With Ford, Holden and Toyota each winding down their automotive assembly operations over the next two years, the industry body representing vehicle part manufacturers has folded.
The Federation of Automotive Products Manufacturers (FAPM), which has around 120 members, has been liquidated and merged with the Victorian Automobile Chamber of Commerce (VACC), according to The Canberra Times.
FAPM’s membership had already halved over the past decade as sales of locally-made cars and production volumes plummeted.
Readers might recall that modelling by the Productivity Commission (PC) estimated that the closure of Australia’s car industry would cost up to 40,000 jobs, mostly in Victoria and South Australia. The PC’s findings were broadly similar to modelling undertaken in late 2013 by the Allen Consulting Group, using economic analysis from Monash University, which estimated that the closure of the local car industry would cost around 33,000 jobs in Melbourne and around 6,600 jobs in Adelaide by 2018.
Personally, I both studies are overly optimistic, given they assume that a high proportion of component manufacturers will move into exports and/or the after-sales parts market, which are already crowded and highly competitive. The PC also assumes that two thirds of the expected 40,000 retrenched auto workers will find another job – an assumption that seems fanciful given the lack of other manufacturing industries in Australia, the sheer size of the employment shock (which of course will occur alongside the sharp decline of mining investment), and the overall weak labour market.
Irrespective, the impact of the car industry’s closure is likely to be huge and represent a king hit to the economy, particularly in South Australia and Victoria. Again, the timing is particularly poor, since these job losses are set to coincide with the unwinding of the biggest mining investment boom in Australia’s history and the loss of tens-of-thousands of mining-related jobs.
These are the two employment cliffs already facing the Australian economy. Add the likely decline of dwelling construction from mid-2016 and you have a third.
With commodity prices sinking fast, and the Australian dollar following suit, Australia may also face the unfortunate prospect of importing Holdens from South Korea at higher prices than could have been built locally given more favourable exchange rates.
Such is Australia’s gross mis-management of the mining boom.
