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Budget bites with automotive funding hard hit

Auto effect: The current Coalition government's first budget is in.

Government to cut back on auto sector funding as car-makers move production offshore

13 May 2014

AUSTRALIA’S automotive industry will be stripped of a number of fundingprograms as the Abbott government’s first budget bites deeply into support for the ailing sector.

The budget, revealed tonight by treasurer Joe Hockey, either kills off or cuts short several incentives once designed to stimulate the industry, but now regarded as unnecessary since Ford, Holden and Toyota all announced they would quit the manufacturing landscape by 2018.

Key points from tonight’s Budget that directly affect Australia’s car-making industry include:Cuts:— The loss of the Rudd government’s proposed $200 million program to support automotive sector jobs, introduced last August to cover the 2013-14 and 2014-15 financial years.

— About $1.0 billion will still be available over the next five years from 2013-14 from the Automotive Transformation Scheme to support vehicle manufacturers and supply chain companies. The ATS, which was slated to provide $3 billion in support from 2011-20, will be shut down on January 1, 2018.

— The measure to shut the ATS from 2018 will save the government $176.7 million in 2018-19, $95.2 million in 2019-20 and $28.6 million in 2020-21. The readjustment will introduce total savings of $618.5 million over eight years from 2013-14.

— Cancellation of funding for next-generation locally-made Holden products, believed to be the next-generation Cruze and front-drive ‘Commodore’, will save $215 million over four years from 2013-14.

— The government will save $4.1 million total over the next three years by dropping assistance to Ford Australia workers. Support for workers affected by Ford’s decision to quit car-making in October 2016 will instead receive support via the federal Automotive Industry Structural Adjustment Program.

Gains:— Government will chip in $100.6 million over six years from 2013-14 (including $0.5 million in 2018-19) to establish a $155 million growth fund to support new jobs, investment and economic growth in South Australia and Victoria following Holden, Ford and Toyota’s decisions to quit manufacturing in 2016-17.

Part of this $100.6 million in funding includes a $20 million contribution over five years to establish the Automotive Diversification Program to help component makers develop new products and find new export opportunities. Of this $20 million, $16.9 million comes from the existing Automotive New Markets Initiative, meaning only $3.1 million is actually new money.

Changes to the fuel and ethanol excises:— The fuel excise will now be indexed with inflation twice a year as of 2013-14 rather than being locked in. Expected to reap the government around $600 million in extra income next year over and above this year.

— From 2015-16, the government will save $120 million over six years by ceasing the Ethanol Production Grants Programme on June 30, 2015. The fuel excise on domestically produced ethanol will be reduced to zero from July 1, 2015 and then increased by 2.5 cents per litre per year for five years from July 1, 2016 until it reaches 12.5 cents per litre.

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