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Car industry treated with contempt: Carr

Carr industry: Opposition industry spokesman Kim Carr says university modelling shows the loss of the Australian car industry could cost $29 billion in 2017.

Productivity report ‘underestimates job losses and cost of car industry failure’

27 Aug 2014

OPPOSITION industry spokesman Kim Carr has lambasted the Productivity Commission’s (PC) report on assistance to the car industry and accused the Abbott government of handling car industry policy with contempt.

Citing figures the PC did not put in its report – even though reportedly requested to do so by Treasurer Joe Hockey – Senator Carr said assistance offered to Australian car manufacturers was a fraction of what automotive giants Germany and the United States offered to their automotive sectors.

Senator Carr, the former Labor government’s industry, science, innovation and higher education minister, also pointed to research by Adelaide University that showed the cost to the economy of closing the car industry would peak at about $29 billion in the 2017 financial year, many times the size of the assistance on offer for the decade to 2020.

“Only 13 countries, including Australia, are able to make a car from start to finish, and every single one of them co-invests in their industry,” he said.

“Here, the cost of that support has been $17.40 per year per person.

“This compares with $90 per person in Germany, $264 per person in the US and $334 in Sweden.”

Senator Carr also claimed the PC underestimated the number of jobs that would be lost when it claimed around 40,000 people would be put out of work when the car-makers packed up and their suppliers shut down.

“The real impact is closer to 200,000 jobs, not 40,000,” he said.

“The greatest impact will be in Victoria, where an estimated 100,000 jobs will be lost. And this is in a state where youth unemployment is at a 15-year high.”

While about 40,000 people were said to be employed directly by the car-makers and their Tier One suppliers, another 200,000 people were employed by in Tier Two and Tier Three suppliers whose jobs were partly reliant on the car industry.

The job losses in these companies were expected to exceed the losses among directly employed people, Senator Carr said.

The cost of government assistance to these people would easily exceed money saved by shutting down the Automotive Transformation Scheme (ATS), he said.

Senator Carr referred to economic modeling done by Adelaide University that showed 200,000 jobs would be lost around the country by the time the last car plant was closed.

“Modeling by the University of Adelaide shows that the loss of the industry will lead to a negative annual shock of $29 billion by 2017,” Senator Carr said.

“That’s the equivalent of about two per cent of GDP – a year.”

It would take the Australian economy 10 years to recover that economic activity, he said.

The modeling showed South Australia was expected to lose more than 23,000 jobs and $3.7 billion in lost wages.

Victoria was expected to suffer much more, with $13 billion in earnings lost each year and 98,000 jobs lost, the university modeling predicted.

Senator Carr said the loss of income tax and the increase in welfare payments to retrenched workers would amount to $20 billion.

That’s more than three times the $6.2 billion that was on offer as co-investment amounts under the ATS. Under the scheme, the government would contribute around 25 per cent of the total investment being made by the car and parts-makers.

This reduced the amount the companies needed to invest and made it easier for them to earn a return on their investment and keep their employees in work.

When the coalition government brought down its first budget this year, the budget papers showed that car-makers and component suppliers had indicated they were planning to spend $3.8 billion in the next three years.

That would have required a co-investment by the government of about $1 billion.

In a separate statement made in conjunction with SA MP Tony Zappia, Senator Carr highlighted a statement by then opposition leader Tony Abbott before the election: “I want to see car-making survive in this country, not just survive but flourish.”

Senator Carr and Mr Makin said the government had refused to commit to Labor’s co-investment plan which would have kept Holden in Australia until 2025 for less than $150 million a year in government co-investment.

They noted that the government had stripped $500 million out of the ATS in December and a further $400 million in the May budget.

“So much for helping the auto industry to ‘not just survive but flourish’,” they said.

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