THE DISTILLERY: Auto motives

Watching the Australian automotive manufacturing industry cut back jobs is like watching a car accident happen in super-slow motion. We've spotted the causes of the accident – high Australian dollar and poor domestic demand – now we just have to see if it hits the wall and needs to be written-off, even with government assistance. However, the Australian Financial Review's Peter Roberts reminds us that global carmakers vary slightly in their culture and if Toyota Australia is to have a future in Australia beyond its current five-year commitment, union attitudes will be crucial. Meanwhile, the high Australian dollar comes up for discussion along with two other factors hindering the local economy, while another business writer brings us the latest research from global management consultant McKinsey.

But first, we start with the Australian Financial Review's Peter Roberts, who says Toyota, which has just slashed 350 jobs out of its Altona North factory, prides itself on having harmonious industrial relations. That harmony was broken last year.

"It is no exaggeration to say the reaction of the unions to yesterday's redundancies will be crucial to the company's local operation. More strikes would threaten confidence in Japan and could wreck any chance Toyota Australia chief executive and president Max Yasuda has of securing a future new investment commitment from his parent group. And there is the bigger uncertainty – like all manufacturers Toyota is wrestling with the question of how long the Aussie dollar will remain at today's record levels.”

Indeed the high Australian dollar features prominently in the second piece of this morning's edition of Distillery from the Sydney Morning Herald's Ian Verrender. This senior columnist has found a useful way to slice the strengths and weaknesses of the Australian economy as investors continue to wait for a seemingly inevitable blow up in the European debt crisis. Verrender begins by acknowledging the world's jealousy of Australia's triple-pronged defence of a global downturn – a growing economy, low national debt and room to cut interest rates.

"But if ever there was proof that economics, dismal as it may be, is an evolving science, it is the manner in which the whims and fears of those controlling global capital flows could be jeopardising our ability to manage our future. For our good luck trinity is being countermanded by a triad of opposing forces that this year will weigh heavily on the Reserve Bank and its ability to kick life into the economy through looser monetary policy. Our dollar, once among the most volatile of global currencies, obstinately refuses to give ground. Our banks have made it clear they will act independently of any moves in official interest rates. And our federal government has steadfastly refused to countenance anything other than a tight fiscal stance so that it can deliver a budget surplus.”

Meanwhile, the Herald Sun's Terry McCrann brings us some research from McKinsey Global Institute, the economics research wing of global management consultant McKinsey. The thrust of the research is that most of the world's top 10 economies haven't reduced their debt levels at all yet – this includes private debt as well as public debt.

"If too much debt is a problem, and it is, cutting it – deleveraging – has yet to get underway in any meaningful sense in any of the world's top 10 developed economies. China is not in the analysis. But it has got as big a debt problem as any of the rest of us. It has not been so apparent because of China's spectacular growth. In short, if cutting debt – for both individual countries and the world as a whole – is a journey of a thousand miles, we have barely taken the first step. That's the original Chinese proverb. I would add that debt deleveraging is a journey on broken glass in bare feet. As MGI's analysis of previous exercises in debt deleveraging in Sweden and Finland in the 1990s makes clear, the process is tough, painful and takes a long time.”

The Australian Financial Review's Chanticleer columnist Tony Boyd says we should always be sceptical when a vested interest criticises a government program that could increase their costs. But in the case of AMP's financial services managing director Craig Meller and his criticisms of Future of Financial Advice legislation, we should probably listen.

"Meller's two main points of criticism are that many of the clauses on the bill are inconsistent with the explanatory memorandum, and that the drafting has resulted in the underlying policy intent of the government being unclear and the scope of the legislation going beyond the government's intent. He has called for a regulatory impact statement so the effect of the legislation on small businesses, consumers and the broader industry can be known in full. An examination of several examples of poor drafting support the claim that the legislation is different to the original proposals and that this will impose an unnecessary cost burden on the industry.”

Returning to the car industry for the rest of this morning's commentaries, The Australian's Philip King reminds readers where most of the Camrys made in Melbourne end up – the Middle East. Between slumping local demand and a higher Australian dollar (remember many Middle Eastern currencies are pegged to the US dollar) there's nowhere for Toyota's production to go but down.

Meanwhile, The Australian's John Durie can't find a reason for interest rates to remain unchanged at the February meeting; ditto for his new colleague, economics writer Adam Creighton.

The Australian's Paul Garvey reaches into the depths of Chinese mythology for an analysis about how China might perform this year economically. In the process he points out that in the two previous Years of the Dragon birth rates have increased noticeably in Hong Kong. Meanwhile, Fairfax's Peter Cai takes a look at Beijing's formidable ability to extract revenue from its citizens.

In mining, the Age's Peter Ker finds takeover speculation plunging for the likes of Atlas Iron and Brockman Resources, as BHP Billiton moves a step closer to building its "outer harbour” at Port Hedland, negating the one thing these two miners can offer BHP – port capacity.

And finally, the Sydney Morning Herald's Insider columnist Ian McIlwraith explains the pitfalls of being a small shareholder on a register that's carrying a dominant shareholder, specifically at Ainsworth Game Technology, while The Australian's Jennifer Hewett surveys the playing field as the Productivity Commission prepares to tackle superannuation.