The Herald Sun says it’s a crisis. The Age sees 40,000 jobs at risk. The AFR warns of a permanent decline:
Toyota’s future as a manufacturer in Australia depends on the company hanging onto its crucial Middle East export markets and a return to international competitiveness, possibly through a lower Australian dollar.
Toyota Australia chief executive and president Max Yasuda announced lay-offs yesterday of 350 people or 10 per cent of the manufacturing workforce at its Melbourne plant and painted a grim picture of the company’s local prospects.
“We are getting less orders from our export customers and . . . we have been struggling with the profitability of the company operations,” Mr Yasuda said last night.
“Currently it is very difficult for me to persuade our parent company to talk about future projects. If we can show our strength then [they] will talk about future growth for Australian manufacturing.”
Toyota has the strongest commitment among the three manufacturers to local manufacturing but is most dependent on export markets. The lay-offs and frank disclosures by Mr Yasuda will prompt new uncertainties for the embattled sector.
So, the Australian media heads into the fray to defend the auto working battler. And why not, automotive is a special case. It is both a keystone industry supporting many others and has strategic value well beyond simple economics.
My gripe today is not that further funds will inevitably be channeled into the protection of the automotive sector. Whatever I think about it, it will happen. The die has been cast with support already agreed with Ford. And don’t kid yourself, the Abbott Opposition’s stand against further automotive protection is just that, an Opposition’s stand. Were they in power, they would do precisely the same thing. It’s simple politics.
No, my gripe is with our chosen path of economic adjustment. And I have three problems with it.
The first is that in a world defined by unacceptable external imbalances, limited demand and intense competition it makes no sense whatsoever to sacrifice export industries, even in the name of other export industries.
Second, Toyota has been, and remains, a fundamentally competitive export business. Certainly the best run of the three majors and here is the irony, using the dollar to force adjustment often targets the most efficient businesses that we have, those that were able to build a global market for themselves.
Third and most importantly, by embracing a high dollar and Dutch disease as the prime mechanism to “make room” for mining investment, our macroeconomic managers have condemned us to this path of rolling crisis and bailout. Decisions about which company lives and which dies in our tradable sectors will be made based upon the selections of the Cabinet. Each compromise with struggling industry encourages other failing businesses to come forward with their hand out. As more and more manufacturing falls into the arms of government, it widens the path first trampled by finance in 2008. All other industries that find themselves in trouble will pound on Canberra’s door and rightfully ask: where’s my bailout?
The alternative would have been to manage the adjustment by changing the macro-economic price signals for the entire economy then letting the market go to work on who lives and dies.
This could have been done thorugh the RSPT. It might have been done using Tobin taxes, or sensible capital controls. It could have been done with fiscal adjustments like limiting the benefits of housing investment. It might have been done with jawboning. Or, some combination of all.
But instead it’s been done with a speculator’s dream in dollar appreciation and the inevitable bailouts that means as we head rapidly back toward our producitivity-stalled twentieth century economy.
