their pull with their government cronies will see them through while the disadvantaged in society suffer unjustly because there is no political leverage being applied on their behalf.
even labour is cowardly here.
why not apply the market? require firms to disclose clearly GOVERNMENT SUBSIDIES (or better still call it TAXPAYERS DOLEOUTS) to clearly identify the inefficiencies in each business and the inefficient supports needed for inefficient outcomes without accountability.
and the fat cts pay themselves more and sack more workers in spite of this.
Better still would be to train public servants to take on directorships in the companies needing HANDOUTS so that they can directly monitor and influence companies to adopt public policy outcomes consistent with government support.
a blank cheque is a total dereliction of accountability by governments and smacks of corruption when the rich network with their sycophantic political cronies wooing supposed leaders and influencing them to take biased decisions which impoverish society overall and cheapen leaders’ credentials and credibility.
Mybe it is time for governments to be issued new shares in the companies at market value to reflect the massive investments and have mandatory board membership as a condition for these DOLEOUTS.
The item should be show not just as revenue for the current year but as GOVERNMENT CAPITAL OWNERSHIP in this case.
Only if leaders can measure the effects of their decisions on inefficient industries will there be any rational decision making.
In this way we will see growing amounts however classified of GOVERNMENT SUBSIDIES/DOLEOUTS for the year and cumulatively and this will allow taxpayers to compare the payments made say to private schools and hospitals against those to the public sector and be enabled through productivity measures to make rational decisions on whether to change such interventions to more effective ones.
This is very easy in accounting terms.
It is time for governments to actively assist efficient businesses and disengage from inefficient white elephants, now matter how much the white shoe brigade does its snow jobs.
Mitsubishi would have survived if its best efforts with the Magna were rewarded and Ford and Holden made accountable for their inefficient interventions.
government SUBSIDIES for all car manufacturers more efficiently administered could have ensured Mitsubishi’s survival, required HOLDEN’s implementation of CSIRO design improvements and moved the car industry to more effective models long before they chose to come to taxpayers with their begging bowls.