Should the Australian Government Finance car Manufacturers Essay Example

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2Australia’s car manufacturing Industry

Should the Australian Government Finance car Manufacturers

Australia is at the brink of seeing an end to its car manufacturing industry. This is as brought forth by the productivity commission recommending the federal government to stop financing the local car manufacturing industry. According to the commission, financing the car industry is backed by a weak justification and that financial help to this industry is not guaranteed (Mark & James, 2014). This decision does not only impact on the federal government’s economy, but others state governments as well. For instance, the state of Victoria and South Australia’s economies will be greatly affected due to the closure of Ford and Holden’s manufacturing plants which are located in the state.

It is estimated that Toyota Australia has in its books about18,000 employees in Victoria and 6,000 in South Australia. If the company decided to close down their manufacturing activities there, all these jobs would be lost leaving majority of this workers unemployed. It is noted by David (2013) that, Ford made the announcement in 2013 that it would bring to an end its production activities in Australia. This would leave about 1200 individuals from Victoria unemployed.

General motors Holden having already announced that they would also end their Australian manufacturing venture, about 2900 employees would again loose their jobs (Emma, 2014). Considering these mass job losses that are looming and the possibility of importing used cars in Australia, the government should reassess its position with regard to financing the car industry. This would not only enhance building the national economy, but also save a whole lot of jobs that are otherwise going to be lost.

Another debate as to why the government should reassess its decision to subsidize the car manufacturing industry involves the government subsidy to the fossil fuel industry. It is estimated that this industry receives about $100 billion a year inform of government subsidy. It raises questions as to why the government is not willing to give $1.5 billion over four years to one of the most profitable industry in the country yet the mining industry is receiving subsidies in billions each year (The Australian Institute, 2014).

However, despite the opposition, the productivity commission recommendation has also received support from some sections which are opposing to the over-generous union wage deals such as those at Toyota. This is as shown by a newspaper publication by Ben potter that was in support of a statement issued by Treasurer Joe Hockey, that the age of entitlement was over and there was a new age of responsibility. Hockey’s quest with such remarks is to utilize the government’s denial of subsidies to some corporate to justify a clearing attack on payments by welfares, social services and spending on public infrastructure (Patrick, 2014).

The publication by Ben potter in the Financial Review further suggested that the report by the productivity commission strengthened the government’s position against high-wage and a high cost protected culture that has been affecting Australia’s industries since World War II, and has also been characterized by low growth, falling prices of goods and a high dollar value (Leheyda& Verboven, 2013).

According to Mark and James (2014), some sections of the government leadership remains disturbed by the implications likely to be faced by bringing down the car manufacturing industry in the country, but are still in support of the need to cut down wages of auto workers and regulations. One of the states that are most likely going to be affected is the Victoria State where most of the car manufacturing plants are situated.

In a bid to save the car manufacturing industry, trade unions have demanded the expansion of military vehicles production so as to thereby provide employment opportunities for the majority of individuals who will remain jobless once the closures are carried out as scheduled (Patrick, 2014). However, this is done while also ensuring that the workers do not oppose to the planned closures. The reassessment of the governments proposal was also given a backing by the deputy prime minister when he expressed his regret of the looming closure of the General motors Holden. He expressed how Holden has been for a very long time, an iconic Australia’s national brand and a part of the country’s heritage.

According to AAI (2013), the car manufacturing industry in Australia has also been subjected to other pressures as well. For instance, the high dollar and availability of cheap labour overseas as compared to Australia. Australia’s car manufacturing industry was once making and selling five cars from five companies but the slow and steady decline in this industry is almost bringing it to an end (Tim, 2011). This trend started with Nissan closing down in 1992, Mitsubishi then followed in 2008. Ford and Holden have also announced their closures in 2016 and 2017 respectively.

The downstream impact of this move by the government should be considered in a more wide perspective. The closure of these car manufacturers will not only affect the car manufacturing industry but other firms as well. Companies that compliment the motor vehicle manufacturing industry will also be greatly impacted by the closure of these companies. This means more job losses as these companies have employees as well. Such include companies that produce and supply car parts.


AAI (Australian Automotive Intelligence), 2013. Australian Automotive Intelligence yearbook 2013.

ABS (Australian Bureau of Statistics) 2012. Australian Industry, 2011-12, Cat. No.8155.0.

Bracks, S. 2008. Review of Australia’s Automotive Industry, Final Report, July, Canberra.

David, M. 2013 June, 19. Ford closure highlights car manufacturing industry’s struggle for survival. Retrieved May 14 2014, From: : http://

Emma, G. 2014, Jan 14. Holden to cease manufacturing Operations in Australia in 2017. Retrieved May 14, 2014 From: http://

Leheyda, N. and Verboven, F. 2013. Scrapping Subsidies During the Financial Crisis —Evidence from Europe, Discussion Paper, September, 13-079, Centre for European Economic Research

Mark, H., & James, M. 2014 Jan 31. Ongoing Financial support for car industry not warranted’: Productivity Commission report. Retrieved May 14, 2014. From:

Patrick, O. 2014 February, 4. Australian government inquiry calls for end to car industry subsidies. Retrieved May 14, 2014, From http://

The Australian Institute. 2014, February, 6. Why do we subsidise industry? Retrived May14, 2014. From :http// Car Advice. Retrieved 2013-09-08. Retrieved from  Mitsubishi i-MiEV on sale to Australian public in Q3.Tim, B. 2011.