Holden's eight hard lessons for Abbott

Tony Abbott and Joe Hockey have yet to understand the implications of helping drive General Motors out of Australia. It will leave the nation with deep scars, and Bill Shorten with a powerful political weapon.

Prime Minister Tony Abbott and Treasurer Joe Hockey have yet to grasp the full implications of what they have done in helping drive General Motors out of Australia.

And for Tony Abbott to suggest that the GMH workers can get work at Olympic Dam is a cruel hoax for South Australians.

BHP has yet to work out how to mine, treat and transport Olympic Dam material on a larger scale. The old large open pit plan was a boom-time uneconomic idea. And Holden is likely to close well before 2017.

Here are eight implications from the Tony Abbott and Joe Hockey decision.

1. At the election Tony Abbott did not seek a mandate from the Australian people to close the automotive industry so he has given Bill Shorten a carbon tax-style issue, which will be particularly effective in South Australia and Victoria. If Shorten follows the Abbott popular appeal formula that the Coalition leader used with such devastation against Kevin Rudd and Julia Gillard, Shorten will achieve similar opinion poll results. Don’t be surprised if those poor Coalition opinion polls cause leadership change speculation in a year or two.

2. Abbott and Hockey never had the normal honeymoon given to political leaders. They are starting on a process of major reform of financial services, superannuation, competition etc. As Paul Keating has so graphically described in his ABC interviews, to make major reform changes you need political capital. Within three months of office Abbott and Hockey have spent a large chunk of their political capital and with the mining investment boom ending and retail carnage ahead, plus the public service reductions, the Coalition’s forward-thinking plans for reform may have to be sidelined. This is a tragedy for Australia.

3. There is still a chance that the closure of the entire motor industry can be avoided and Toyota retained if the government comes in behind the parts makers and helps them further diversify and market internationally (Give Holden's money to the parts makers, December 11).

But if it does not then the industry will crumble well before 2016-17. Immediately bankers will be looking nervously at parts makers’ balance sheets and investment will stop; consumer purchases of Commodores and Cruzes will fall and those who have bought Commodores recently will suffer big losses; the lower demand and banker pressure will make it hard for many parts makers to continue.

4. A large part of Australia’s manufacturing skills base in defence and other areas will go out the window with motor. And the big rise coming in gas prices will kill off another part of the manufacturing sector. It’s true that manufacturing has been declining but to suddenly wipe most of it out when the mining investment boom was ending is a disaster for the country.

5. It is likely Labor will win power in Victoria next year, partly in protest against Abbott and Hockey.

6. Be ready for rises in bad bank debts, particularly in South Australia and Victoria.

7. Retrenchment funding and unemployment rises stemming from the simultaneous decline of motor, mining investment and retail areas will hit the budget. The LNG and iron ore profits will need to be big to cover the large government costs.

8. Where will Australia gain its growth? There are five industries that stand out – mining for revenue but not employment; agriculture, tourism, Chinese investment in housing, education and possibly some areas of health, although our health costs are too high for export.

Bruce Billson’s plan to stimulate small enterprise now becomes the government’s only hope of redemption.

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