The real value of our automotive manufacturing industry
4th November, 2013
The Australian economy would be $21.5 billion smaller if automotive manufacturing leaves the country in 2018. Melbourne and Adelaide will be heavily impacted with significant job losses and a long-term fall in gross regional product (GRP).
Economic analysis by Monash University’s Centre of Policy Studies and research by the Allen Consulting Group has identified the impacts Australia will see if automotive manufacturing in Australia ceases.
Releasing a Federal Chamber of Automotive Industries commissioned report with this analysis and research, Chief Executive Tony Weber said without Government support for automotive manufacturing, high-tech jobs and skills will be lost. He also said significant foreign direct investment would cease, as overseas headquarters redirect investments to other automotive manufacturing countries, not to other industries in Australia.
“This report shows the value of automotive manufacturing to Australia. It details the benefits to Australia as a whole””to the economy, communities, the supply chain and other industries. The FCAI will be using this report as a basis for our submission to the Productivity Commission’s review of the automotive sector. I want to be clear: financial support for the industry is an investment in Australia and this investment needs to be long-term,” Mr Weber said.
“For that investment, Australians receive significant returns through direct foreign investment, employment, skills, training, technology transfer and research. And the investment also generates spill-overs that flow into other industries and areas of the economy. Without that investment, we lose these long-lasting benefits.”
Key points from the report
Automotive manufacturing in Australia receives around $500 million in Government funding each year. For this investment, the Australian economy is $21.5 billion larger (based on an economic welfare net present value calculation).
The modelling worked on a scenario where Australian automotive manufacturing shuts down over a two-year period from 2017 to 2018.
On a per person basis, Government assistance to automotive manufacturing is around $18 per person””a very low figure by international standards. The $21.5 billion return equates to $934 per person in benefit.
Australia would be a very different place without automotive manufacturing. If we lost this important capability:
Australia’s GDP would be $7.3 billion smaller (in today’s dollars) by 2018.
Billions in foreign direct investment would cease, as head offices direct investment to other automotive manufacturing countries, not to other industries in Australia.
Employment losses in Melbourne would equate to some 33,000 jobs in 2018, and around 6,600 in Adelaide. These jobs would eventually return in both cities, but with lower real wages. And employment levels would not return until around 2027 for Melbourne and 2025 for Adelaide.
The economies of Adelaide and Melbourne would be heavily impacted with gross regional product (GRP) contracted by up to 1.4 per cent and it is likely GRP will be lower than pre-closure levels until the end of 2031, while employment could fall by around 1.5 per cent.
These impacts do not include the spill-over effects, including to advanced manufacturing and research and development (R&D), which cannot be modelled, but are recognised by chief executives of companies like Boeing, Rio Tinto and Coca-Cola Amatil. These include:
technology transfers through R&D and innovation;
lean management techniques and applications; and
advanced labour skills and manufacturing techniques.
The report found that if barriers to export were removed and the Australian industry could return to 2008 levels of exports (when 160,000 vehicles were exported), Australia’s consumer welfare would increase by $7.1 billion over time.
http://www.fcai.com.au/news/news/all/all/341/the-real-value-of-our-automotive-manufacturing-industry