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Rudd’s policy bomb lands on ailing SA economy

Jul 17, 2013
Holden workers at Elizabeth

Holden workers at Elizabeth

South Australia: dateline July 2013. Mining explorer UXA Resources ceases trading, mining producer OzMinerals lays off 61 workers at Prominent Hill, gas distributor Envestra is set to be swallowed up in a merger and lose its Adelaide head office, and Adelaide Brighton Cement talks about going offshore.

Two hours north of Adelaide, the town of Port Pirie ponders what might happen if smelter owner Nyrstar can’t get its ambitious $350 million redevelopment financed and approved.

“If Nyrstar goes, Port Pirie goes with it,” an adviser to Nyrstar told me yesterday.

Sitting on the edge of this economic crumble is Holden, the Elizabeth-based car manufacturer trying to build a business case to convince its Detroit bosses that it can turn a dollar out of making and selling cars in Australia.

And then along comes newly recycled Prime Minister Kevin Rudd to announce a change in fringe benefit taxes that will add $1400 to the cost of a company car.

Industry analysts predict it will hit the car makers for six and take down a stack of jobs at suppliers, new car dealerships and associated service industries.

This fringe benefits tax (FBT) change, by the way, is to offset the cost of a change to the carbon tax that cannot be legislated for in the current parliament, due to opposition from the Coalition and the Greens.

It’s been two decades since South Australia’s economy looked so perilous; and there appears to be little coming from either the State Government or the State Opposition on how we should deal with this looming economic storm.

Jay Weatherill and Steven Marshall spent most of this week swapping barbs about whether a cop can run an education department.

But back to the main game. Reaction to Rudd’s proposed removal of the FBT concession on vehicles to help pay for the ditching of the carbon tax has been ferocious.

The Federal Chamber of Automotive Industries (FCAI) said the changes will have dire consequences.

“The effects will flow right through the industry, including to dealerships and service centres,” FCAI chief executive Tony Weber said in a statement.

“I want to know if the government truly understand the consequences of this decision, and why the industry was not consulted on such a significant change.”

The retail sector said the changes will impact 320,000 employees across the nation.

“They will lose money and they will have less money to spend,” Australian Retailers Association executive director Russell Zimmerman told AAP.

Australian Chamber of Commerce and Industry chief economist Greg Evans described why the carbon tax changes and associated FBT adjustments will hurt.

“It’s harmful for business, its harmful for the economy and its harmful for jobs,” Evans told media in Canberra.

The Business Council of Australia slammed the timing of the carbon tax changes and the FBT moves.

“Businesses are still likely to be paying one of the highest carbon prices in the world for up to another year and their competitiveness is suffering every day as a result,’’ it said.

Toyota, normally silent on delicate matters of economic policy, warned of a “significant impact’’ on its Australian manufacturing operations.

Matt Reinehr, the chief executive of lease company NLC, told the Australian Financial Review the FBT changes would “kill the industry’’.

He told the AFR salary-packaged cars drove new car sales and the impact of the measure would affect the whole industry chain, adding that FBT concessions were a more effective use of taxpayers’ money than direct subsidies.

Australian Industry Group chief executive Innes Willox, was just plain angry.

“… there are very serious concerns about the industry impact and the additional compliance costs of the proposed change to the tax treatment of cars,’’ he said.

Is there a silver lining to any of the changes announced by Rudd yesterday?

Not likely, going by local manufacturer Adelaide Brighton Cement’s reaction to the accelerated move from a carbon tax to an emissions trading scheme.

ABC had been on the record saying the carbon tax, which it estimated cost it $6 million in the first year of the scheme, would send it offshore

The company’s managing director Mark Chellew said yesterday that nothing had changed.

“There is still a disadvantage for emissions-intensive, trade-exposed sector in Australia,” he said.

“I think it made us seriously reconsider where we make our clinker and cement and made us look at more of an offshore strategy.

“Obviously every bit helps, but we formed certain views over where will make materials over the next 10 years, and whilst we are open to reconsider our thinking, I don’t think this [an early ETS] is sufficient.

“We are one of the first countries outside of Europe to bring in an emissions trading scheme, so our view was always ‘let’s do something sub-$10 a tonne to see how it works’.”

Is there any chance that our State MPs – on all sides – might knock on the Prime Minister’s door and pitch our case?

 

 

 

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