Warren Truss says axing the carbon tax will lower the cost of producing cars in Australia.

Warren Truss says axing the carbon tax will lower the cost of producing cars in Australia. Photo: Alex Ellinghausen

What do Holden and Qantas have in common? Here's a clue. It isn't that they are being killed by the carbon tax, although you might think they were. In his letter to Holden on Tuesday, Deputy Prime Minister Warren Truss said axing the carbon tax would ''lower the cost of producing cars in Australia''. The truth is the cost would scarcely budge. The cheapest new Commodore sells for $35,000. Holden says the carbon tax costs it $45 per car. That's right, only $45. It's a fraction of a per cent.

Nor are Holden and Qantas being done over by rapacious unions.

During the global financial crisis, Holden's workers accepted half-shifts to stop job losses. In April this year, they signed up for a three-year wage freeze in exchange for a commitment from Holden to stay in business beyond 2016. Each production-line worker puts in an extra quarter hour a day.

They are the most productive in the 37 countries in which General Motors manufactures cars.

''Every 60 seconds a vehicle rolls down our assembly line,'' Holden boss Mike Deveraux told the Productivity Commission last week.

''The people making cars in Adelaide have to deal with a significant amount of complexity as each car comes past them - much more than in most other GM plants. They will build a couple of Cruzes, they will build a Commodore, a sports wagon, a Caprice, another Cruze. I mean, a different car and a different job comes at these people every 60 seconds, and on Cruze, they are loaded to 56 seconds out of that 60-second cycle time, balanced across hundreds of people on that assembly line.''

''It's the highest loading in GM plants anywhere that build the Cruze.'' And yet Australian workers cost more than their less agile counterparts overseas.

About 80 per cent of the cost of making a car is people.

Deveraux asked rhetorically: ''Is the cost of labour higher in Australia than it is in Asia?'' He answered: ''Of course it is. We have a very good standard of living here and I don't think I would be making anybody surprised when I say that people in Australia make more than they do in many other places in the world.''

Holden told the commission it cost twice as much to make a car in Australia as in Europe, and four times as much as in Asia.

Holden never needed to close that gap. The deal it had struck with the Gillard government (that the Abbott government reneged on) wouldn't have closed the gap, but it would have closed it somewhat, enough to make it worth staying.

A global corporation like GM can tolerate having loss-incurring plants in affluent markets like Australia. Its general philosophy is to ''build where we sell'', and it knows the dollar might one day start to fall.

The dollar is the common thread in the death spirals of Qantas and Holden. Not as obvious or as politically charged as less important issues such as the carbon tax or industrial relations, it has risen to a height never before seen in its 30-year history as a floating currency, and hasn't yet moved too far down.

In the quarter of a century to January, 2010, the Aussie averaged US72¢. In recent months, it has been US105¢. It has been great for car buyers and great for travellers. A foreign car that cost $20,000 now costs $14,000. An overseas air ticket that was $2000 now costs $1400.

For companies like Holden and Qantas, on the edge before the dollar soared, it means anything they try to sell overseas costs 45 per cent more.

It's why Golden Circle is closing its canneries and moving to New Zealand. It's why Electrolux is closing its factory in Orange and will source fridges from Asia and Eastern Europe. It's why neither Holden nor Qantas can survive, unless the dollar falls.

On Friday, Reserve Bank governor Glenn Stevens abandoned his usual reserve and said he would prefer a dollar nearer US85¢ than US90¢, where it has recently been. It will need to go lower still if we are to regain our competitiveness. When mining prices were high and earnings were flooding in, it didn't much matter whether the rest of the economy was able to make money. Now that they are not, and the Australian dollar is still high, we have a problem.

One way or another we will have less buying power next Christmas. Either the dollar will be dramatically lower, allowing us to compete again, or more Australian firms will fold, causing a recession. It's time to talk seriously about how we can bring the dollar down.