The production line at the Holden Elizabeth plant in SA. Photo: David Mariuz
The possible withdrawal of car maker Holden could trigger a recession in southern states, it is feared.
With Treasurer Joe Hockey already complaining of rising unemployment and falling economic growth nationally, there are increasing fears the auto giant, which has its headquarters in the US, is on the cusp of following Ford out the door, unless Canberra comes up with a new aid package soon.
Experts say closing GM Holden's Australian operations would deprive local component makers of critical mass, instantly putting up to 40,000 jobs on the line in Victoria alone.
''The knock-on effects would be massive, perhaps enough for a recession in the southern manufacturing states,'' said an MP who did not want to be named.
The Coalition government was elected on a platform of winding back subsidies to car makers but since the election has been confronted with a fresh crisis amid talk of Holden's demise.
Industry Minister Ian Macfarlane has held crisis talks with Holden but stopped short of providing extra financial help. Relations were further strained by General Motors' decision to promote Holden's top man in Australia, managing director Mike Devereux to GM's China operations. That earned a rebuke from Mr Macfarlane who saw it as an act of bad faith.
Premier of South Australia Jay Weatherill has branded the situation ''very dangerous''.
''Every day the federal government waits on whether it will commit to the co-investment strategy, the more dangerous it gets,'' he told ABC radio, calling the possible closure ''a reality''. The outlook for jobs growth is not restricted to traditional manufacturing. Deloitte Access Economics will report on Tuesday that business investment outside the mining sector has fallen to its lowest since 2008.
The total value of projects is down 5.7 per cent during the year after sliding for three successive quarters, the longest slide in a decade. ''Business investment spending is looking increasingly shaky,'' said Deloitte Access Economics partner Stephen Smith.
The value of all projects under construction fell another 3.3 per cent in the September quarter to 7.9 per cent during the year. The value of projects regarded as committed, under consideration or possible fell 3.9 per cent during the year.
Mr Smith hoped the new government would boost infrastructure spending just as the Labor government did during the financial crisis, saying the lower dollar might have come too late to save manufacturers. ''Although yet another round of federal and state subsidies may help, they may still be more in the nature of delaying the inevitable rather than kick-starting a recovery,'' he said.