From the AFR:
General Motors’ local arm, GM Holden, which last year received promises of $275 million in public funds to continue manufacturing cars in Adelaide, confirmed the company was considering requesting money for investment in its V6 engine plant in Port Melbourne.
“With the $275 million I understand why some people found that distasteful,” GMH director of corporate and government affairs Matt Hobbs said. “However, it is the way automotive investment gets attracted to any country – there are either tariff barriers or there is co-investment.”
Toyota is considering adding a third model to its locally manufactured Camry, Camry Hybrid and Aurion line-up after building a $300 million engine plant which received $63 million in federal money.
A Toyota spokeswoman confirmed a third model would require government funding. “First we have to do the planning and then we would look at funding,” she said.
Regular readers will know that I am generally torn by such support. I am a fan of industry policy where market failures present themselves but the bald-faced support for car manufacturers is not that. And I’ll happily admit that productivity is the key to prosperity and such support is unlikely to boost it.
On the other hand, I do think that any modern nation that sees itself as capable of standing on its own two feet in a strategic sense needs a car industry. Without it you risk losing the essential expertise of basic mechanical operations, which is hardly strategically sensible.
Shadow Treasurer, Joe Hockey sees no such issues, declaring simply that:
…the government had wasted taxpayer funds on industry assistance for manufacturing while contributing to higher costs. “That is just a waste of taxpayers’ money,” Mr Hockey said. “The fact is, Australia is becoming an incredibly expensive place to produce things.
It was a more than fair point to make that such protection raised costs when the nation faced capacity constraints. Not freeing up labour to shift from legacy to growth industries did contribute to wage inflation, and therefore higher interest rates and dollar as well, making such interventions self-defeating.
But with labour markets loosening that is no longer the case and as I’ve been arguing for many years, as we approach the mining reckoning, and the dollar prepares to correct, we will need an industrial base to rebound or we’ll stumble into the twilight of endless recession apparent in the UK. It’s not much good looking for productivity gains in industry if you don’t have any.
In this context I have to agree with ongoing support, as contradictory to the purists that that will be.
