The federal government is again being pressured to fast-track more subsidies for Australia’s loss-making car industry, following warnings its collapse could cost the broader economy.
Modelling commissioned by the Federal Chamber of Automotive Industries (FCAI) showed there would be a $7.3 billion reduction in gross domestic product growth if the sector shut down in the next five years.
The economic pie was already much larger because of the industry, despite it receiving a relatively low level of government subsidies by international standards, advisory firm Allen Consulting found.
The government currently subsidises the industry by about $500 million a year but the new coalition regime has ordered the Productivity Commission to review the viability of the payments. A final report is due next year following the interim report before Christmas.
Ford already plans to end manufacturing in Australia by 2016, while Holden’s US owner General Motors could reach a decision on the fate of the local operations before Christmas.
South Australia and Victoria would be severely affected, given the states are major bases for car making plants and related vehicle auto parts manufacturers that support thousands of jobs.
SA Manufacturing Minister Tom Kenyon said the federal coalition government, which has previously questioned the feasibility of throwing more funds at the industry, needed to quickly make up its mind.
“The federal government should stop hiding behind the Productivity Commission report and get out and make a decision,” Mr Kenyon told AAP on Monday.
Independent South Australia senator Nick Xenophon said the impact of a local car industry shutdown would be “chilling”, given the report’s findings.
“Make no mistake – while the closure of the car industry would have an impact of earthquake proportions in Adelaide and Melbourne, those tremors would be felt right across the country,” he said.
The federal Labor opposition’s industry spokesman Kim Carr said the government’s indecision was threatening more than 200,000 jobs.
“Gross regional product in Adelaide and Melbourne would not recover for almost two decades until 2031,” he said.
“If the Prime Minister is serious about the budget bottom line and protecting jobs then he would realise he has to act to ensure the future of this critical industry.”
Industry Minister Ian Macfarlane said the Productivity Commission should be left to do its job.
“The inquiry will provide the government with necessary information to respond … in a measured way that focuses on long-term sustainability and identifies options that are sustainable, accountable and transparent,” he said.