After the car industry
With the closure of GMH locked in, it seems virtually certain that Toyota will follow the same path in the end, along with most of the supporting components industry. It’s possible that a well-designed policy, combined with a sustained depreciation of the $A, could keep the industry alive (the fact that it survived the end of the high tariff era was largely due to the Button Plan in the 1980s), but this is the Abbott government we’re talking about, so it seems unlikely.
The impending end of the car industry constitutes the effective end of large scale manufacturing in Australia, at least as the term is ordinarily understood. The remaining manufacturing sector consists mainly of basic processing of agricultural and mineral products for export, along with food and beverages for the domestic market. Elaborately transformed manufactures, on which such high hopes were pinned in the 1980s and 1990s have been declining for years, and will be confined to niche markets once we stop exporting automotive products.
An immediate policy implication of the end of car production is that it’s time to drop a bunch of policies whose rationale was to support the domestic industry. The most obvious candidate is the FBT concession, just reinstated by the Abbott government. But there’s also the maintenance of some of the worlds weakest fuel efficiency standards, driven by the desire not to tilt the playing field against Falcons and Commodores. More generally, a whole range of pro-car policies will need to be reassessed, given that they increase our dependence on imports and therefore our vulnerability to terms of trade shocks.
There are direct implications for employment policy, arising from the job losses that are about to take place, and longer term implications for education and training. More on these soon, I hope.