The government's car crash of an automotive policy

Along with loading iron ore on to ships and sending them off to foreign parts, we are also, in a sense, loading Australian dollars on to foreign ships and sending them off to foreign parts too.

The decision to reduce automotive tariffs to levels our Asian competitors see as unworkable has sent the new-vehicle market into turmoil. According to the latest registration figures, the top 10 selling marques have been significantly rearranged since 2001, when the Motor Industry Development Plan, known as the Button plan, had reached fruition and a 15 per cent tariff, a favourable dollar and a cheap assistance plan seemed enough to sustain the local industry.

The registration figures also show how Australia will be exporting more than a fifth of its manufacturing base just so we can buy new cars for a few dollars less. 

It goes to show how much Australians like a discount – we're happy to put our neighbours out of a job to get one.

In 2001, the four most popular marques were Holden, Toyota, Ford, and Mitsubishi, all local manufacturers. Together they garnered 62.3 per cent of the market.

In 2015, the top four makes were Toyota, Mazda, Holden and Hyundai. The two local manufacturers held 26.7 per cent while Ford, now in 6th place, added 6.1 per cent to the locals' market share.

The importance of this change lies in how many Australian jobs are supported by the vehicle sales of each marque.


In 2001 the four manufacturers directly employed more than 12,000 people, excluding the parts suppliers that are the bedrock of the industry.

In 2015, the top four marques employed about 7700 people in Australia, and that figure will drop alarmingly over the next two years.

Comparisons between the four marques illustrate the folly of the Abbott government in deciding to close the car industry.

A total of 206,236 Toyotas were sold in 2015 and Toyota employed 3900 people in Australia to achieve those sales, a ratio of 53 vehicles for each person employed.

Mazda, which came second with 114,024 sales, employed 125 people. In total. That's a ratio of 912 cars for each person employed. And Mazda is not the only importer achieving big sales from skeleton staffing levels.

In short, Australia is getting nothing in terms of employment from getting rid of tariffs and creating the most open car market in the developed world. 

Yes, we have access to cheaper cars but, although market economists say competition will keep prices down, there is reason to believe that when the local factories close, the constraints they have brought to price rises will also disappear.

Chances are, right-hand drive vehicles will suddenly cost more to produce.

No one can be surprised at this result. The surprise lies in the willingness of the Abbott government to export as many as 200,000 automotive jobs to other countries, jurisdictions that value domestic employment – steady employment, eight hours a day, award wages -- more highly than we do.

So much so, they have for quite some time offered greater assistance to their carmakers than Australia ever did. It was so low under Labor's Automotive Transformation Scheme, the Productivity Commission was too embarrassed to do the comparison, as requested by Joe Hockey, when it compiled its last report.

Australia already offered the lowest level of assistance of any car-making country when acting prime minister Warren Truss and treasurer Joe Hockey decided in December 2013 to close down the car industry without even a vote in the House.

All it took to wipe out 70 years of achievement and accumulated industrial capacity was a whim by an austerian treasurer, who did not even last long enough in the post to oversee the displacement of the 200,000 automotive workers he in effect sacked, and a National Party leader keen to redirect some of the automotive assistance to his own constituency.

Our embrace of the misleadingly named free trade philosophy has made us even more of a laughing stock than Australia's current carbon emissions policy. There is nothing "free" about removing tariffs and kissing goodbye to 200,000 automotive jobs. That sounds like just the opposite, a trade policy with a very high price tag.

How long will it take us to train a similar number of architects and lecturers, the vaunted shock troops of Australia's new export economy? Will sufficient people want to pay US-style fees to obtain those qualifications? 

With more than 60 different brands available on the market, the list of importers creating minimal numbers of jobs in Australia is extensive.

An honourable exception in this sad list is Nissan, which made cars here for 26 years before throwing in the towel in 1992. The company has maintained its aluminium casting plant in Dandenong, and its workforce, since it stopped making cars.

The only importer that does recognise the absolute free kick Australia's industrial non-policy has delivered is Hyundai. Like the other pure importers, Hyundai has a low ratio of jobs to sales – fewer than 200 people to sell more than 100,000 vehicles a year in Australia.

However, the big Korean group has at least been seeking to establish its good citizen credentials by drawing attention to its steel mill in Korea, which uses mostly Australian iron ore and coking coal to produce more than 20 million tonnes of steel a year.

That at least shows some awareness of the great benefit it is deriving from our open market and the need to offer something in response.

But it also draws attention to the fatal flaw in the government's plan to eschew manufacturing and base the country's future on primary industry, whether it be mining or agriculture.

Hyundai might buy 8.2 million tonnes of iron ore at $55 or $60 a tonne, but when this is viewed from a national perspective, it is not that flattering for the bureaucrats and the Productivity Commission who designed this part of the economy.

The business plan they have designed looks like this. Australia sells iron ore at $60 a tonne and buys it back in the form of vehicles at around $20,000 a tonne. Value adding? Who needs it?

As well as loading iron ore on to ships and sending them off to foreign parts, we are also, in a sense, loading Australian dollars on to foreign ships and sending them off to foreign parts, as well.

And 200,000 automotive jobs are about to follow.

Ian Porter is a manufacturing analyst and a former business editor of The Age.


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