JOHN MENADUE. The end of car manufacturing in Australia

 Last Friday General Motors Holden closed its last Australian manufacturing plant at Elizabeth in South Australia. In an attempt to save Christopher Pyne. Malcolm Turnbull has told us that ship and submarine building in SA will take up the slack. But consider the figures. The car manufacturing industry employed 200,000 people across Australia with an effective rate of protection of 8% .The submarine project will employ about 2000 people in Adelaide but with an effective rate of protection of 300 %. Yes 300%. Go figure that out for a waste of money! 

I pointed out this nonsense some time ago but it does bear repeating in light of the sad closure in Elizabeth. My first car was a second hand Holden FJ!

Malcolm Turnbull criticises Bill Shorten for ‘flirting with protectionism and questioning free trade’. Has he no shame or doesn’t he understand!

The 300% effective rate of protection for the submarine build is the highest rate of protection ever in Australia. And for that rate of protection, there will be less than 2,000 people employed. Even in the days of high protection with Tom Playford and Jack McEwen, we never saw a rate of protection like this.

When the Abbott Government pushed our automobile manufacturing industry out the door the effective rate of protection was 8%. Yes 8% and employing 200,000people.

Speaking with Donald Trump after his election, Malcolm Turnbull said that Trump was ‘very impressed with our naval ship-building plans … including twelve new regionally superior submarines.’ Trump could surely have only been impressed if he had been misled.

Apart from the massive level of protection and the $50b budgetary cost, Malcolm Turnbull has yet to adequately explain how our security will be improved by building these conventional submarines to operate against Chinese nuclear submarines in the South China Sea. Even the US has reservations about our inserting twelve conventional submarines in the South China Sea. Projecting ourselves into that area against China is likely to make us less secure.

Comparing the motor vehicle industry and the proposed new naval shipbuilding in SA, Jon Stanford in ‘JON STANFORD. Business welfare under the Coalition: two case studies (1)’ and ‘JON STANFORD. Business welfare under the Coalition: two case studies (2)’, said

‘Car manufacturing, the imminent loss of which may cost an estimated 200,000 jobs, has an effective rate of assistance (ERA) of less than 8%. The proposed submarine acquisition will require an ERA in excess of 300%. In return, according to the Defence Minister, the project will create “1,100 jobs in the shipbuilding process, potentially 750 jobs in the supply chain”. As a payoff for such a high ERA this is a very damp squib … The Australian Submarine Corporation in Adelaide has been consolidating three air warfare destroyers (AWDs) for the last ten years. They have been plagued with cost and delivery overruns. Finance Minister Mathias Cormann has noted that “these ships are costing $3 billion a ship when equivalent ships from other parts of the world would have cost us $1 billion a ship”. Not only is the cost of the ships unacceptable, but they are already years late in delivery, leading to significant additional costs for the RAN.’(in extending the life of the Collins class submarines)

But there is even more in Malcolm Turnbull’s highly protectionist stance. To hide the decision as much as possible in late December 2015 the Turnbull government quietly announced that it would not be removing the $12,000 excise duty on used car imports and the other restriction that imports be limited to a single second-hand vehicle. The Turnbull Government made this decision despite the fact that there was no automobile manufacturing in Australia that in future would need protection. As a result of the lobbying by the Federal Chamber of Automobile Industries, Australian consumers continue to pay thousands of dollars more on imports of second-hand vehicles. The restrictions are so severe that very few second-hand cars can be imported.

Malcolm Turnbull should be careful when he talks about free trade and free markets. The Productivity Commission has told us very clearly that the Free Trade Agreements that the government has negotiated with ROK, China and Japan have produced marginal benefits. Yet Malcolm Turnbull never stops telling us how wonderful these agreements are. The main result is trade diversion and prejudice to Australian jobs .

Neither the Business Council of Australia, the Australian Financial Review or News Corporation have raised a word of query or criticism of the 300% submarine protection. This is despite their persistent arguments about free markets and open competition. In fact, their arguments are invariably about protecting business and capital rather than getting the market to work effectively.

The 300% protection is so outrageous and scandalous it must surely be reviewed. It just cannot be sustained. It is a boondoggle that Malcolm Turnbull continues to boast about. Pity about those 200,000 auto workers.

Quite predictably The Adelaide Advertiser has not examined this issue in any serious fashion.


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3 Responses to JOHN MENADUE. The end of car manufacturing in Australia

  1. Ian Richards says:

    John – crystal clear and so well put. Almost everything about the submarine project is wrong. “The worst strategic, industrial and economic decision in Australian history”

    For light relief, a comment by an industry rep at a defence expo “The HOBART class propellor shafts were designed in Holland, manufactured in Finland – they will be driven by a diesel engine designed in USA and modified by the Spanish called ‘The Bastard Caterpillar’.” Apply this construction philosophy to the three orphan ships and the mind boggles – but construction is the easy part – repair and maintenance and spares inventory ten years on – past human comprehension.

  2. Don Macrae says:

    How on earth do they get away with it?

  3. Neil Hauxwell says:

    A sad ending indeed- for an industry that has employed hundreds of thousands over many decades. Post GFC, when the A$ soared as money originating for other countries’ central banks was rushed into Australia for our higher yielding bonds (and a risk free profit), we could all snap up 4 wheeled bargains from the government subsidized factories of Europe, Asia and the US. A national interest Australian government would have slapped on a tax on the money movement to dampen the A$ surge, but no, vision beyond the electoral popularity of a nice 12 grand hatch is not in the Liberal line of sight. Better to use the surge as a excuse to kill off the jobs an entire sector. And the reptiles of the financial pages were waiting to help- same old chorus “wage levels too high, too many sickies,no economies of scale, blah bloody blah” Generations of migrants got their start on the lines of Australian car plants . Jobs and pride, gone with a flick by some pricks in a party room.

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