Gittins: The end of Aussie made cars
In the 1960s manufacturing accounted for about 25 per cent of all the jobs in Australia. But it’s been declining steadily since then and today it’s about 8 per cent. The obvious question is, why?PT3M51S http://www.canberratimes.com.au/action/externalEmbeddedPlayer?id=d-32fbx 620 349 February 11, 2014
One advantage of getting old is meant to be a greater sense of perspective. You've seen a lot of change over your lifetime and seeing a bit more doesn't convince you the world is coming to an end. Unfortunately, getting old can also leave you convinced every change is for the worst as the world goes to the dogs.
A lot of people have been disturbed by the news that Toyota's closure as a car maker in 2017 will bring an end to the manufacture of cars in Australia, with the loss of many jobs also in the parts industry.
But my guess is the most disturbed observers will be the old, not the young. I doubt if many young people had been hoping for a career in the car industry. And I know that few people - young or old - buy Australian-made cars.
Illustration: Kerrie Leishman
That's not a cause for guilt, but for being sensible. To regret the passing of an industry whose products few of us wanted is just sentimentality, making no economic sense. A lot of the dire predictions we're hearing won't come to pass. However many jobs the vested interests are claiming will be lost, they're almost certainly exaggerating.
That's particularly true of the alleged flow-on effects, which are often calculated on the assumption that any money which would have been spent buying the product in question will now not be spent on anything. I've never believed car making was of special strategic significance to advanced technology. Every industry claims to be special. And I've heard the claim that this spells ''the end of manufacturing in Australia'' too many times in the past to believe it.
You think 35,000 is a huge number of jobs to be lost? It isn't. It's 0.3 per cent of all jobs, equivalent to about two months' net job creation in a normal year. You think this could put the economy into recession? We're overdue for another recession but this isn't nearly big enough to be the main cause of one. Even if it was, it wouldn't happen until 2017.
It's true some of the workers who lose their jobs won't be able to find alternative jobs, and some that do won't find jobs as well paid. But far more will find jobs than many of us imagine. Naturally, it's important for governments to give affected workers a lot of help to retrain and relocate.
Some people assume an imported car creates no jobs. Far from it. Are you able to buy an imported car for anything like the price at which it crosses our docks? Of course not. Most of the gap between the landed price and the retail price goes on creating jobs for Australian workers in our extensive car-distribution industry.
The fact is the sale, fuelling, servicing and repair of cars has always involved far more jobs than the making of cars and car parts has.
I've been responding to people's fears about the decline in manufacturing for almost as long as I've been a journalist because manufacturing's share of total employment began declining well before I joined Fairfax in 1974.
The truth is the industrial structure of our economy has been changing slowly but continuously since the First Fleet. A lot of angst has been generated over that time but the fact remains we're infinitely more prosperous today than we were then - with a much higher proportion of the population in the paid workforce.
The changing mix of industries is actually a primary cause of our greater affluence. Countries that try to prevent their industry structure changing are the ones that stop getting richer.
To put the latest developments into context, let me show you the bigger picture of Australia's economic history, drawing on a Reserve Bank article. Throughout much of the 19th century, agriculture accounted for about a third of the nation's total production, with mining bigger than manufacturing.
By Federation, agriculture provided about 25 per cent of total employment, with manufacturing providing 15 per cent and mining about 8 per cent. By the 1950s, however, manufacturing had grown to 25 per cent, agriculture was falling towards 10 per cent and mining was down to 1 per cent.
So as the shares of agriculture and mining declined, manufacturing's rose. But from the 1960s, manufacturing's share of total employment started falling from its peak of about 25 per cent to be down to about 8 per cent today.
Remember, however, that an industry's declining share of the total doesn't necessarily mean it's getting smaller in absolute size. Although today agriculture accounts for only about 3 per cent of the total, the quantity of rural goods we produce has never been higher. And manufacturing's output began falling only in recent years.
So an industry's share falls mainly because other industries are growing faster. And, with the exception of mining, the sector that has provided virtually all the growth is services. It accounted for half our jobs even in the 19th century, but from the 1950s, its share took off, rising sharply to about 85 per cent today. Most of the growth has been in health, education and a multitude of ''business services''.
Many older people find the relative decline of manufacturing disturbing but I can't see why. Services sector jobs tend to be cleaner, safer, more skilled, more value-adding, more satisfying and better paid.
Ross Gittins is economics editor.