Has Macfarlane gone mad?

There is a bit of a meme around that the MSM are giving the LNP Coalition a free ride in government. On Friday the Australia Financial Review did its bit to buck the trend by asking the above question in an editorial.


When federal Industry Minister Ian Macfarlane spoke about a “final” assistance package for GM Holden last week, The Australian Financial Review took it as a sign that someone was finally standing up to the car makers’ protection racket. But Mr Macfarlane’s latest comments indicate a more protectionist mind-set. He agreed that Australia “needs” a car industry. He wants to reverse Ford’s decision to cease manufacturing cars in Australia after 2016. He wants an Australian industry to make cars that are driven “all over the world”. And he flags the option of an Australian car industry that is “supported by the government long term”. “I’m going to do everything I can to work with the companies to make sure that car workers’ jobs are protected, so we can have an industry long-term, so that Australia can be proud of its industry base,” he said on Thursday.


Has this normally sensible minister gone mad? It’s one thing to politically show you are doing everything you reasonably can to keep an industry going. But it’s another to use the language of the mendicants and rent seekers…

The AFR says that putting uncompetitive industries on permanent subsidy mocks Tony Abbott’s vow to make Australia open for business. It says that Joe Hockey and company should stand up to this lunacy.

At stake is whether the Abbott government has the wit and gumption to tackle the serious task of reviving Australia’s stalled productivity growth. Mr Macfarlane should be the first person to recognise this.

Plain words indeed!

Ian Macfarlane is one Abbott minister for whom I have a bit of grudging respect. Not much loved as president of the Queensland Graingrowers Association before entering politics he has always struck me as grounded and pragmatic. I think he’s been given the task of saving the car industry in Australia without using subsidies, but his comments suggest he knows that without subsidies the car producers will walk. They speak of “co-investment”. I believe it’s standard for countries that manufacture cars only 13 of which have industries integrated from design to shop-room floor.

Before you join the chorus of people calling for an end to such subsidies, have a read of Remy Davidson at The Conversation. The subsidies are entirely unremarkable and vanishingly small, he says. I did like this bit:

Australia has first-rate engineers and builds world-quality suspension and braking systems, develops advanced composites and innovative alloy technologies.

Australia also builds second-rate cars. It has a third-rate managerial class and fourth-rate governments.

He does suggest that the future may be in component manufacturing rather than in making complete cars. Essentially with our high dollar due to the ‘Dutch disease’ and the ‘resource curse’ we need to find high value-added, low volume niche markets. Davidson suggests that even here we need the volume of the domestic market. Part of the argument is that many component manufacturers are insufficiently diversified and insufficiently established in export markets to survive the demise of domestic car manufacturing.

A bit of investigation reveals that the car industry is part of a cluster of sophisticated industries. The reports are paywalled, but look here, here, here and here in the IBISWorld collection.

There is also the question of opportunity cost. Is supporting car producers the best way of spending x dollars?

There is a claim that:

The Australian cleantech sector boasts revenue of $29 billion a year and employs 53,000 people, making it larger than Australia’s automotive manufacturing industry and one quarter the size of the country’s entire manufacturing sector.

I would query the last bit. Sources consistently put employment in manufacturing as close to a million. This site puts employment at 941,400 and exports at $87 billion or about 35% of Australia’s merchandise total.

I understand the Australian ship building industry is larger than the car manufacturing industry.

At present, Australia accounts for 30% of the international market share for aluminium shipbuilding.

I understand that the US Navy use some of our aluminium catamarans in their overseas operations. Ironically, the can’t take them home because of the Merchant Marine Act of 1920, also known as the ‘Jones Act’.

The question is raised as to whether car manufacturing is a keystone industry, as often claimed. Pillip Toner suggests that it is:

Consider the car industry. It draws on an extraordinarily wide-range of advanced technology and services, advanced metallurgy, machining. Consider the millions of lines of code that go into engine management systems and safety systems of modern vehicles.

Australia is just one of 13 countries in the world that have the capacity to go from the drawing board right through to the production line and the showroom – and every country that has that capacity seeks to nurture its industry. The modern motor vehicle industry sits at the very heart of a national input-output system at the very heart of its national science and technology base.

The comparative level of subsidies has been fact-checked here and here. The subsidies do appear to be quite modest.

Here’s an Industry Innovation Council paper on manufacturing trends to 2020.

In other criticisms of the Government, business and the AFR are of course calling for industrial relations reform and microeconomic reform generally. Heather Ridout was even suggesting that increased expenditure on education and infrastructure would promote productivity.

9 thoughts on “Has Macfarlane gone mad?”

  1. In my recollection, Ian Macfarlane was an effective Minister and managed in energy matters to work across different jurisdictions and political parties in a smooth manner. His recent public comments do leave me in doubt which path he will try to take with the motor vehicle sector but that is probably a wise way for him to communicate at this stage. In spite of what the AFR thinks, it is probably best for Australia in manufacturing and security terms to have some motor vehicles produced. It is a difficult road ahead for Macfarlane, weaving between the interests of the LNP, its cheer squad and the national interest. Let’s hope he can do it.

