Australia needs a car industry. Without the ability to make vehicles, our entire nation’s dying manufacturing base will take a massive hit.
Manufacturing produces wealth and it produces jobs.
Knowledge does not. It is simply nothing more than a big myth that you can have a knowledge-based economy. It rests on a faulty assumption: that we know more than other people and are more intelligent.
And it runs on a big lie: that information will feed a family.
It won’t. It might satisfy some craving of the mind, but at the end of the day, the countries that produce will have more than the countries that don’t. For a start, the countries that produce will have freedom. Those that rely on others for everything from hats to harvesters, well, they will need to be content relying on others for economic and physical security as well.
Any government that is even moderately interested in pursuing the national interest will know that it does not want to drive down that road.
But that’s where successive governments have taken Australia.
Now, don’t get me wrong. I’m not suggesting that research and development is not important. Nor that Australia not should not be an innovative place. We should. But there’s no point having good ideas if they are put into practice in factories somewhere else.
Nor am I suggesting that the government should simply keep on handing over great chunks of money to keep the car industry alive. Subsidies should not be discounted but they are not the only answer either.
And let’s get another myth out of the way.
The common assumption is that Australia is simply not large enough to support a domestic car market. That’s rubbish. When Holden made the first all-Australian car in 1948, Australia’s population was less than 8 million. Now it’s closing in on 23 million. So the market is three times bigger than it was half a century ago. There is definitely a domestic market.
In fact, if there were not a market, car importers would not be in on it. But they are here and that is partly the cause of the Australian car industry’s demise.
Imports are not a bad thing if they spur competition. They are a bad thing if they kill it. Unfortunately, that’s exactly what has happened.
And when competition is reduced, prices always go up.
At the moment, there is a ceiling on how much prices can go up. It’s called the cost of local production. Importers can raise their prices as much as they want today, but, generally speaking, they can’t go past that ceiling if they want to make a sale. Tomorrow, things will be different.
A real factor killing Australia’s car industry is not foreign, but domestic. Unions, ironically, have become so successful that they’ve managed to kill off the business. Good on them for getting higher wages than anywhere else in the world. What’s it matter when it forces the factories to close?
Another factor is the exchange rate. The Aussie dollar has gone up and remained high for a relatively long time. It makes imports cheaper and adds costs to exports. Although it’s a different topic altogether, fluid exchange rates, in the long run, don’t help anyone but speculators. People who do useful things like manufacturing are hurt when prices are unstable.
But the biggest factor in the car industry’s decline is the Australian government, or rather its absence in a market filled with other interventionist governments.
Free markets are a good thing in theory, provided there is a level playing field. In practice, countries like China do not believe in a level playing field. They believe in China and who can really hold that against them. The US and Germany are no different. Both those countries subsidise their car industries as well.
Germany and the United States spend nearly $100 for every citizen on their car industries. By contrast, in Australia it is only $18. And they protect their industries in other ways. There is a 5% tariff on imported vehicles in Australia. In Germany it is double that, plus there is also 19% VAT, which is not applied to vehicles made in the EU. And even in countries like Thailand, which exports 180,000 vehicles a year to Australia and which has no tariff on exported Australian vehicles, there are virtually no Australian made cars on the shelves. That’s because other taxes and bureaucratic compliance costs come into effect. They might call it free trade but they still protect their car industry.
Australia is the most open market for vehicles in the world. One report from the December 2012 issue of Autoengineer Australasia found that there were 64 car brands on sale in Australia. In the United States there were just 33, even though its car market is 14 times larger than ours.
The Australian government can go it alone on the free-trade playing field and watch while every other nation looks after their interests. Or it can put Australia first and ensure that our car industry survives.
I know what I would prefer.