Welfare for car makers: a policy of confusion

Today's announcement that the federal government will not uphold its pledge to abolish the funding assistance to the car industry is wrong-footed, counter-productive and confusing. Although the chances of passing the abolishing bill through the Senate are slim—if not impossible—the Coalition does not help the cause for a more productive Australia by backflipping on its previous commitments.

Car industry corporate welfare is wrong-footed. No one, including governments, has greater knowledge than market forces to determine what should be produced and at what prices. In particular, the long history of ill-advised subsidies to the car industry in Australia should speak for itself. The annual one-billion-dollar-plus taxpayer handout has been flushed into an ailing business that already recognises it is not viable. Basically, by allowing this expensive life-support funding assistance, the government is taxing productive, job-creating activities—and there are many in Australia—to coddle a self-admitted unproductive industry. No unbiased rationale can sustain a valid argument for this continuing waste.

The car industry corporate welfare is counter-productive. There are all sorts of vested interests to claim this is ‘in the national interest’ – but it is most certainly not. On the contrary, Australians’ best interest lies in a vibrant and competitive economy. Nonetheless, of all arguments supporting the public funding of a private business, the most compelling in this case is the one regarding job protection. After all, thousands of jobs are in line to go in the next years as the car industry prepares to leave the nation for good. Yet, make no mistake, these jobs will disappear as many industry jobs did before in Australia – think of lamplighters, switchboard operators, and elevator operators. Hence, if the government is seriously concerned with the lives of so many workers in the car industry, it would be more honest (and cheaper) to direct public funds for job-seeking assistance and welfare support, when duly needed.

The car industry corporate welfare is confusing. The present government was elected on a clear platform against fiscal laxity. In a disastrously-advocated, poll-dropping first budget, the Coalition has promised hard spending cuts—many would say, too much too soon—concomitantly with indefensible largesse moves, such as the long-dead Paid Parental Leave scheme and now the car industry subsidy maintenance. 

This lack of policy coherence undermines the whole movement towards a leaner, more efficient government message. As goes the saying, if one does not know to which port one is sailing, no wind is favourable.

Australia (and its government) faces a decisive moment of truth when posed the question of whether or not the moribund car industry is worth such an expensive life support — and the answer is a resounding ‘no, it is not’. The stark reality is that Australia no longer remains competitive in the global car manufacturing market. Its own car industries already recognise defeat and are closing. The car industry corporate welfare is misguided: it is wrong-footed, counter-productive and confusing. May it rest in peace. 

Dr Patrick Carvalho is a Research Fellow at the Centre for Independent Studies.