Economy

Government going to anti-subsidy body for car industry advice: Productivity Commission report rings alarm bells on GM Holden rescue plans

Myriam Robin /

The government will soon charge the Productivity Commission with delivering a draft report on the car industry, according to a report in The Australian.

This report, which must be delivered by Christmas, would inform its rescue plans for General Motors Holden, which South Australian Premier Jay Weatherill says requires Federal commitment to a $275 million rescue package before the end of the year to keep production going in Australia.

But a leading economist is questioning why the government would go to a body historically opposed to industry assistance to advise it on an industry reliant on such assistance.

For example, the head of the Productivity Commission – a body funded by but independent from the government – in March last year said government hand-outs to the manufacturing sector didn’t help protect or create jobs.

When informed by SmartCompany that the government plans to go to the Productivity Commission for a report, University of Sydney senior research fellow Phillip Toner said it was “a bit odd”.

“The Productivity Commission has been fairly hostile all along to industry assistance. I just hope it’s not a cover for removing assistance.” Toner supports government assistance to the automotive industry because, he says, it allows Australia to maintain the diverse manufacturing base necessary for future innovation.

There are other government departments the government could have gone to, he added.

“There’s the industry department itself, that actually manages the program, for example. They’ve got expertise in the area, and it’s the obvious place to go if you wanted to review or amend the program.

“So why doesn’t the Industries Minister rely on advice from his own department?”

Richard Reilly, chief executive of the Federation of Automotive Products Manufacturers, told SmartCompany it was the industry’s responsibility to make its case on its own importance.

“The issue with the new government is that we’ve been liaising for a long time with the shadow minister, Sophie Mirabella.

“Now, with her losing her seat, we’re trying to liaise with [newly appointed] Industries Minister Ian Macfarlane for the first time. We’ve written to him asking for a meeting to discuss the industry, and the component sector within it. But it’s early days yet.”

The report by the Productivity Commission on the car industry was one of two election commitments the Coalition made on the sector before the election. The other was to withdraw $500 million from the Automotive Transformation Scheme.

Speaking to The Australian, Minister Macfarlane signalled a pragmatic approach to the issue.

He is flying to Adelaide in two weeks for talks with GM Holden and its unions, and will visit Toyota and Ford facilities in Melbourne soon after.

“It’s all part of the balance,” he told the newspaper. “If we take a cold economic rational position on the car industry, there is no point in me going to Adelaide.”

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Myriam Robin

Myriam Robin is a reporter for SmartCompany and its sister site LeadingCompany. She has degrees in economics, international studies and journalism. She likes writing about businesses taking risks and doing new things.

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