THE DEMISE OF LOCAL MANUFACTURING

The agonising demise of our local manufacturing and assembly industry is complete.

The industry’s arc of establishment, growth, containment and decline is book-ended by the counterpoint images of Ben Chifley launching the FX Holden at Fishermans Bend in 1948 and the AMWU’s Dave Smith farewelling the final red Commodore SS at Elizabeth last month.

There is plenty of blame to go around in this tale of the loss and destruction of high value-add manufacture on the altar of ‘free trade’.

No thinking economist or commentator can dispute the advantages of free trade – and I do not do so here. But we need to remember that Australia competes with governments that say one thing in their free trade agreements and do something else in reality. We make a very serious flawed judgement when we enter into plans on the assumption that all governments and cultures operate to our values. My experiences in Asia and with the ASEAN car industry bodies taught me those lessons. Zero tariff at port? Sure … but let’s have an ‘inland development tax’ of 150% on landed value at the provincial level – just one hypothetic example of how the game might be played.

It does set one to wondering about the ineffectiveness of the World Trade Organisation and the harsh realities of FTA negotiations. Every car manufacturing country in the world subsidises its industry in some form or other.

Back in the day, there was wide acceptance of the consumer benefits of the Button Plan to slowly lower the car tariff over time. But the architect of that plan, Senator Button, always stipulated that the transition to a low or no tariff policy should be gradual and accompanied by government intervention to preserve valuable skills and engineering capabilities. That is precisely the course upon which we embarked, but the concomitant support policies were piecemeal, inconsistently applied by both sides of politics, and ultimately proved ineffective.

Free market champions, like the editors of the Australian Financial Review, like to point out the gross cost to consumers of tariff protection over the 70-year journey. It’s strange indeed that they never bother to calculate the gross value of wages, salaries, taxes and other inputs contributed by the local manufacturers over the same period. The very same consumers that were (according to the AFR) ‘forced’ to buy Holdens, Falcons and Camrys actually worked in those plants, took home their wages, paid their mortgages, raised families and contributed to society.
So … what is the true value of that social contract? It’s never been measured.

Finally, we have the motoring press.

Many times I was in press conferences where experienced journalists loudly criticised the local manufacturers for failing to build ‘popular’ cars. No matter how often we pointed out that 40,000 units a year is not an economic production run – Australia’s best-selling cars all sell about that figure – they kept banging on about what rubbish business leaders we were. The fact is making cars at low volumes in plants thousands of kilometres from the major markets of Europe, China and North America can only be financially sustained via government policies that offer incentives and encourage export. Thailand is the poster child in that regard.

So, to repeat myself, few are blameless in this.

But at the end of day, as one of my more colourful American bosses once said to me, “When it comes to making cars, it’s like pet food – the dogs have to eat the dog food….” – and in the end, they didn’t.

It’s been a great journey and here we are in the next exciting phase – and we have an important role to play in this new era.
What a fascinating industry. Imagine selling soft drink for a living!

David Blackhall
AADA CEO

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