Jobs are becoming a Coalition baptism of fire

Whoever wins the election will be faced with a potential employment disaster. Generals Motors' call on Holden and mining projects ending could bring the toll to 300,000.

If the Coalition wins the 2013 election it will face the danger that the combination of mining and motor industries could cause 300,000 jobs to be shed over two to three years, with many of the jobs lost or about to be lost in the last year of the 43rd parliament.

In terms of employment I cannot think of a more dangerous set of circumstances for an incoming government hoping for two terms.

This danger, particularly for the Coalition, was made very apparent at the Australian Leadership Retreat on Hayman Island. The most immediate danger is the motor industry because it had seemed likely that the head of General Motor’s international operations, Tim Lee in Shanghai, planned to make the decision about continuing to make Holden in Australia next month – a few weeks after the election.

But Australia had a lucky break. Earlier this month Tim Lee was given the job of spearheading General Motors’ China operation and the new man in charge of the international business, including Australia, is former Volvo Chief Executive Stefan Jacoby.

Jacoby has been in the job only a few weeks and is likely to give a new government more time. Nevertheless that time will not cover an extended period and the Coalition’s plan for productivity commission hearings and other delays are likely to be given a cold reception. General Motors has signed an agreement with its work force in Adelaide which is groundbreaking and will boost productivity substantially. But on its own it will not be enough to keep Holden here (Holden workers take pay cut, August 13).

To combat Australia’s low tariffs, unfavourable trade agreements and a high dollar General Motors and Toyota need a partnership with the Australian government. The Howard government invested $1 billion but the ALP has now increased that to $2 billion and on that basis Holden and Toyota will stay on in Australia, although the FBT change has ravaged Toyota. The Coalition is planning only $1 billion dollars although it is prepared to negotiate a higher figure. The sensible policy for the Coalition is to retain the motor FBT but make it applicable only to cars made in Australia. Then there is unlikely to be a requirement for anything more than the $1 billion dollar outlay. But if the Coalition miscalculates in a game of bluff then there are some 45,000 workers in the motor industry whose jobs are in jeopardy, which translates to a total work force of around 150,000 including indirect job creation.

If Australia was in the middle of a mining boom, letting the motor industry go might be a feasible option but the party that wins the 2013 election faces the likelihood of an end to mining project construction activity on Australia’s giant LNG projects plus other major mining expansions.

These projects currently employ in the vicinity of 35,000 people and, like the motor industry, have an indirect employment which takes the total to around 150,000 people. Unless new projects can be generated almost all the 150,000 jobs will be lost. In addition there are more than 12,000 public servants whose jobs are in danger in the next two years. The Coalition has plans to generate some two million jobs in Australia via its incentives and deregulation of small business. I have documented these incentives in previous articles (The Coalition's business booster shots, August 20) and there is a very good chance that a large number of jobs will be created.

But there is no way that there will be a million jobs (let alone two million) jobs created if we lose some 300,000 jobs in motor, mining and the public service.

These are dangerous times for Australia and will test the Coalition if it wins the election.