Flow-on effect of car manufacturing 'significant' to economy
Chief executive of Coca-Cola Amatil Terry Davis said the US was only just recovering from a "huge" loss of manufacturing activity in recent years, and Australia should not allow itself to go down that path.
He said local manufacturing benefited from government support more broadly, and the automotive industry was part of that.
"The downstream, flow-on benefits that are derived from the [Australian] car industry, and you hear this from the Americans as well, are significant," Mr Davis said.
"Is it a subsidy or is it just a different way of how we collect our taxes?"
His comments come after Australia's biggest car maker, GM Holden, detailed plans this week to cut nearly a quarter of its workforce, blaming the high dollar.
The bulk of the jobs, 400, will be lost in South Australia, and a further 100 cut in Victoria.
The news of the job cuts reignited debate about the heavily subsidised car manufacturing industry in Australia.
National secretary of the Australian Workers' Union Paul Howes said the flow-on effects of the collapse of Australia's auto industry would be "almost impossible to appropriately calculate".
"Not just in terms of raw numbers on jobs but also the flow-on effects through the ability of this country to have the knowledge to have any type of value-adding industries," he told an economic summit on Wednesday.
But former Reserve Bank board member Warwick McKibbin said the Productivity Commission should look seriously at the local car industry to see whether it was honestly viable.
"Australian consumers have decided they don't want to buy Australian cars," he said. "We're a democracy, that's their choice, but the question is: Does the government therefore have the right to come in and say we should still be producing cars when the people don't want those cars?
"It's really just a waste of resources. It's a subsidy, a very large subsidy to a group in society."
There was debate about positive spin-offs from high-end technology on an economy, but that should be assessed, he said.
Frequently Asked Questions about this Article…
Coca‑Cola Amatil chief executive Terry Davis says the Australian car industry delivers significant downstream economic benefits, and he warns Australia should avoid the large loss of manufacturing activity seen in the US — arguing local manufacturing benefits from broader government support.
Union leaders like Paul Howes say the flow‑on effects would be huge and hard to quantify — not just job losses but lost know‑how and the ability to sustain value‑adding industries, which could affect suppliers and regional economies that investors watch closely.
GM Holden announced plans to cut nearly a quarter of its workforce, blaming the high Australian dollar, with about 400 jobs lost in South Australia and a further 100 in Victoria — a move that reignited debate over the sector’s viability and economic impact.
The article notes the car sector is described as heavily subsidised, sparking debate: some argue subsidies support valuable downstream benefits, while critics like Warwick McKibbin call them a large waste of resources if consumers won't buy Australian cars — a policy risk investors should monitor.
Warwick McKibbin suggested the Productivity Commission should seriously assess whether local car manufacturing is honestly viable, pointing out that if Australian consumers choose not to buy domestic cars, continuing production via subsidies may be unjustified.
According to the article, job losses at major car makers like GM Holden would have considerable downstream impacts — affecting supply chains, regional employment (notably in South Australia and Victoria) and the broader manufacturing knowledge base investors consider when evaluating local economic strength.
Terry Davis and others argue government support plays a wider role in sustaining local manufacturing, including the automotive sector; however, the article shows there’s debate over whether such support is a justified subsidy or an inefficient use of resources if market demand is lacking.
Investors should monitor government policy on industry support, outcomes of any Productivity Commission reviews, consumer demand for Australian cars, and announcements from major players like GM Holden and industry voices such as Coca‑Cola Amatil and unions — all factors highlighted in the article as shaping the sector’s economic ripple effects.
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