From the moment Ford announced it is pulling out of car-making in Australia from 2016, the remaining car makers had the Federal Government over a barrel. The ministers know, and the car industry knows that just one manufacturer in Australia cannot survive. Without the volume of parts coming into the country – reducing the unit cost for both companies – neither General Motors-Holden or Toyota can be truly competitive, here or overseas. And that appears true, regardless of the Australian dollar. Already Holden is reviewing its Elizabeth plant in Adelaide and has prepared its workers for job losses and pay cuts. But even those in Holden’s Fisherman’s Bend plant will be worried. And at Toyota’s Altona plant in Melbourne. Holden, according to reports, has asked Government for an additional $265 million, on top of the $275 that has already been committed. GM-H managing Director Mike Devereaux has long reminded me that no Government in the western world leaves its car-makers unsupported. He is also keen to note that every member of the G20 makes cars except Saudi Arabia, which is one of the biggest buyers of Australian built Toyota Camry’s and Holden Commodores. Now Saudi Arabia is investigating building its own vehicles, which could snuff out one of the most lucrative markets for the local vehicle builders. But Mike Devereaux, I think, has another motive in raising the question of Government support right now: he is also trying to flush out policy from the coalition. For some time there has been murmours coming out of the Opposition that it would seriously review the level of taxpayer support going into the car industry. It can see savings for a Budget it desperately wants to balance. Until Kevin Rudd deposed Julia Gillard – and polls showed a massive victory for the coalition parties, this attitude was of vital consideration to the car industry – especially in the head-offices in Detroit and Toyko. Now that Rudd has changed the numbers the car-makers must play on both sides of the political fence – in an attempt to parly an agreed deal out of both sides. Right now that seems to be pie in the sky. There is little likelihood the coalition will be rushed. But there is little doubt time is running out for the local car industry. Head offices will not wait long before trying to re-dress their cost bases. Within a few years there may be just one country in the G20 that does not build vehicles. The problem is … it might be Australia.
The cash splash is over … now we have to get back to work It’s a rhetorical question I know. But the Reserve Bank board must harbour some small concern that despite record low interest rates, Australia’s economy is not responding quickly. It is not creating the a sharp turn-around in consumer or business confidence. In fact, in the face of rates being cut to record lows, Australian consumer confidence fell. That said, it was measured just after the Federal Budget, and there weren’t many smiles in that. Yes, I understand that auction clearance rates in Sydney have topped 80% in the past couple of weekends. I know that Melbourne is showing signs of recovery. But Queensland’s ongoing malaise, caused by a massive fall in coal prices and the property market continuing to lie flat on its back gives cause for concern. Again … what happens if you cut rates but nothing (or not enough) happens? The dollar’s fall will do more to stimulate Australia’s economy – especially the rural and the manufacturing sector. Yet though the Government will consistently blame the dollar for all the recent travails in the economy, it will not face up to the fact that the horse has bolted. Manufacturers have left the country and those that haven’t already are heading there as quickly as possible. And this is where the Government has been too slow to respond. This is where the sliver of a majority has worked against the Australian people and the Australian economy. If we had our time over again … the better solution would have been for Australia to go back to the polls in 2010 to get a decisive majority for either political party. In the past three years – despite hectic legislation – it is hard to conclude that Australia has done anything other than wallow. Gross National Expenditure is running around 1% … which shows it is the import/export side of the equation that is still holding up growth. That said, as Treasury Secretary Martin Parkinson said this week, there is some stupidity in looking at the numbers. To suggest that WA is in recession was just plain dumb. The problem is that WA – like Australia – is a big place and what households are feeling in Perth is vastly different from Port Hedland or Paraburdoo. What Australia needs - and I think the public is up for it – is big fundamental change: to the tax system, state and Federal relations and to the way social welfare is paid. I understand in saying this that the white noise will be immense as individual groups win or lose from such changes. But for Australia’s productive future, change has to occur. The nation has to be able to pay its way. But even more, if must give incentive to those prepared to take risks … in order to create more wealth in the future. The feeling I get right now – from all parts of Australia – is that the nation has squandered the mining boom. And now that its best days appear to be behind us … the big question is whether Australia can make hard decisions to better profit from its tail. And that does not mean hand-outs … it means acknowledging the concept of being paid for a hard-days work and not being taxed too heavily for the privilege.
The cash splash is over … now we have to get back to work My theory has always been that you should try things in life – even if they are a bit rough to start with. The Mayor of New York, Michael Bloomberg, once told me that when he started his Bloomberg service it was rough – very rough. But his attitude was that the appearance would improve in time. The real trick is to get your timing right because, often, first mover advantage is the real key to business success. It’s not always right, of course. Plenty of people have been trail-blazers, only to discover that their resources or energy do not match their ideas. So this is my first step in an experiment to see whether people want information via blogs or videos or whatever media I might be using at the time. It’s rough – for now – I know. But it’s a first step. Let me know what you think so I can improve it. Cheers, Ross