Combet stands firm in face of auto woes

FEDERAL industry and innovation minister Greg Combet has encouraged car-makers to maintain dialogue with government, but says increasing financial support beyond current levels is not the answer to making them more competitive.

Speaking to GoAuto after an address to the Federation of Automotive Products Manufacturers (FAPM) in Melbourne last week, Mr Combet defended government policy to reduce import barriers, saying funding was now given more efficiently and in a more targeted way.

His comments came just hours after GM Holden chairman and managing director Mike Devereux urged Australians to pay heed to the higher levels of protection afforded to overseas car-makers by their respective governments.

He said Australia was living in a “fairytale” if it believed it could have a prosperous local industry without “playing the game as aggressively as every other country in the world”.

Mr Devereux cited as key problems Australia’s relatively high input costs – labour, electricity and transport – coupled with low tariffs and comparatively small government assistance.

Holden revealed earlier last week that each car that rolls off its Adelaide production line costs $3750 more than the average across all General Motors’ international car-making factories.

According to Holden figures, Australia spends $17.80 per person on the car industry each year. In comparison, Germany spends $95 per taxpayer and the US $250.

Referring to the trouble engulfing the industry at present, Mr Combet told GoAuto that “adjustments take place”.

“Businesses are making a transition here from being domestic market-focused to being more global supply chain focused,” he said.

Asked whether there would be substantial changes to the policy settings before the election, Mr Combet said: “I wouldn’t speculate about that.

“I’m saying to the industry let’s keep talking. If we can tweak things then I am happy to look at it.”

Mr Combet indicated that the government was feeling heat from some circles over the assistance it hands the industry – $1.5 billion allocated under the Automotive Transformation Scheme to 2015.

The minister also said a suggestion that Australia sticks to World Trade Organisation rules while other countries flaunt them to the local market’s detriment was “rubbish”.

“We have the New Car Plan, incorporating the Automotive Transformation Scheme (ATS). Have you noticed there is a lot of criticism out there by the economic commentariat? They don’t like it.”

The NCP promotes “more innovative, more productive, more competitive and more export-focused” conditions for the industry, rather than more protectionism.

“We’ve liberalised trade and reduced tariffs but we have instituted specific industry measures like the New Car Plan that are actually more economically efficient and much more targeted ways of supporting the industry,” said Mr Combet.

The minister ruled out emulating the Brazilian approach, which was to add a floating tariff on imports to make up for the discounting effect a strong currency has on the price of imports.

This tariff keeps the prices of imported vehicles steady, preventing them from gaining a price advantage over domestically produced vehicles.

“The dollar has come off a lot. We will not be intervening in the valley of the dollar, I’m afraid. It’s a market system,” he said.

Mr Combet’s comments came after he made a generally supportive speech to the parts industry at the dinner. Apologising for bringing politics into the room, he contrasted the government’s stance with the policies being promoted by the Coalition.

He said proposals to subtract $500 million from the $1.5 billion allocated under the ATS for the period to 2015 and also to have a Productivity Commission inquiry into the ATS were direct threats to General Motors’ plan to invest $1 billion in two new models and Toyota’s plan to invest in a third model for the Altona plant.

“Now some of you may have had some experience with the Productivity Commission or, in your idle moments or if you’re an insomniac, you may have read some PC reports and be familiar with the economic philosophy that would apply,” he said.

“That will create a lot of uncertainty for the major investments planned for the industry.

“If you are sitting there wanting to make a $1 billion investment, you want to know what the public policy settings are over the course of the decade during which you will be looking for a return on that investment.”

Mr Combet said the government and the parts industry were facing the challenges that will come with Ford’s decisions to cease manufacture in 2016.

“We all know the pressures that General Motors Holden and Toyota are under and also the pressures … that affect all of the parts industry. I’m very mindful of it.”

Mr Combet said the Australian economy was in good shape and one of only a few advanced economies that has had continuous growth for more than 20 years.

“We still have the economy growing at around 2.5 per cent, unemployment is actually still relatively low at 5.5 per cent and there is certainly a very significant amount of private sector investment continuing to come into the economy,” he said.

“Interest rates are down at 2.5 per cent and there are a whole host of other reasons we can have a lot of confidence about the economic outlook.

“Even the dollar … has come off. It fell below US92 cents today. That is an enormous relief from some of the pressure that has been experienced in the manufacturing sector,” he said.

He conceded that there were still “considerable pressures” within the manufacturing sector and, in particular, the automotive manufacturing part of the economy, which remains “so extremely important” in employment terms.