Flow-on effect of car manufacturing 'significant' to economy

The head of the country's biggest soft-drink bottler has thrown support behind Australia's automotive industry, saying the economic benefits of the industry are "significant".

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.