Paul Fletcher (Bradfield, Liberal Party, Parliamentary Secretary to the Minister for Communications) Share this | Hansard source

I am very pleased to rise to speak on the Automotive Transformation Scheme Amendment Bill 2014. This is an important bill, which gives effect to decisions announced by the government in the context of the 2013-14 Mid-Year Economic and Fiscal Outlook—the MYEFO—and gives effect to budget decisions taken by the government in respect of the Automotive Transformation Scheme.

In the time available to me this evening, I would like to make three points. Firstly, Australia has had for some years an automotive industry which by world standards is subscale and uncompetitive. Secondly, Labor in government refused to acknowledge this reality, whereas the coalition government, the Abbott government, has acknowledged this economic reality and has acknowledged that to promote our competitiveness as a nation we need to move away from industries such as automotive, in terms of where funding goes, and play to our strengths as a nation. And, thirdly, consistent with that, this bill makes sensible savings by reducing the extent of public subsidy to an industry which is no longer competitive in world terms.

Let me turn to the first point, that the automotive industry has been for some years in Australia subscale and uncompetitive. Let us look at the figures for domestically made cars in recent years and the market share captured by domestically made vehicles. Between 2007 and 2012, in just five short years, domestically made cars fell from 19 per cent of total car sales in Australia to less than 13 per cent. In other words: consumers were voting with their feet and that resulted in a situation where an industry that was already subscale by world standards became even more subscale.

Let us have a look at the numbers in terms of automotive manufacture globally. These are the figures for the 2013 year from the global automotive peak body. In 2013 there were 87.3 million vehicles manufactured: China manufactured 22.1 million; the United States, 11 million; Japan, 9.6 million; Germany, 5.7 million; Korea, 4.5 million. And where was Australia? The total production from Australia sounds like a rounding error when compared to the numbers that I have quoted. Production for Australia in 2013, according to the world automotive industry peak body, was 215,926 vehicles—a tiny, tiny fraction of global production.

And why is this important? It is important because automotive manufacturing is a scale game, and if you cannot have large-scale production and large production runs, then you cannot be world competitive in your pricing, and that is a fundamental difficulty that the Australian automotive sector have got into. I need hardly add that that very small quantum of production was spread across multiple manufacturers, so the production run per manufacturer was even smaller by world standards. Therefore, the question in public policy terms becomes: does it make sense to be putting public money into subsidising an industry that is clearly struggling to be competitive? Is this a good allocation of public money?

The issue about global competitiveness for Australia is one that needs to be recognised as we think about spending taxpayers' money. We need to think about the global competitiveness of Australia. The Business Council of Australia recently released a report from consulting firm McKinsey entitled Compete to prosper: improving Australia's global competitiveness, which makes the point that a great deal of Australia's industry assistance has been allocated to declining sectors, and, sadly, the automotive sector has been one of those. We are clearly in a position where we have allocated as a nation very substantial subsidies, very substantial amounts of public money, to an automotive sector which, as the figures demonstrate, is struggling to be competitive. Indeed, according to the Productivity Commission, total support to the automotive industry between 1997 and 2012 has been around $30 billion. During that period, the number of vehicles manufactured locally was slightly over five million and so, working through the maths, the support per vehicle over this period was approaching $6,000. A very substantial amount of public money to subsidise one particular industry, and yet, as the numbers I have quoted indicate, it is an industry that is struggling to survive in a highly competitive global market.

We have recently seen from Holden the worst ever loss being announced—$553 million for the calendar year 2013, taking its total losses to approximately $1 billion over the past eight years—and Ford recently announced its third worst ever loss—$267 million, taking its total losses to $1.1 billion over the past eight years. So given these fundamental competitive dynamics, the inevitable result has been a decision by the global automotive manufacturers to cease manufacturing in Australia. It is hardly surprising that they have done that when you look at the tiny production runs in this country, the difficulty in operating economically and the many other difficulties that they face. What did then chief executive of Holden in Australia, Mike Devereux, say when he announced Holden's decision to close in December 2013? He had this to say:

… Australia's automotive industry is up against a perfect storm of negative influences including the sustained strength of the Aussie dollar against almost all major trading currencies, the relatively high cost of production and the relatively small scale of the local domestic market.

… building cars in this country is just not sustainable.

These are not easy decisions, and nobody is saying—the government is certainly not suggesting for a second that the departure of automotive manufacturing in Australia is going to be easy for the country or for the affected communities.

Debate interrupted.

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