Monday Breaking Politics - Future of the Car Industry

This morning I had the pleasure of debating the Liberal's Andrew Laming in my regular slot on Breaking Politics with host Tim Lester. One of the topics was whether the government should intervene to save Australia's car industry.




SUBJECT/S: Car manufacturing, QANTAS, carbon policy, debt limit

TIM LESTER: Imagine Australia as a country that does not build cars, Mazdas, Hyundais or BMWs but for that locally built Holden's, Fords and Toyota's they'd be gone. Well it may be government and car maker decisions in coming weeks set us up for that future. On Monday, Breaking Politics is proud to have the two Andrews in the studio, Andrew Laming the Liberal MP in the Queensland electorate of Bowman and here in Fraser in the ACT, Labour’s Andrew Leigh. Welcome to you both. Andrew Laming one person in Labor who really ought to know, Kim Carr, says that for less than $150 million a year, according to one estimate government could keep Holden in Australia. Would that be money well spent?

ANDREW LAMING: Well this has been a tantalizing proposition for every government right up to today and here we are Groundhog Day again wondering whether or not we can save our vehicle manufacturers. It’s not too much the quantum of money but it’s the social impact of not having vehicle manufacturing and all of the support industry continuing so governments of both sides of the political fence work very hard to keep our manufacturing here in Australia. And I never ever forget the social benefits of keeping that industry here and the employment it provides.

LESTER: So you think this Government needs to work pretty hard to keep the car industry in Australia?

LAMING: Oh there’s nothing new. All governments up until today have worked extraordinarily hard - some would say too hard - to keep vehicle manufacturing here. We need to make sure if we are providing some assistance to keep it happening in Australia, that at an employment level we are also getting factories and manufacturing that is as efficient as possible and competitive.

LESTER: What’s your sense, have governments spent too much in the past to keep vehicle makers in this country, or do you think we've got it pretty right?

LAMING: Well self-evidently how much we've invested has simply led to the same question being raised again today, and we will have this on-going negotiation with overseas owners about how to keep manufacturing here.

LESTER: Andrew Leigh, $150 million well spent or would it be a waste of money?

ANDREW LEIGH: Tim, I share Andrew’s views about the importance of high-tech manufacturing to Australia. The typical car has a couple of hundred microchips, Kim Carr tells me. So its high-tech manufacturing. What I worry about though is the amount of time Mr Abbott has spent over the last few years focussing on the impact of the carbon price which is a very small impact on motor manufacturing, but then very little emphasis on the targeted assistance which is being provided to vehicle manufacturers which is a much larger component of their decision to locate in Australia.

LESTER: Okay, we know the price tag. Is the price tag worth paying.

LEIGH: Well there’s two reasons economists talk about the benefits of industry assistance. Of course in general economists take a pretty dour view of it, but the two reasons to support it are spill overs to other industries, research and development spill overs, and also geographic concentration.  And you see both of those things in the car industry I think. A lot of parts manufacturers and so on are tied into the production chain and benefits into other areas such as defence manufacturing. But also very heavy regional concentration  and it would be a bitter blow for some of these communities to lose car manufacturing.

LESTER: I'm taking you're saying money well spent?

LEIGH: Certainly those two criteria that economists apply to industry assistance can, I think, be effectively applied to car manufacturing.

LESTER: Andrew Laming the same ideological argument go on each time this comes up, over whether we should support the industries that can't make their own way or not. What’s your end conclusion on whether the Government ought to spend this money or say ‘say la vee’?

LAMING: Well in the end we've created a vehicle industry pedestal where to fall of the pedestal is something very difficult for any government to contemplate. My argument is that our nation has some of the least mobility of our workers between states, that has been pointed out by demographers before. We have large concentrations of unemployment, the highest proportion of unemployed workers living in completely unemployed households in the OECD after one or two non-English speaking economies. So we have a real problem with getting households working and we have a real problem getting unemployed workers to move to where there’s suitable work. Those reforms are absolutely vital before we can contemplate loosing something as significant as the vehicle industry.

LESTER: Right, so aren't you saying we need to keep the vehicle industry ticking over for a fair while yet?

LAMING: Without taking the eye off the more important area of reform around long term unemployment and mobility for work.

LESTER: Okay, how will you feel then if the federal government does not change its spending formula  for the car industry and Holden says ‘bye bye’?

LAMING: Well obviously any government either side of the fence will be working so that day doesn't arrive so that’s a negotiation we hope will be successful.

LESTER: Am I missing something here or isn't this government drawing a line on Holden here, saying it can't go further financially?

LAMING: Well that of course is the rhetoric one would expect before a negotiation so of course the Government will be expecting every pound of flesh out of Holden, the vehicle manufacturers to do their best. But when the negotiation eventually reaches its conclusion we've got to get the best deal we can for tax payer.

LESTER: So what we're seeing from Joe Hockey  and Tony Abbott is negotiation here it’s not a final decision?

LAMING: Well it’s self-evident that the negotiation is in progress. In the end we've got to get the best deal we can.

LESTER: Do you accept that Andrew Leigh, that the Government is doing all it can in terms of setting a strong negotiation position and is simply being careful with tax payer dollars here?

LEIGH: Well you're talking about confidence in head offices I think Tim. I’m concerned that the governments overly bolshie position with car manufacturers doesn't send strong signals to headquarters about our support for the industry. Much as I'm concerned that Mr Abbott's approach to QANTAS effectively seeming to say that QANTAS is just another private company. It makes him sound a lot like the way Mr Howard was speaking about Ansett in the early 2000s.

