Car Industry Report Predicts Economic Devastation If Government Assistance Ends

The Federal Chamber of Automotive Industries has released a report on the car industry.

The report, prepared by the Allen Consulting Group, is titled: The strategic role of the Australian Automotive Manufacturing Industry.

The report argues that Australia’s GDP would be $7.3 billion smaller (in today’s dollars) by 2018 without autmotive manufacturing. It says billions in foreign direct investment would cease and the economies of Adelaide and Melbourne “would be devastated” if government assistance to the industry ceased. The report says employment would fall by around 1.5%.

The car industry receives around $500 million in government funding each year. The report says: “For this investment, the Australian economy is $21.5 billion larger.”

The report comes as the Abbott government faces a decision about the continuation of government assistance to the car industry. Politically, the timing of the decision is awkward because of the South Australian election next March and the Victorian election at the end of 2014.

The government’s decision will also be a test of its economic decision-making and its commitment to market principles.

Extract from “The strategic role of the Australian Automotive Manufacturing Industry”, p55. [Read more…]