Macfarlane's plan to save the car industry

The motor industry has come under severe pressure in recent years, with many predicting its imminent demise. Resources and Industry Minister Ian Macfarlane has a very different outlook.

Suddenly I am optimistic that we are going to retain an Australian motor manufacturing industry at least until 2022. The alternative may be a one-term Abbott government.

My view about the motor industry partly stems from a remarkable KGB interview with resources and industry minister Ian Macfarlane (KGB: Ian Macfarlane, November 28).

And we might also be on the way to solving a more immediate problem – the looming New South Wales gas shortage.

Most people believe that barring a miracle, by 2016 the motor-making industry and most of the component parts makers will be closed because they cannot compete with low-cost countries. That is certainly not Macfarlane’s vision but it is the view of a large number of cabinet members.

Macfarlane explained that in the motor deliberations that everything is on the table – including directing the fringe benefits tax concessions to locally made cars and much more active government purchases of locally made vehicles.

He will also need export markets and an end to the bad labour deals that previous managers of General Motors, Toyota and Ford signed. The crazy deals contributed to the Ford closure. (General Motors has fixed most of its labour agreement problems but Toyota has not).

And the veteran minister is prepared to play hard ball with General Motors. General Motors in Shanghai wanted an Australian decision by Christmas but Macfarlane was firm with the Americans that there will be no decision until around April after a Productivity Commission review.

It would seem General Motors is now going along with Australia. But like John Button in the 1980s, Macfarlane wants a long-term vision for the industry, including exports. Clearly the recent fall in the Australian dollar will help. But in Cabinet so will the statistics from the Bureau of Resources and Energy Economics, which show just how savage the looming decline in mining investment will be. If anything the Bureau understates the position. If the Abbott government decides to shut down the motor industry in the 2016 election year (that’s when it’s set to shut) they face a horrible set of employment numbers to take to the polls. Between now and the 2016 election the economy will lose some 150,000 jobs linked to the mining investment industry, most in 2015-16; another 150,000 are likely to be lost in retail as a result of the new penalty rates and the swing to on line trading (Australia faces a humiliating retail calamity, November 12).

Directly and indirectly motor, including the parts industry, would add another 150,000. Add to that the public service reduction and you’re looking at something like 500,000 jobs going down the gurglar. Even if it turns out to be only 350,000, that’s still a huge number.

I put to Macfarlane that if the government closes motor it would (albeit unfairly) get the blame for all those job losses and almost certainly would not be re-elected in 2016. In addition, if it closes motor the government faces bills that are many times the proposed subsidy because most of the parts companies have promised more in retrenchment benefits than they have in shareholders’ funds. The government will be required to make up much of the difference. Macfarlane sidestepped the question but the power of the looming 2016 situation is clearly not lost on him. He will make sure all his cabinet colleagues understand that Bill Shorten will be odds on to be the next prime minister should the Abbott government shut motor at the same time as the mining investment collapse, the retail revolution and the public servant cuts. Of course Macfarlane correctly believes that a lot of jobs can be created via deregulation of business and the proposed encouragement to the small enterprise sector.

When it comes to NSW gas Macfarlane paints a grim picture of what might happen to the state. That grim picture appears to have motivated the NSW government to take its head out of the sand and to stop listening to radio announcers. All the gas earmarked for NSW has been sold, so fracking technology is the only way to provide NSW with gas. Macfarlane believes the Santos plan to drill in low populated areas of the Gunnedah Basin is the way to go. In time, he believes farmers will realise just how beneficial fracking can be. Albeit in jest, the thought of NSW reverting to wood or coal heating seems to have at last struck a cord with the NSW government. But there is not much time.