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Government sits on Bracks report

Autonomous nation: Car-making is Australia's largest manufacturing industry.

Rudd considers Bracks review as vital new car industry plan and Olympics loom

General News logo4 Aug 2008

THE Rudd government’s highly-anticipated response to the long-awaited Steve Bracks-led review of the Australian automotive industry is almost certain to be announced during the 2008 Olympic Games.

GoAuto understands the Bracks report, which was tabled last Thursday (July 31) and will be reviewed by both federal industry minister Kim Carr and prime minister Kevin Rudd, will be made public in about a week without immediate government response, or revealed alongside its new industry assistance plan closer to mid-August.

Either way, the review’s vital recommendations and the government’s even more crucial reaction to them are unlikely to be known until after the opening ceremony for the Beijing games this Friday night (August 8).

The Bracks review will canvass significant industry issues including imported vehicle tariffs, the $500 million Green Car Innovation Fund and the continuation of financial assistance under the Automotive Competitiveness and Investment Scheme (ACIS), following consultation with industry stakeholders.

Some industry sources expect the former Victorian premier to recommend, instead of reducing tariffs on imported new passenger cars from 10 to five per cent from 2010 as scheduled, that the duty be reduced by one percentage point each year until a five per cent tariff is reached in 2014.

Proponents of the plan say this more gradual approach would give Australian car-makers more time to adjust to the reduction in prices of imported vehicles, while opponents argue there will be unnecessary confusion wrought by five annual price reductions and that savings experienced by car buyers would not be as large.

If passed on by the importer, a five per cent tariff reduction for an average $30,000 imported passenger car would represent a retail saving of $1500.

Car-makers and the Victorian and South Australian government have asked the Bracks review to recommend the 2010 tariff reduction be abandoned.

However, GoAuto understands there is legislation in place to reduce import tariffs in less than 18 months, and the Federal Chamber of Automotive Industries (FCAI) has indicated that if the government decides to go ahead with the tariff reduction it is unlikely to enter into a protracted, complex battle to have this overturned by both houses of parliament.

“We’re happy for any pause in the tariff reduction,” said FCAI media and communications manager James Goodwin, “but including commercial vehicles and SUVs the tariff in real terms is now only about seven per cent, so we believe it is better to fight for more assistance through ACIS.” It is expected Mr Bracks will recommend extending the ACIS scheme, which will provide $2 billion in assistance between 2006 and 2010 to Australian car-makers via import duty credits that are exchanged for investment in local research and production.

The same day the Bracks review was handed to government, the FCAI issued a press release highlighting the importance of automotive manufacturing to the Australian economy.

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“The automotive industry is Australia’s largest manufacturing industry and the largest exporter after mining, generating export earnings of more than $5 billion a year,” said FCAI chief executive Andrew McKellar (pictured at left).

“The outcomes of the Bracks review are critical to securing ongoing and renewed investment in the Australian automotive industry,” he said.

“It is important that the government’s response establishes policy settings that will underpin the development of an Australian automotive industry that is sustainable in every sense.” The same day also saw the FCAI release modelling conducted by Econtech into the ‘Economy-wide Impacts of Future Assistance Options for Australia’s Automotive Industry’, which the auto industry’s peak lobby group says casts further doubt on automotive assistance modelling by the Productivity Commission earlier this year.

According to the FCAI, the Econtech modelling shows that reducing or eliminating automotive industry assistance would lead to a reduction in automotive production of between 4.8 and 20.9 per cent, and that the elimination of assistance to the industry would have a negative impact on overall consumer living standards.

Further, the Econtech report said that assistance to the automotive industry is now at the point where further reductions in assistance will yield marginal or no benefits to the economy.

“An important difference between the Econtech and Productivity Commission approaches is that Econtech’s modelling does take into account the diminishing marginal benefit to reducing tariffs,” said the report.

“For this reason, Econtech results will show a smaller (or negative) benefit from reducing tariffs compared to the PC results.” Mr McKellar said the report is in line with the results presented in Econtech’s 2002 report commissioned by the Productivity Commission.

“It is disappointing and concerning that the Productivity Commission ignored a number of key factors when putting together their findings and it is now apparent why the Government did not use the Commission to undertake the industry review,” he said.

Mr Carr confirmed his government received the Bracks review into the Australian automotive industry on July 31 during a doorstop interview in Canberra the same day.

“It is a comprehensive assessment of the future of the industry and the government will now consider this report carefully, digest it, and together with my colleagues, we will make a response to that review in the next little while.

“The public will see the report shortly. The government will consider the report carefully. The industry is under acute pressure right around the world. We are seeking a partnership with the industry for it to move into a more green phase quickly.

“We don't just want to see a green car, we want to see a green industry in Australia. We expect they will be able to develop a significant transformation of the industry over the next short while,” said Senator Carr.

Asked if he could guarantee the report won't be released during the Olympics, Mr Carr said: “No I can't guarantee when the report will be released, other than to say to you that it will be released shortly.

“The government wants to consider this report carefully, these are matters of incredible importance to Australia and we will not be making a knee jerk response to this report.

“It is absolutely critical to Australia that we have a vibrant automotive industry, a sustainable automotive industry, an industry that continues to provide the capability to ensure that we have a reservoir of skilled labour performing highly technical work in some of our most advanced industries in the country.

“It is the most advanced sector of manufacturing it provides enormous spillover effects for every other aspect of manufacturing in Australia. It provides us with the capabilities to make sure that we can build fighter aircraft, that we can have a vibrant electronics industry, and in glass, and in steel and in rubber and in plastics.

“All of these things flow through from the Australian automotive industry. We are one of twelve or so countries in the world that can make a car from conception through to the showroom floor.

“The question that will have to be answered is: does this country want to stay in that company of the twelve or so nations? I firmly believe that we should be, and together with my colleagues we will be assessing this report and determining which is the best way to ensure that this industry reinvents itself, is revitalised and maintains its sustainability.” In response to questions concerning ACIS funding and import tariffs, Mr Carr said: “The industry wants to be treated on the basis of a level playing field with other countries around the world.

“Now every other country of the 12 or so nations that I mentioned spends considerable sums of money working with their industry because those countries understand the importance of the car industry to their particular economies.

“The Australian industry is no different. We want to see however that the industry is transformed because we can't go on the way we are at the moment and I would expect that these issues of the levels of tariff support, the levels of investment that's required to sustain the industry will be matters that the government will consider very, very carefully,” said Mr Carr.

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