Kevin Rudd’s $6.2 Billion Auto Industry Package
Australian Prime Minister Kevin Rudd announced a $6.2 billion dollar package to support the Australian Car Industry. This was after foreign owned car manufacturers announced plans to shut down local production in the wake of the global financial crisis.
$500 million of this money will be set aside for a ‘Green’ car innovation fund, to produce environmentally friendly vehicles.
The intentions of this plan are certainly noble. Australia has a proud history of automotive production. The industry employs many people who hold a lot of valuable know-how.
These are the problems I see with the plan:
1. It’s a large amount of money and it may only temporarily defer the problem. Foreign manufacturers will milk the government funds, artificially boosting their profits, then shut down the factories when the money has been exhausted.
2. Australian automotive tariffs are set to fall from 10% to 5% making it harder for our local industry to remain viable in the presence of low cost German, Japanese and Korean imports. Would we be merely sustaining an uncompetitive local industry out of pride?
Here are some possible alternatives:
1. Assist Australian entrepreneurs in buying out the local arms of these manufacturing firms, to ensure that the industry is under Australian ownership and that profits remain in this country.
Perhaps a new Australian company can focus on producing low cost, energy efficient vehicles that would offer something unique and provide a competitive edge on the market.
2. Use the money to pay for redundancies for these workers and retraining to allow them to get job in other industries where their skills can be adapted, e.g. Agricultural technology, military vehicles
What are your thoughts? Your comments are most encouraged.