One ‘last’ bailout for Holden

Federal Industry Minister Ian Macfarlane has toured the Holden plant this week as part of Holden's attempt to chisel more money out of the government in exchange for, again, committing to stay in Australia for the remainder of this decade.

This money would be on top of the $275 million given to Holden last year to commit to staying in the country until after 2021. It would also be on top of more than $2 billion given to Holden since the turn of the century.

Despite these massive taxpayer-funded donations, Holden has cut more than 700 jobs in the last 20 months.

Minister Macfarlane has said that this will be the last industry assistance package for Holden, something that seems very unlikely for several reasons. Holden sales in Australia last year were down 9 per cent and they posted a loss of $152.8 million, which hardly inspires confidence in the long-term viability of Holden without government support.

In addition, Australian car makers mostly produce cars for a segment of the market that is declining; Federal Chamber of Automotive Industries data shows that the large car segment of the market is down more than 20 per cent this year, after similar falls last year. It also costs much more to manufacture cars in Australia; Ford suggested it costs four times as much to build a car here as opposed to elsewhere in Asia.

Those two factors also weigh heavily against expectations of future export gains.

The car industry in Australia has been dependent on tariffs, subsidies and protection since its inception. Claims that Holden will suddenly stand alone after one last support package should be treated like a smoker's claim that they will quit – after one last cigarette.

The fact that other countries provide support for their automotive manufacturing industries doesn't mean we should do the same. We should take advantage of the lower priced cars made available by that assistance. Cheaper imported cars represent a free transfer of money from foreign taxpayers to Australian consumers.

Instead of taking advantage of those transfers, the government tries to lure foreign consumers into buying Australian cars by throwing Australian taxpayers' dollars at Holden. Not only is that money thrown away, it diverts resources away from competitive industries and encourages uncompetitive industries to lobby the government for more assistance.

It's time to start asking some questions of politicians. First, what benefit is Australia receiving from its $1.1 billion a year in support for the car industry? Second, what did we get for our $275 million 'co-investment' in Holden last year?

I can see no reason why Holden should get one last, taxpayer-funded 'cigarette.'

Simon Cowan is a Research Fellow at The Centre for Independent Studies.