Car industry must have globalised future: Bracks

A key review into Australia’s car sector has called for millions in funding to help small and medium sized car part makers expand into global supply chains.

But the Review of Australia’s Automotive Industry, by former Victorian premier Steve Bracks, has surprised some observers by rejecting industry calls for tariff cuts to be delayed.

Bracks recommends that passenger motor vehicle tariffs be cut from 10% to 5% by 2010, setting them third-lowest among the world’s major car producing economies.

But while that decision will not please the auto industry, Bracks as urged the Federal Government to sweeten the deal with a $2.5 billion assistance package.

The Global Automotive Transition Scheme would replace the current Automotive Competitiveness and Investment Scheme and be used to help the sector make the structural adjustments it needs to survive in the lower-tariff environment.

Almost half of that fund should go to small and medium sized car part makers to help them reduce their reliance on supplying local car part makers and become much more export focused.

Up to $80 million should also be set aside from the fund for one-off payments to help struggling component makers restructure or merge or to fund worker entitlements where there are job losses.

Brack’s message, in short, is that the sector will have to change and there will be pain – but the Government should do what it can to soften the blow as much as possible.

Consideration should also be given to doubling the $500 million green car scheme if it proves successful, the report argues.

Further recommendations include:

• Including road transport in an emissions trading scheme.
  Expanding access to overseas automotive supply chains using eminent “automotive ambassadors”.
• Harmonising, and in some cases reducing, state and territory passenger motor vehicle taxes, while encouraging governments to support an environmentally sustainable Australian industry.
• Establishing a new automotive industry innovation council to provide advice and oversight in relation to the new arrangements.

Car industry peak group the Federal Chamber of Automotive Industries was relatively level in its response to the report, even though Bracks did not heed its call for the tariff wall to be maintained.

“We urge the Government to consider all options in framing its response to the review,” FCAI chief executive Andrew McKellar says. “It is essential that the Government take into account the strategic importance of the industry when it determines future policy arrangements.”

Federal Minister for Innovation, Industry, Science and Research Kim Carr welcomed the report.

“Mr Bracks finds that the industry needs to continue embracing global competition, but also acknowledges the challenges it faces, not least climate change,” Carr says.

“This can be seen as a threat to the Australian industry – or as an opportunity to carve out a new niche in the international production system and secure critical export sales.”

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