The $30 billion of taxpayer assistance handed to car makers between 1997 and 2012 had only delayed the structural adjustment facing the industry, the Productivity Commission says.
In its review of Australia’s automotive manufacturing industry, the commission says future plans to prop up components makers and pay redundant workers above-average assistance would also be unwise.
The review estimates that up to 40,000 workers will lose their jobs as car making in Australia ends and component makers adjust to the loss of business.
Australian car makers had been unable to survive in the highly competitive global and domestic market, with Ford, Holden and Toyota announcing they will cease local manufacturing by the end of 2017.
Even though government support had progressively reduced, the automotive industry remains Australia’s most supported sector. It had an effective assistance rate of 9.4 per cent in 2011-12.
That compares with 3.8 per cent across the manufacturing sector and 0.3 per cent for mining.
“It is estimated that up to 40,000 people may lose their jobs,” the commission’s report says.
It is likely job losses will be staggered over several years.
The commission warns against continuing assistance to component manufacturers beyond 2017.
It also cautions against providing adjustment assistance to unemployed workers beyond that provided to other job seekers.
It says the Automotive Transformation Scheme should end when the last car maker shuts up shop.
Component makers will receive more than $300 million in assistance between 2014 and 2017.
But there were industry and equity arguments against extending assistance to advantage component makers before other businesses also facing adjustment pressure.
The report says the government should ensure workers receive appropriate assistance but that should not exceed what is available to other job seekers.
Unemployment will be concentrated in particular areas such as northern Adelaide, parts of Melbourne and Geelong. However, the report warns the government to think hard before intervening.
“Regional adjustment funds, infrastructure and defence spending and industry support programs are costly and ineffective ways to facilitate workforce adjustment,” it says.
Industry Minister Ian Macfarlane said the government was working with the sector on a transition plan to help workers and component suppliers.
“The government’s focus is squarely on ensuring support during the transition process is targeted and effective and that workers have the skills, training and information to help them move into new jobs,” he said in a statement.