LESTER: Okay, what would you do with QANTAS that Tony Abbott isn't doing How do you deal with that? Do we really buy back in to a national carrier?

LEIGH: What shadow treasurer Chris Bowen has suggested is that a small equity injection from the Government would send a strong signal to capital markets of the Government’s commitment to the national carrier. I think Australians would be pretty shocked by the collapse of QANTAS, the downgrade of QANTAS's shares is of deep concern to many Australians. This isn't, in my view, just another airline. And I get concerned when the Prime Minister suggests that it might be.

LESTER: Andrew Laming time to buy some of the QANTAS pie?

LAMING: Well that’s one of a number of options. We have the QANTAS Sale Act which really appropriately now needs to be a part of a national conversation. I think saving the QANTAS brand is important to every Australian but unlike the vehicle manufacturing issue, this is a more complex and international one where there are potentially a whole lot more solutions to this problem. So I think it’s right we keep our options open on QANTAS.

LESTER: Okay, Andrew Leigh the senate votes this week on the carbon tax withdrawal. Is Labor really better frustrate a change for another seven months that appears a new senate is going to make anyway?

LEIGH: What the Senate has done is decide to have a bit of scrutiny into the government's alternative proposals for dealing with climate change, and I think that's appropriate. What the government is trying to do in this debate is push off to one side what it would do about climate change, because it knows it has this dog of a policy, so called "Direct Action", which won't work and will cost more. So they want the focus to be on the carbon price, which, let's face it, is a policy which is already reducing  emissions, a seven percent emissions reduction on the national electricity market strongly praised by economists across the board, doing its job at a low cost. And you've got the Clean Energy Finance Corporation already making returns from targeted investment in clean technology. You know, really, if you believe the science and you believe Australia's future should be a clean energy future then I think we have the policy settings right and its reasonable that the Senate takes a while to contemplate the frankly retrograde  proposals being put forward by the government.

LESTER: Andrew Laming?

LAMING: Well, why this blowtorch-like intensity is on the current Labor opposition is that they had all these opportunities to come up with wise ideas as alternatives to a carbon tax when in government and they didn’t. We now have a situation where the relentless negativity of this opposition is now being cast as sticking to Labor values. So, one wonders whether Labor's values are simply relentless negativity around this issue. So the carbon tax is not being accepted by the Australian people. They voted accordingly and yet you have this pre-Christmas nickel-and-diamond from the new opposition. That's why I think Australians would be scratching their head wondering exactly what they're trying to achieve.

LESTER: Okay, but we are we not, or at least the Government is seeking is it not, to dump one carbon solution without really properly outlining and getting ready for the new carbon solution?

LAMING: Well, obviously a Direct Action based approach is little different to what many economies around the world do right now and keep in mind that what the Labor opposition when in government had up to three point eight billion dollars’ worth of direct action in their plan. I mean, every time you go directly to a brown-coal fired power station and try and improve the situation in that plant, that's a form of direct action. So, I wouldn't say that we should have this antipathy towards direct action. It's being used world-wide, used in nations as diverse as Japan, Norway and even the UN itself.

LESTER: Okay, one more topic before we close. The Greens are about to combine with the Government in the Senate to scrap the debt ceiling after so much criticism from the Government, Andrew Laming, of the Greens, you know, the 'economic fringe-dwellers' and the like. How comfortable are you partnering with them to do this?

LAMING: Well, obviously we have an agenda, and that is to allow us to fix the economic mess created by the former government, address the ten billion dollars that we're paying every year in interest, and we have to do a deal with one of these two players down in this place to make sure that we can get it through, and to get it through quickly. Whether it's a deal with Labor or the Greens, in the end, we can get about fixing the economic mess created and that's what we are doing.

LESTER: Andrew Leigh, will there be some great damage done when the debt ceiling disappears and the Government is unrestrained, in terms of how far it can borrow?

LEIGH: Well it will be in a pretty strange situation, Tim. I mean, if Andrew had gone to the good voters of Bowman before the election and said ‘I'm going campaign in this election to strike a deal with the Greens’, a party that Tony Abbott has described as being more extreme than any other because it doesn't in economic growth, he says. And if Andrew had said, ‘look the best thing I'm going to advocate is that we get rid of the debt limit altogether’. I suspect that would've been a page one issue during the campaign, it would've been seen as a gaffe by the Member for Bowman. Andrew, of course, didn't do that during the campaign. Tony Abbott and Joe Hockey are doing it now. A real broken promise to add to the litany of broken promises you've had from the Government. So, boat buy-back, non-existent. Unity ticket on school funding isn't happening. Superannuants are being hurt if they're low income superannuants, and now the so-called 'budget emergency' and our promised budget update within a hundred days isn't happening and the debt cap's been blown sky-high.

LESTER: Unlimited debt in a deal with the Greens is a bit of a mismatch from the Coalition's campaign isn't it?

LAMING: Tim, not at all. The average Australian, and certainly those in my electorate and in fact Andrew's, would simply say you only need a debt ceiling when you have a government with a debt problem and I can say to every Australian this Christmas they will have neither.

LESTER: Andrew Laming, Andrew Leigh, great to have you in the studio. Thanks for coming in.

LEIGH: Thanks, Tim. Thanks, Andrew.

LAMING: Thank you.

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