Government begins review into support of Australian car industry

Federal Treasurer Joe Hockey submitted the terms of reference to the Productivity Commission yesterday outlining the scope of the inquiry and the proposed process to be taken.

A preliminary findings report is due to be released by December 20, with the Productivity Commission requested to submit the final report to the government by March 31, 2014.

In his terms of reference submission, Hockey writes the government “desires an internationally competitive and globally integrated automotive manufacturing sector” and insists any support for the local car making industry must be “accountable, transparent and targeted at the long-term sustainability of the sector”.

Hockey says the review will seek input from “a broad range of stakeholders” and be conducted in the context of the government’s “desire to improve the overall performance of the Australian economy”.

The wide-ranging review will examine national and international market and regulatory factors affecting the industry’s current structure, productivity, profitability, competitiveness and sustainability; Australia’s attractiveness as an investment location for research and development and component and vehicle production; local and international demand for Australian design, engineering, and automotive products; and consumer preferences and demand for new products and technologies.

It will take into account international automotive industry assistance arrangements including quantifying tariff and budgetary assistance provided by major and emerging car-making countries and the barriers and opportunities for Australia’s manufacturers; the impact of current workplace arrangements in the industry, domestic assistance, and government vehicle purchasing policies; and the spill-over benefits of the automotive sector, such as technology diffusion.

The review will seek to identify and evaluate alternative public support mechanisms that improve the long-term profitability, sustainability and productivity of the industry; facilitate innovative alternative vehicle and component technologies by the industry; retarget assistance; and introduce more internationally competitive workplace and taxation policies.

Finally, it will assess the significance of the capabilities within the industry, its direct employment and economic benefits, its secondary impacts on other sectors of the economy, and quantify the costs and benefits of existing and alternative assistance mechanisms.

The Productivity Commission has invited interested people and organisations to make written submissions to be considered in its review.

The Commission’s review will guide the Federal Government and Industry Minister Ian Macfarlane in their negotiations with Holden and Toyota, whose futures as local car makers hang on the review’s findings and recommendations.