Some of you may have seen a TV ad for a used car business in Hobart where the owner’s spin is that his trade-in deals are so good he has to ask himself, “Why do I do it?”
I couldn’t help but think of this, watching the unedifying spectacle during the week of Holden announcing job cuts after taking massive taxpayer handouts to keep their Australian manufacturing operations open.
According to news reports, the Commonwealth and state governments have forked out more than $12 billion of our money over the last decade to car industry manufacturers. And what do we have to show for this huge investment? Not a lot really.
Why do we do it?
If the Australian car industry is really that unprofitable and inefficient, how can we justify pouring so much money down this bottomless pit? Last year alone, Holden received $250 million in government assistance, one instalment of $2 billion in subsidies the carmaker has been given in the past 12 years, on the basis that they employ people. Holden’s announcement that it is laying off another 500 workers has politicians gnashing their teeth. Yet over the last couple of years closure of food manufacturing facilities across Australia will have put at least 1000 Australians out of work – with not a raised eyebrow to be seen.
Analysis done by the Centre for Independent Studies has shown that the fewer workers Holden employs, the higher per capita subsidy we are paying. Before the announcement this week, we were paying $45,000 per head per year in direct subsidies – not including tariffs and additional taxes like the luxury car tax. Now it will be up over $50,000 – yet there is still no guarantee that there will not be further job losses.
This is bizarre. By propping up an inefficient industry we, the taxpayers, are actually paying the wages bill for a company we don’t own, just for the sake of saying we can make our own (expensive) cars – cars that Australians are clearly demonstrating they don’t want.
Why do we do it? The response from government and supporters of these industry subsidies argue that it is vital to our national security that we maintain the capacity to build our own cars. I can’t understand why – the Kiwis survive perfectly well without their own car industry and cars there are some 40% cheaper than they are here.
Why do I raise this? The self-sufficiency of the Australian car industry contrasts sharply with that of Australian farmers.
According to the OECD, our farmers are among the least subsidised in the world. Just 3.2 per cent of farm income is attributable to government assistance, the second lowest proportion in the world behind New Zealand’s one per cent. (There are some grounds for arguing with even that figure – but I’ll let it stand for the purposes of this discussion.)
The OECD average is 20 per cent, capped by Norway at 60 per cent. I wonder how you look yourself in the mirror every morning knowing that 60 per cent of your farm income comes from taxpayers?
Yet Australian farmers have to take what prices the market offers and what the high Australian dollar exchange rate delivers and try to make a living. At the same time, they face ever-mounting costs of government regulation and an army of finger-wagging instant experts telling what to do and how to do it. If there is the slightest hint of assistance, these instant experts come out of the blocks faster than a speeding bullet and launch into a chorus of ‘level playing field, global markets, international competitiveness’ yada yada yada.
On the face of it, Australian agricultural exports are doing well, $30.5 billion in 2011/12, which is $3.3 billion more than in 2010/11, but the performance varies between sectors. Unprocessed grains and oilseeds and meat are doing well, but horticulture not so well.
We are importing more and more fruit and vegetables. The trade deficit in this area alone is $264 million a year. Australia is closing fruit and vegetable processing facilities while importing more from overseas.
Why might that be so? Supermarkets and private labels, that’s why. Woolworth’s chief executive Grant O’Brien conceded at a CEO Tasmania lunch last week that the customer is king, which means that price is the now the sole determinant for the supermarkets. Loyalty to Australian farmers goes out the window. If you can stretch the definition of “Made in Australia” to cover processing imported food, then so much the better.
Come the crunch, when we have the next international health scare (such as the new strain of bird flu currently emerging in China), countries will close their borders to prevent the spread of the disease. It is not hard to work out where that will leave us when we’ve replaced high-quality safe locally produced food with imports and driven our efficient Australian farmers out of business.
So, where are our priorities with Australian taxpayer dollars and industry policy?
Would the Australian way of life really be threatened if we left it to others to build cars? Do we need car security in the same way that we need food security? Of course not – and it is time our political leaders realised this.
