Take the car industry. It.....

[johnydep]

This quote goes with previous debates I've had about Australia not being capable of sustaining 3 automotive vehicle manufacturers. Our Government and industry need a better plan!

"Take the car industry. It directly employs only 46,000 workers, with perhaps 200,000 in total employed, directly and indirectly. (The total Australian workforce is close to 11.5 million and it is not uncommon to see 25,000 new jobs created in one month.) The plants are hopelessly sub-scale by international standards and the Australian public is increasingly reluctant even to buy the cars that are produced. Were it not for government fleet purchases, at least one of the manufacturers would have already quit the country."

Nothing new or green about rust-bucket industries

by: Judith Sloan, Contributing economics editor
From: The Australian

JULIA Gillard has told us that we are going to "build a new Australian economy". But if we are building a new economy, why would we worry about the old bits, such as the sub-scale and unprofitable car industry or the old technology, emissions-intensive aluminium industry?

It's hard to see what's new about these rust-bucket industries.

Take the car industry. It directly employs only 46,000 workers, with perhaps 200,000 in total employed, directly and indirectly. (The total Australian workforce is close to 11.5 million and it is not uncommon to see 25,000 new jobs created in one month.) The plants are hopelessly sub-scale by international standards and the Australian public is increasingly reluctant even to buy the cars that are produced. Were it not for government fleet purchases, at least one of the manufacturers would have already quit the country.

Let's face it, the Australian car industry has had many more lives than the average cat. First, there were those years of resistance to the removal of quotas and the cuts to tariffs. Then the hands shot out for transitional assistance -- read, enormous sums of taxpayer dollars. The budgetary assistance is currently running at $160,000 per worker per year, with total protection amounting to an average of $7000 per car.
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Now the pretence of temporary handouts has given way to the Orwellian term, "co-investment". Not that taxpayers will be receiving any equity in the operations. Nor can they hope for any financial return on the investment. Co-investment is just another term for large, open-ended subsidies.

The fact that we are still having this debate is extremely depressing for all those who fought the good fight during the Hawke-Keating years and which was progressed, albeit more slowly, under Howard and Costello.

Propping up industries in which Australia has no comparative advantage simply reduces per capita income below where it would be otherwise and sucks resources from areas where we can compete unassisted. It is about preferring one group of workers over others.

All this chatter of spillover effects and high multiplier effects is just rationalisation for these multinational companies having a lend of the Australian taxpayer. The numbers are just too small to justify the current level of subsidy, let alone the level of subsidy envisaged for the future. After all, the industry had assured us the degree of assistance could be phased down over time.

Now we are being told by the car companies that we will be on the hook for ever if we want them to stick around -- a form of industrial blackmail, if there ever was one.

We are now also facing the possible closure of the old-technology, energy-inefficient aluminium smelter at Point Henry, just outside Geelong. It is easy to see the closure of Rio's smelter at Bell Bay in Tasmania being not far behind.

But surely that should be OK with the government? After all, we are not only building a new economy, we are going clean and green. It is hard to see how aluminium smelting can fit these descriptors.

It is estimated that Alcoa Australia has received a total of $4.5 billion in subsidies for its plants at Point Henry and Portland. The current electricity subsidy arrangements are coming to an end in 2014. There are no reasons why aluminium smelting should occur in Victoria; in fact, there are strong reasons why it should not.

In the case of the Point Henry smelter, there are 600 direct employees and possibly the same number again in indirect employment. These numbers are very small, even when judged in relation to the Geelong labour market.

Yet, the local Labor federal member of parliament is talking about "no stone being left unturned". But why? The intention of the implementation of the carbon tax is to reduce the relative importance of emissions-intensive economic activities and there are not many more intensive than aluminium smelting.

Why not start with the closure of Point Henry? It could make a big contribution to the bipartisan target of a 5 per cent reduction in emissions by 2020. The Treasury's modelling envisages a significant shrinking of aluminium smelting as part of the government's "clean energy future".

Now, many people will be able to appreciate the merits of allowing companies to compete without recourse to taxpayer subsidies, but will naturally worry about the fate of the workers who lose their jobs as part of the transition away from industry protection.

The evidence is actually quite hopeful on this score, particularly if certain steps are taken. Indeed, the experience of the 1970s and early 80s was that the number of jobs in highly protected industries continued to fall, notwithstanding the high tariff wall that existed at that time. There is actually quite limited scope to prop up employment in highly subsidised firms -- the Australian car industry has been a case in point.

When the Mitsubishi factory closed its doors in Adelaide, workers had been given a long period of notice and were assisted in the processes of retraining and job search. Both the state and federal governments were involved. Many workers remained in the area and a high proportion secured alternative employment, including the setting up of businesses. We need a political leader to state the obvious, just as Paul Keating did all those years ago -- "People have found better jobs. I mean, did we ever hurt anybody liberating them from the car assembly line?"

There is no reason to think that the workers from old industries who are displaced to make way for the new economy cannot handle the transition. The government should be concentrating its efforts on this front, rather than handing out cash and other incentives to see companies limp on for a few more years.

We should be supporting the Prime Minister's vision for a new economy which, in her words, "will be more adaptive, flexible and able to seize new opportunities than ever before". It will be a case of out with the old and in with the new, so the structure of industry actually reflects our true comparative advantage, rather than relying on the generosity of the taxpayer.

http://www.theaustralian.com.au/news...-1226270122823