Henry has a great piece in The Weekend Australia in which he recounts the depressing history of one of our most protected- at least in a border protection sense and more latterly in terms of government handouts – industries, the passenger motor vehicle industry.
(The other one, textiles, clothing and footwear has pretty much left the premises, Australia, that is. Interestingly, there was never the same fuss and bother about TCF – I put it down to masculine attraction to fast cars!)
In that article, Henry pounces on the multiplier argument in favour of subsidising the PMV industry. You know the sort of thing – for every dollar invested in the industry, a further $18 is added to the economy. Of course this is piffle. (One of my former bosses, Dick Blandy, used to argue that the SA government should subsidise the pie cart (yuck, pie floaters) in North Terrace – just think of the multiplier effect!)
Henry turns this argument on its proponents and calculates the ‘multiplier’ figure for the mining industry, using the same methodology. And the answer is $150 for every $1 invested in mining. Now we are talking.
One of the most depressing aspects about the debate on industry protection is the emergence of new hired guns, a role assumed by people who should know better – I am thinking Allen Consulting and Peter Dixon’s mob at Monash. Oh dear.
And while we are in the game of revealing myths, here are three more:
- There are at least 200,000 workers who are employed, directly and indirectly, in the PMV industry who will be affected. This is just tosh because most of those 200,000 workers will be completely unaffected – indeed, they will probably benefit – because they are involved in retailing, distribution, repair and the like.
- Other countries subsidise their PMV industries to a much greater degree than Australia. When I looked at the figures, it is clear that there is some serious fudging going on with these figures. In particular, all general industry assistance overseas in counted as subsidies to the PMV overseas but not here. And then there is adjustment for differential taxes, etc. These ‘studies’ were designed to reach the conclusion required by the parties requesting the study – the unions and the local car manufacturers, at the behest of head office.
- The idea that there are all sort of technology and skills spillovers from the local PMV industry is simply not borne out by the facts. There are not great swaths of former PMV workers applying their skills in other industries and there is no evidence of technology invented in the Australian PMV industry being applied elsewhere – at least to any great degree.
In the meantime, the three things that will save Toyota Australia are:
- Producing cars that are popular with the public;
- Dramatically reforming work practices at Altona;
- Face-saving by Toyota headquarters manifested in a preparedness to accept returns that are lower than the cost of capital in its Australian operations.
The government should also get on with the further reforms needed in this industry such as eliminating the Luxury Tax on cars and the effective prohibition of the importation of second hand cars. There is also a case for looking at the emissions and other specifications imposed by regulation.