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Inquiry formalises call for end to Australia’s car industry

Burning money: The Productivity Commission has called on the federal government to turn off the tap on taxpayer support as soon as car-making ends in Australia in late 2017.

Final Productivity Commission report tabled in federal parliament

26 Aug 2014

AUSTRALIA should slam the door on all car-related funding once the last car-maker quits in late 2017, the Productivity Commission says.

The final 326-page report into Australia’s ailing car industry, tabled by federal treasurer Joe Hockey on the last day of the timeframe in which the report had to be released publicly, pulls no punches, having changed its frame of reference and reshaped its conclusions as the car-making industry it tried to provide advice on crumbled.

Its assessment is blunt and chilling, saying the best thing the government can do is switch off taxpayer-funded support schemes for car-makers and components suppliers alike as soon as the last Australian-made car rolls off the production line.

“... The Commission has considered a range of options for assistance to firms that manufacture components, including extending the Automotive New Markets Program (AMNP) and altering the design of the Automotive Transformation Scheme (ATS), but has not been able to identify an option that it considers would have net benefits to the community.

“In the case of the ANMP, while it is too early to fully evaluate its performance, there is little convincing evidence of additionality of investment being generated by the scheme, nor of the assisted businesses being likely to achieve longer term sustainability.

“Other reviews of assistance schemes in Australia have also raised concerns over the additionality, and thus the net benefits, generated by such schemes.

“Accordingly, the Commission considers that, on balance, the provision of industry-specific assistance to component manufacturing firms, beyond that already committed to the end of 2017, would not result in net benefits to the community.

“More generally, governments should not provide any further ongoing or ad hoc assistance, including capital subsidies, to firms in the automotive manufacturing industry beyond that already committed.” Like the Productivity Commission, the Federation of Automotive Parts Manufacturers did not mince its words, saying the final report into the car-making industry “neglects the profound effect the implementation of the government’s budgetary measures will have on the automotive component sector”.

“Reducing funding of the ATS by 66 percent in 2015 will have serious implications for the continued operations of many firms within the automotive supply chain”, FAPM chief executive Richard Reilly said.

“The ATS has been an integral part of the business planning processes and quoting mechanisms of companies for many years.

“To reduce the funds available mid-stream leaves companies in the supply chain vulnerable to more competitive international pressures,” he said.

The fear is that while Ford is committed to building cars until it quits in 2016, and Holden and Toyota until 2017, parts makers who are already struggling, may not be able to hold out until the end.

According to Mr Reilly, the Productivity Commission was neglecting the realities of manufacturing life, and the impact of policy change during this critical period of transition.

He said the Abbott government’s mid-year economic forecast outlook proposed to remove $500 million from the ATS each year from 2015-17, leaving less than half the legislated funding for the industry.

Restoring pre-budget measures would also reduce the number of redundancies among the 40,000-strong automotive workforce, as well as give parts makers “a better chance of transitioning their workforce into new skills or industries”.

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