End car subsidies by 2020: Productivity Commission


The Australian Productivity Commission has called for all government subsidies to car makers to end by 2020, saying that arguments that support public subsidies for automotive manufacturing are weak and that the wider community would benefit more if financial assistance would stop.

Image credit: holdenhq.com.au
Image credit: holdenhq.com.au

The release of the Productivity Commission’s position comes a day after the Federal Government denied a request by SPC Ardmona for a $25 million aid to upgrade its Shepparton cannery. 

“Our draft proposal is that there should be no further industry specific funding beyond 2020,” said the Commission’s Deputy Chairman Mike Woods in a media release.

“The Commission opposes a supplementary rescue package for Toyota and component manufacturers. Governments could better assist firms by undertaking broad based economic and regulatory reforms and removing impediments to greater workplace flexibility.”

The decision to end government aid means Toyota, which remains to be the only car manufacturer committed to Australia, will not be receiving any financial assistant by the end of the decade. Ford and Holden have announced that they will cease manufacturing operations in Australia by 2016 and 2017 respectively, and Toyota is set to decide on the production of the next generation Camry by this year.

According to the position paper released by the Productivity Commission, the community would benefit from the ending of assistance to automotive manufacturing through the Automotive Transformation Scheme (ATS).

“Assistance imposes costs on the community and dulls incentives to improve productivity, seek export opportunities, and diversify into other industries,” said the Commission.

Prime Minister Tony Abbott has announced a $100 million funding which will help Ford and Holden workers in South Australia and Victoria find new jobs. However, the Commission said regional adjustment programs can be of limited value.

“Loss of employment and economic activity will be concentrated in some regions, with some already having relatively high rates of unemployment and disadvantage.”

“Infrastructure investment and labour adjustment programs, where warranted, need to be designed in ways that generate net benefits for the community as a whole.”

The Commission is calling for submissions in response to the Position Paper and to its Preliminary Findings report released last December. Public hearings will be held in late February and it will submit its final report to the Government by March 31 this year.