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NEWS
Industry body throws weight behind manufacturing
FCAI estimates Aussie economy would shrink $21.5 billion without Holden, ToyotaThe Federal Chamber of Automotive Industries (FCAI) is now leading the charge to convince government more support is needed for local manufacturing to continue beyond 2018.
In a press release issued late last week, the peak industry body – representing automotive importers, manufacturers and parts suppliers – drew on analysis by Monash University’s Centre of Policy Studies and the Allen Consulting Group to make its case that allowing local production to die would cost the country more than would be saved by ending assistance for the industry.
"This report shows the value of automotive manufacturing to Australia," said FCAI Chief Executive, Tony Weber, as quoted in the press release.
"It details the benefits to Australia as a whole—to the economy, communities, the supply chain and other industries. The FCAI will be using this report as a basis for our submission to the Productivity Commission’s review of the automotive sector. I want to be clear: financial support for the industry is an investment in Australia and this investment needs to be long-term.
"For that investment, Australians receive significant returns through direct foreign investment, employment, skills, training, technology transfer and research. And the investment also generates spill-overs that flow into other industries and areas of the economy. Without that investment, we lose these long-lasting benefits."
In the context of local manufacturers closing their doors over a two-year period from 2017, the report projects the national economy shrinking by $21.5 billion, and heavy job losses in Melbourne and Adelaide with concomitant impact on those cities' "gross regional product" of up to 1.4 per cent.
According to the report, the government currently tips in around $500 million a year for that $21.5 billion the industry contributes each year to the economy. Government assistance equates to $18 per person, which the report's authors indicate is a very low figure by international standards.
Gross Domestic Product for the country would be reduced by $7.3 billion without vehicle manufacturing, and investment from overseas would be redirected to other countries with a local manufacturing industry.
Job losses would amount to 33,000 in Melbourne and 6600 in Adelaide in the short term – a reduction of 1.5 per cent of the workforce. Eventually these workers would find new employment, but the report suggests that unemployment levels may not return to the 2018 level until 2027 in Melbourne and 2025 in Adelaide. Those workers who find themselves unemployed would struggle to find work that would pay as well.
Collateral damage would take the form of a brain drain, with engineers headed overseas, rather than sticking around and shifting into non-automotive areas of industry populated by high-tech firms with operations based in Australia, including Boeing, Rio Tinto and Coca-Cola Amatil. In the past, and currently, these companies have been reliant on the local automotive manufacturers to supply skilled workers with the ability to introduce innovative techniques.
While the FCAI is at the forefront of this argument – ahead of the Productivity Commission's review into the local automotive manufacturing industry – it is by no means alone. The ABC has reported that the University of Adelaide recently updated a study into the industry, and Associate Professor John Spoehr, the author of that study, reckons the FCAI's figures are conservative. The loss to the South Australian economy would be $1.24 billion and 13,200 jobs, the Professor says. It's implied in the ABC's report that Ford's recent decision to end manufacturing at its Geelong and Broadmeadows plants has worsened the prognosis for the local industry.
But economists throughout the country are more circumspect. Malcolm Bosworth, a professor from ANU and formerly a member of the Productivity Commission has gone on record with The Australian to refute the findings of The Allen Group, which was commissioned by the FCAI to carry out the study. Bosworth's argument is that the FCAI's argument hinges on the loss of overseas capital from General Motors and Toyota once local manufacturing ceases. He also remains unconvinced that the economy cannot absorb the short-term job losses and find alternative employment for the workers.
Fairfax's Michael Pascoe has been equally outspoken, suggesting that the government subsidies for the local manufacturing industry are assistance for which all taxpayers are slugged, but it's only helping a relatively small proportion of car buyers who happen to be in the market for Commodore, Camry, Aurion, Cruze and – until 2016 – Ford's Falcon and Territory. Pascoe's comment piece ends with the dry observation that one way to sway the electorate at large that the local manufacturing industry must be saved is to have the Labor Party "recommend that it be scrapped."
Government manufacturing minister Ian Macfarlane has already offered the local industry guarded support, but any decision to assist the industry (or not) rests on the outcome of the Productivity Commission's review into the local manufacturing industry. The Commission will deliver a preliminary review on December 20, but the final report may not be tabled until March 31, 2014.
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