Time to put the brakes on auto industry handouts

The car industry is no longer a significant employer of Australian workers. Its loss will have limited economic impacts, and now is a good time for tough decisions.

Crikey

The continuing focus on the future of General Motors’ local operation and the broader automotive manufacturing industry is wholly out of proportion to the industry’s significance in the wider economy.

The car industry employs 46,000 people. The total transport equipment manufacturing sector employs 76,000 people, according to Australian Bureau of Statistics data. That’s around 8 per cent of the total manufacturing workforce, and two-thirds of one per cent of the entire Australian workforce.

To put that in perspective, that’s around half of the number employed in food manufacturing and food retailing, and the same number as employed in each of the telecommunications, super and insurance funds industries.

Greens MP Adam Bandt today tried to claim that the closure of Holden, coupled with the government’s mooted 12,000 public service job cuts, might send the economy into recession. For a start, the 12,000 cuts are on hold because Labor got there first and were intended to be over four years, while Holden wouldn’t close until 2016. Presumably Bandt is warning of a recession in 2016-17. And even if 58,000 jobs disappeared overnight, it would be well under 1 per cent of total employment. There’s more risk of policy-makers and politicians talking us into recession than there is of the automotive sector’s closure pushing us into one.

Bandt and others, like departing Fairfax economics writer Tim Colebatch and even Robert Gottliebsen (who yesterday predicted “five tidal waves of unemployment”) are reflecting a 1980s mentality.

Back then, vehicle manufacturing by itself provided nearly 2 per cent of all Australian jobs in a huge manufacturing sector that employed 17 per cent of all workers. Back then, vehicle manufacturing employed not much less than half of the entire professional services workforce. Now, it employs less than 10 per cent of that sector.

And in any event, looming unemployment is no reason to avoid hard decisions. Unemployment was 9.5 per cent and heading up when Bob Hawke announced his industry statement of March 1991 that slashed tariffs, including for motor vehicles (which were at 35 per cent). At that point, around one in seven Australian workers were employed in manufacturing.

If unemployment at below 6 per cent isn’t a good time to take another step in that direction, then when is?

Speaking of tariffs, if GM and Toyota do decide to pull out, then there will be no further point in maintaining the existing 5 per cent tariff on imported vehicles or the punitive tariffs on second-hand imports (subject to suitably stringent safety standards).

The removal will be a boost for Australia’s automotive retail sector, which employs nearly 70,000 people, as well as cutting the price of vehicles for all Australians.

The decision point comes as the US Treasury sold the last of its US$50 billion in shares in General Motors bought in a bailout during the financial crisis. “All three US automakers are profitable, competitive, and growing,” Treasury Secretary Jack Lew said.

One of the reasons they’re profitable is that governments around the world insist on throwing money at them for the privilege of making cars in their countries. It’s an obsession that Australia has no need to continue.

This story first appeared on www.crikey.com.au on December 10. Republished with permission.

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