Holden opens a Pandora's box for Hockey

The government’s decision to end its General Motors relationship steers Australia in a new direction. It’s a bold move that will only work if capital is allowed to flow to our competitive sectors.

There is no ‘blame game’ as such to be had in the demise of Holden. It is now clear that a deliberate choice was made by the Abbott government this week to end its relationship with General Motors and to allow its local subsidiary Holden to become a sales company, with the direct loss of around 3,000 manufacturing jobs.

Although some coverage of this week’s events featured a suspenseful “will GM or won’t they?” theme, in retrospect there is little mystery to the auto giant’s decision.

GM was playing a waiting game, and Treasurer Hockey was the man sent into parliament to say, “don’t bother waiting any more”.  For although the Coalition took cuts to auto subsidies to the last election, in GM’s calculations there was always the hope that it would buckle to political pressure, from its own side in Victoria and from Labor in South Australia, and hand over the required cash.

On top of the existing package of subsidies, the extra $150 million a year GM was asking for was small beer. But the debate raging in the Coalition’s joint party room was a matter of principle. Why make things in Australia that we don’t want to buy ourselves, and can’t export? 

The economic ‘drys’ won the day, and sent the message to GM in the clearest possible terms during Question Time on Tuesday.  

Hockey’s sometimes uneven parliamentary performance while in opposition was a thing of the past. On Tuesday he put on a spectacular display of indignation as he thundered: “We want them to be honest about it, we want them to be fair dinkum. Because if I was running a business and I was committed to that business in Australia, I wouldn't be saying that I haven't made any decision about its future. Either you're here or you're not.”

Translated into American for the GM board, it would have sounded like this: “[incomprehensible Arrzzie stuff] take the money we have already offered or take your fannies back to Detroit [more inaudible stuff, and something from that guy Truss - is he the bellhop? What does that guy do?].” 

Despite cultural differences it was a clear message. GM wanted $2,000 of the extra $3,750 it costs it to make a car in Australia to be paid for by taxpayers while it waited until 2020 for the Australian dollar to fall to, and stay at, a reasonable level.

By then it could almost certainly be producing the mix of local and export models that would return it to profit.

Hockey and his allies in the joint party room had to stare down protectionist Nationals and moderates like Industry Minister Ian McFarlane, and decide that the money, and the wait involved, was all too much.

The significance of this shutdown for the workers involved, for the last manufacturer Toyota, and for the SMEs making up the 50,000-strong parts industry, is huge – though it is largely irrelevant to the supply of quality cars to Australian drivers (broken hearts of Holden fans notwithstanding).

However, as a turning point in Australian history it should not be underestimated.

Hockey was sent out to press the button on a different kind of economic future.

The vision of the Abbott government is clearer than ever. Dead wood will be cut out. Uncompetitive work practices must end. Capital must flow to sectors in which we have a genuine global competitive advantage, not just a comparative advantage.

There are two glaring observations to be made about this turning point.

First it is a bold gamble. The reasserted dominance of the ‘drys’ within the Coalition, if they are consistent and able to maintain party-room power, will bring a period of structural change in which Australian lives are painfully reshaped forever – but which if successful will leave the country able to compete globally in the long term. Like the Keating reforms of the early 1990s, a lot of eggs will be cracked to make a new omelette.

Secondly, the Holden decision is utterly at odds with the Coalition’s decision to block the takeover of GrainCorp. There, a natural area of global competitiveness – agribusiness – was protected against the free flow of capital hunting for profits. That's what capital is supposed to do.

GrainCorp suitor Archer Daniels Midland wanted to invest money in an undercapitalised sector, and one in which rigid competition provisions (port access) are already in place. No need to subsidise that business. Only block it for purely political reasons.

The demise of Holden as a manufacturer will linger in the Australian psyche, whether rationally so or not. But the longer lasting effect will be if it is the first of many protected species to be allowed to die off.

If it is, the Coalition damn well better allow the industries that can flourish on their own to attract capital. Lots of capital. And that won’t happen if the short-sighted nationalism and protectionism of the GrainCorp decision is repeated. 

At the same time as shutting off Holden's fuel supply, the Coalition has pressed the start button on something big. Steering it will be a mammoth task.

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