Anna Greco Chief Executive of the Federation of Automotive Products Manufacturers says manufacturing in Australia is in trouble, especially the automotive industry.

In a paper recently released Greco says the Australian automotive industry is experiencing the perfect storm; high fuel prices, a commodity inflated exchange rate, soaring input costs, low-cost competition and trade negotiations gone wrong. This has had an immediate affect on the Australian automotive industry.

Greco says the impact of Ford’s announcement of a 25 percent cut in production on hundreds of component manufacturers has been immediate and to put things into perspective, the effect is greater than the closure of Mitsubishi.

“The free trade agreement with Thailand has led to a $2.3 billion annual automotive trade deficit in that country’s favour and the sale here last year of more Thai made vehicles than those made in Australia.”

Greco says Australia has long prided itself on being an advanced nation with a high standard of living. But countries achieve a high level of GDP only through a diverse industrial and service-based economy.

“How long could Australia sustain its high-income statues without the investment, research and development and knowledge and skills that come from manufacturing?”

The paper describes how developing countries around the world support their automotive sector through such measures as tariffs, industry assistance, investment incentives and tax mechanisms. Almost every vehicle-producing country imposes tariffs: 10 percent in the European Union, 25 percent in China, 80 percent in Thailand and 105 percent in India. Total assistance in Thailand is about $18,000 a vehicle. “Even Germany, which has one of the lowest levels of production, provided 500 million Euros to step up applied research in hydrogen and fuel cell technology and 420 million Euros to BMW.”

Greco says Australia has more vehicle makes and models than any other country. “Dry economists see this as a marvel of open markets and believe Australia should import all its vehicles, as we do 70 percent of clothes, 60 percent of toys and 40 percent of furniture from China.”
In responding to the Bracks review of the industry Greco says the Government must carefully consider the benefits of the industry to Australia.

“Starting with jobs, almost 500,000 Australians make their living directly or indirectly from it. The workforce is well trained and loyal, with long periods of service.” The industry spends more than average in manufacturing on skills and training.

Innovation is another consideration. “The industry is one of the largest research and development spenders, investing $720 million last year and $42 billion over the past 10 years,” says Greco. “GM Holden is Australia’s largest private investor in R&D, and has more than 1000 designers, engineers and technical staff in its regional design and engineering centre, while Robert Bosch employs 300 automotive engineers that put Australia at the leading edge of automotive technologies and applications in the region.”

Then there is knowledge transfer. The Bracks review found the industry provides “extensive knowledge spillovers to other parts of the economy.” This includes not only automotive machinery and equipment, but land transport, truck assembly and heavy engineering, which is vital for mining, construction and infrastructure.

The economic benefits are significant. The industry contributes about 6 percent of manufacturing value-add and almost 1 percent of GDP. Without it, Greco says there would be a negative impact of $9 billion to $11 billion a year on the balance of payments.

We remain heavily dependent on manufacturing (42 %) and mining (31%) to earn export revenue. “Without automotive, we would lose billions of dollars of investment in plant and equipment, new model development and technological application development, and not just in the sector, given that even diversified  automotive companies may also pull up stumps and take all their investment and production offshore.”

Greco says automotive workers feel a sense of pride in building vehicles or technologies that go into them. “As a nation, Australia also should have a sense of pride, as an advanced economy with design, engineering and technical expertise.”

“I’m a proud Australian who wants to live in a country that produced things. If the day comes that Australia reverts to being no more than a farm, quarry and beach, I’ll join the estimated 1 million Australians who have taken their knowledge and skills overseas,” says Greco.

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