  2. Mahaut1329, I suspect that if anyone can Macfarlane can. I suspect he’ll be opposed by Hockey, Sinodinis and Robb, which makes it an pretty even match with Abbott perhaps having do decide. Abbott is likely to be conservative, which means hanging onto the car industry for a while yet. Eventually one would think that full vehicle manufacturing will go, but hopefully not until the components industry is on a better footing.

    Of interest, it seems we are still making Harley Davidson wheels and will continue to do so.

    Once I had shares in a firm called Pacific BBA which made high-end lightweight brake callipers, which were then applied more generally in the industry. I recall them being forced to set up an assembly plant in Detroit to satisfy the unions there, but retained the quality manufacturing in Australia.

    Eventually they were taken over by Bosch (cf comment about third-rate managers above) and for the moment live on at least in part with 150 engineers employed in Clayton working on new high-end motor racing technology.

  3. Great post. A couple of counter points though:

    1. Its difficult to import second hand cars into Australia. So we aren’t just subsidising car makers, we are actively protecting the local new car industry from the global used car market.

    2. Self driving vehicles. Cars that drive themselves are going to be on the road by the end of the decade. There is a good chance that many, many people will prefer to hire a robotic taxi rather than own their own car. If this is the case some estimates say that each self driving car could take 2.5 regular cars off the road. Someone needs to ask: what will be the impact of self driving cars on our habits and will our local manufacturers be able to survive in this environment?

  4. Very informative post, Brian.

    That Jones Act is one of the most arrant examples of statist dirigisme I have encountered.

  5. “statist dirigisme”
    Isn’t that like saying “watery H2O”?
    Anyway, pity Australia didn’t have policies along the lines of the Jones Act instead of blind and stupid worship of free trade.

  6. Queensland perspectives old chap! To me MacFarlane is a very boring reason why it is difficult to vote! Whatever the car industry says about itself,the major driver of it and its reasons are all need to be balanced by the potential of recall and workers needing secure work.BOSCH is nothing to criticise,accept in the general sense,maybe spark plugs in use could certainly be more innovative and not necessarily always in vehicles.A quick look on YOUTUBE sees all sorts of experiments around discharging spark plugs and plasma effects. In one sense of actual personal competition with the Minister ,it was little big I,that had something to do with grain handling like submarine hatches on silos and matters on farms,which the little big I cannot prove to any of you. Suffice to say a similar event happened or happenings in car manufacturing and selling used cars.LIKE a Melbourne radio program called Makes and Models.Selling in the sense advising prospective buyers and sellers what were those cars worth and problems on all sides of those matters. To me the problem with the car industry like most manufacturers they always cry poor,whereas the community support rather than government support is the greatest treasure they have.Untapped,and not necessarily asking for much.I look at the Geelong plant for example and see Submarines.Yep! Submarines! Why not!? A sub to compete against boaties or compliment boaties.Aluminium may not be that useful as a consumer market for subs,whereas other alloys and plastics maybe.And why don’t the boat manufacturers and car manufacturers get together,both time money and possibility may improve.One will be able to see homemade subs on YOUTUBE,it would be good to have a choice in buying cars completely or as a kit,just like boats subs etc.Including motor bikes and options of fuel use.The problem for all types of manufacturers to be more flexible is as much property address for manufacturing.Do you really think they need to be in GEELONG or Dandenong all year round.THE CAR COMPANIES ALSO SHOULD SEE WETHER AMONGST THEIR STUFF THE WHEAT EXPORTING FACILITIES CAN BE UPGRADED WHEN NOT IN USE AS A EXPORT TERMINAL VIA RAIL, CANNOT BE PUT TO OTHER USES WHICH INVOLVE PRECISE ENGINEERING INCLUDING ROBOTICS.Who cares if say GMH is in the infrastructure building industry on and off whenever they see they can add value to whatever is going on.Women’s opinion please.

  7. Volume 2. Apart from submarine locks it was also me,that suggested phosphines,that are now not that useful given insectivoria have adjusted.This is commonly seen as a reason to stop doing what one has been doing,but,apart from now knowing both wheat and phosphine maybe,a problem for human health, I don’t necessarily think that has to be.Both experiments on using phosphine and neem tree products would be responsible,including wether a tool used on mine in plastic manufacturing called a HILSCH TUBE OR A HILSCH VORTEX TUBE based on heating and freezing compressed air using the well known effects of venturi matters.See Exair and Hilsch or Vortex Tube.Or Google to see YouTube. As with all matters with one design parameters be they cars or spaces in cars,or silos,one use of any space isn’t really what a modern human is on about. Silos should have many uses,and a tech.that proves it is clean to store cereals ,and a method to clean would solve I think some money problems for farmers on and off farm,as people tools or silos.Buried,span around the speed of cars on the road,or a vehicle in itself.And offering students to dream up new uses for on farm silos and farmer tools vehicles and time use.Hilsch Vortex TUBES MAYBE USEFUL WITH A CAR TO CREATE NEW WORK FOR ALL SORTS OF CONTRACTORS INCLUDING GIVING WEEDS PLANT VIRUSES AS IN WEEDS.Knowing what one is doing is a pre requisite.

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